The economy

Question 1

areas of agreement

Answer 1

both branches of liberalism are influenced by Locke’s natural laws, which emphasise property rights
Liberals see the possession of private property and the pursuit of property ownership as a natural right
both branches of liberalism support the idea that free markets promote economic activity and the creation of wealth. Individuals, pursuing their natural self-interest in a free economy, will natural take advantage of free markets

Question 2

areas of disagreement (1)

Answer 2

• classical liberals prefer laissez-faire capitalism. This means that the state is rarely justified in interfering in economic activity
• Classical liberals do not favour taxes, subsidies or regulations, arguing that these will hinder economic development or growth.
• Furthermore, compulsory welfare states require taxation and while individuals are free to opt out of the services provided, they cannot opt out of paying the taxation that funds them
• J.S Mill argued that the government should interfere as little as practicable in society especially in economic activity (links to ideas of negative freedom)

Question 3

areas of disagreement modern liberals (2)

Answer 3

modern liberals prefer Keynesian-style intervention in the economy to deliver full employment and general state management of the economic cycle to negate the effects of recessions and assist developmental individualism

Question 4

areas of disagreement classical liberals (2)

Answer 4

classical liberals are critical of the supposed efficacy of Keynesian economics, believing that the state is ill equipped to plan or intervene in the economy. As economicist Milton Freidman once quipped, ‘if you put the federal government in charge of the Sahara Desert, in five years, there’d be a shortage of sand’

Question 5

areas of disagreement of modern liberals (3)

Answer 5

argue that laissez-faire capitalism can lead to exploitation, deprivation and excessive inequality. Rawls sanctioned state interference in the economy , using individual and corporation taxation to fund state-managed welfare provisions as a away of aiding developmental individualism

Question 6

Areas of disagreement classical liberals (4)

Answer 6

Argue that economic interference erodes egotistical individualism and leads to a dependency culture. Furthermore, welfare spending is expensive and can lead to the state building up potentially unmanageable levels of debt that risk bankruptcy