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F. A. Hayek


Written in 1973 for the Italian Enciclopedia del Novicento where the article appeared in an Italian translation.


Reprinted as Chapter Nine of  Hayek, F. A., New Studies in Philosophy, Politics,  Economics and the History of Ideas, Routledge & Keagan Paul, London and Henley, 1982 [1978], pp. 119-151 ORDER THIS BOOK








2. The classical and medieval roots


The basic principles from which the Old Whigs fashioned their evolutionary liberalism have a long pre‑history. The eighteenth‑century [121] thinkers who formulated them were indeed greatly assisted by ideas drawn from classical antiquity and by certain medieval traditions which in England had not been extinguished by absolutism.


The first people who had clearly formulated the ideal of individual liberty were the ancient Greeks and particularly the Athenians during the classical period of the fifth and fourth centuries BC. The denial by some nineteenth‑century writers that the ancient knew individual liberty in the modern sense is clearly disproved by such episodes as when the Athenian general at the moment of supreme danger during the Sicilian expedition reminded the soldiers that they were fighting for a country which left them 'unfettered discretion to live as they pleased'. Their conception of freedom was of freedom under the law, or of a state of affairs in which, as the popular phrase ran, law was king. It found expression, during the early classical periods, in the ideal of isonomia or equality before the law which, without using the old name, is still clearly described by Aristotle. This law included a protection of the private domain of the citizen against the state which went so far that even under the 'Thirty Tyrants' an Athenian citizen was wholly safe if he stayed at home. Of Crete it is even reported (by Ephorus, quoted by Strabo) that, because liberty was regarded as the state's highest good, the constitution secured 'property specifically to those who acquire it, whereas in a condition of slavery everything belongs to the rulers and not to the ruled'. In Athens the powers of the popular assembly of changing the law were strictly limited, though we find already the first instances of such an assembly refusing to be restrained by established law from arbitrary action. These liberal ideals were further developed, particularly by the Stoic philosophers who extended them beyond the limits of the city state by their conception of a law of nature which limited the powers of all government, and of the equality of all men before that law.


These Greek ideals of liberty were transmitted to the modems chiefly through the writings of Roman authors. By far the most important of them, and probably the single figure who more than any other inspired the revival of those ideas at the beginning of the modern era was Marcus Tullius Cicero. But at least the historian Titus Livius and the emperor Marcus Aurelius must be included among the sources on which the sixteenth‑ and seventeenth‑century thinkers chiefly drew at the beginning of the modern development of [122] liberalism. Rome, in addition, gave at least. to the European continent a highly individualist private law, centring on a very strict conception of private property, a law, moreover, with which, until the codification under Justinian, legislation had very little interfered and which was in consequence regarded more as a restriction on, rather than as an exercise of, the powers of government.


The early moderns could draw also on a tradition of liberty under the law which had been preserved through the Middle Ages and was extinguished on the Continent only at the beginning of the modern era by the rise of absolute monarchy. As a modern historian (R. W. Southern) describes it, the hatred of that which was governed, not by rule, but by will, went very deep in the Middle Ages, and at no time was this hatred as powerful and practical a force as in the latter half of the period.... Law was not the enemy of freedom: on the contrary, the outline of liberty was traced by the bewildering variety of law which was evolved during the period.... High and low alike sought liberty by insisting on enlarging the number of rules under which they lived.


This conception received a strong support from the belief in a law which existed apart from and above government, a conception which on the Continent was conceived as a law of nature but in England existed as the Common Law which was not the product of a legislator but had emerged from a persistent search for impersonal justice. The formal elaboration of these ideas was on the Continent carried on chiefly by the Schoolmen after it had received its first great systematization, on foundations deriving from Aristotle, at the hands of Thomas Aquinas; by the end of the sixteenth century it had been developed by some of the Spanish Jesuit philosophers into a system of essentially liberal policy, especially in the economic field, where they anticipated much that was revived only by the Scottish philosophers of the eighteenth century.


Mention should finally also be made of some of the early developments in the city states of the Italian Renaissance, especially Florence, and in Holland, on which the English development in the seventeenth and eighteenth centuries could largely draw. [123]


3. The English Whig tradition


It was in the course of the debates during the English Civil War and the Commonwealth period that the ideas of the rule or supremacy of law became finally articulated which after the 'Glorious Revolution' of 1688 became the leading principles of the Whig Party that it brought to power. The classical formulations were supplied by John Locke's Second Treatise on Civil Government (1689) which, however, in some respects provides a still more rationalist interpretation of institutions than came to be characteristic of eighteenth century British thinkers. (A fuller account would also have to consider the writings of Algernon Sidney and Gilbert Burnet as early expositors of the Whig doctrine.) It was also during this period that that close association of the British liberal movement and the predominantly non‑conformist and Calvinist commercial and industrial classes arose which remained characteristic of British liberalism until recent times. Whether this merely meant that the same classes which developed a spirit of commercial enterprise were also more receptive to Calvinist Protestantism, or whether these religious views led more directly to liberal principles of politics, is a much discussed issue which cannot be further considered here. But the fact that the struggle between initially very intolerant religious sects produced in the end principles of tolerance, and that the British liberal movement remained closely connected with Calvinist Protestantism, is beyond doubt.


In the course of the eighteenth century the Whig doctrine of government limited by general rules of law and of severe restrictions on the powers of the executive became characteristic British doctrine. It was made known to the world at large chiefly through Montesquieu's Esprit des lois (1748) and the writings of other French authors, notably Voltaire. In Britain the intellectual foundations were further developed chiefly by the Scottish moral philosophers, above all David Hume and Adam Smith, as well as by some of their English contemporaries and immediate successors. Hume not only laid in his philosophical work the foundation of the liberal theory of law, but in his History of England (1754‑62) also provided an interpretation of' English history as the gradual emergence of the Rule of Law which made the conception known far beyond the limits of Britain. Adam Smith's decisive contribution was the account of a selfgenerating order which formed itself spontaneously if the individuals [124] were restrained by appropriate rules of law. His Inquiry into the Nature and Causes of the Wealth of Nations marks perhaps more than any other single work the beginning of the development of modern liberalism. It made people understand that those restrictions on the powers of government which had originated from sheer distrust of all arbitrary power had become the chief cause of Britain's economic prosperity.


The beginnings of a liberal movement in Britain were soon interrupted, however, by a reaction against the French Revolution and a distrust of its admirers in England, who endeavoured to import to England the ideas of Continental or constructivist liberalism. The end of this early “English” development of liberalism is marked by the work of Edmund Burke who, after his brilliant restatement of the Whig doctrine in defence of the American colonists, violently turned against the ideas of the French Revolution.


It was only after the end of the Napoleonic wars that the development based on the doctrine of the Old Whigs and of Adam Smith was resumed. The further intellectual development was guided largely by a group of disciples of the Scottish moral philosophers who gathered round the Edinburgh Review, mostly economists in the tradition of Adam Smith; the pure Whig doctrine was once more restated in a form which widely affected Continental thinking by the historian T. B. Macaulay who for the nineteenth century did what Hume in his historical work had done for the eighteenth. Already, however, this development was paralleled by the rapid growth of a radical movement of which the Benthamite 'Philosophical Radicals' became the leaders and which traced back more to the Continental than to the British tradition. It was ultimately from the fusion of these traditions that in the 1830s the political party arose which from about 1842 came to be known as the Liberal Party, and for the rest of the century remained the most important representative of the liberal movement in Europe.


Long before that, however, another decisive contribution had come from America. The explicit formulation by the former British colonists, in a written constitution, of what they understood to be the essentials of the British tradition of liberty, intended to limit the powers of government, and especially the statement of the fundamental liberties in a Bill of Rights, provided a model of political institutions which profoundly affected the development of liberalism in Europe. Though the United States, just because their people felt [125] that they had already embodied the safeguards of liberty ill their political institutions, never developed it distinct liberal movement, for the Europeans they became the dreamland of liberty and the example which inspired political aspirations as much as English institutions had done during the eighteenth century.


4. The development of Continental liberalism


The radical ideas of the philosophers of the French Enlightenment, mainly in the form in which they, had been applied to political problems by Turgot, Condorcet and the Abbé Sieyès largely dominated progressive opinion in France and the adjoining countries of the Continent during the Revolutionary and Napoleonic periods; but of a definite liberal movement one can speak only after the Restoration. In France it reached its height during the July Monarchy (1830‑48), but after that period remained confined to a small élite. It was made up of several different strands of thought. An important attempt to systematize and adapt to Continental conditions what he regarded as the British tradition was made by Benj amin Constant, and was developed further during the I 830s and 1840s by a group known as the 'doctrinaires' under the leadership of F. P. G. Guizot. Their programme, known as 'guarantism', was essentially a doctrine of constitutional limitations of government. For this constitutional doctrine which made up the most important part of the Continental liberal movement of the first half of the nineteenth century, the constitution of 1831 of the newly created Belgian state served as an important model. To this tradition, largely deriving from Britain, also belonged the perhaps most important French liberal thinker, Alexis de Tocqueville.


The feature, however, which greatly distinguished the type of liberalism predominant on the Continent from the British one was from the beginning what is best described as its free‑thinking aspect, which expressed itself in a strong anti‑clerical, anti‑religious and generally anti‑traditionalist attitude. Not only in France, but also in the other Roman Catholic parts of Europe, the continuous conflict with the church of Rome became indeed so characteristic of liberalism that to many people it appeared as its primary characteristic, particularly after, in the second half of the century, the church took ill) the struggle against 'modernism' and therefore against most demands for liberal reform.


During the first half of the century, up to the revolutions of 1848, [126] the liberal movement in France, as well its in most of the rest of' western and central Europe, had also been much more closely allied with the democratic movement than was the case with British liberalism. It was indeed largely displaced by it and by the new socialist movement during the second half of the century. Except for a short period around the middle of the century, when the movement for free trade rallied the liberal groups, liberalism did not again play an important role in the political development of France, nor after 1848 did French thinkers make any important contributions to its doctrine.


A somewhat more important role was played by the liberal movement in Germany, and a more distinct development did take place during the first three‑quarters of the nineteenth century. Though greatly influenced by the ideas derived from Britain and France, these were transformed by ideas of the three greatest and earliest of the German liberals, the philosopher Immanuel Kant, the scholar and statesman Wilhelm von Humboldt, and the poet Friedrich Schiller. Kant had provided a theory on lines similar to those of David Hume, centred on the concepts of law as the protection of individual freedom and of the Rule of Law (or the Rechtsstaat, as it came to be known in Germany); Humboldt had in an early work On the Sphere and Duties of Government (1792) developed the picture of a state wholly confined to the maintenance of law and order ‑ a book of which only a small part was published at the time, but which, when it was finally published (and translated into English) in 1854, exercised wide influence not only in Germany but also on such diverse thinkers as J. S. Mill in England and E. Laboulaye in France. The poet Schiller, finally, probably did more than any other single person to make the whole educated public in Germany familiar with the ideal of personal liberty.


There was an early beginning towards a liberal policy in Prussia during the reforms of Freiherr vom Stein, but it was followed by another period of reaction after the end of the Napoleonic wars. Only in the 1830s did a general liberal movement begin to develop, which from the beginning, however, as was also true in Italy, was closely associated with a nationalist movement aiming at the unification of the country. In general, German liberalism was mainly a constitutionalist movement which in north Germany was somewhat more guided by the British example, while in the south the French model was more influential. This found expression chiefly in a [127] different attitude towards the problem of limiting the discretionary powers of government which in the north produced a fairly strict conception of the Rule of Law (or the Rechtsstaat), while in the south it was guided more by the French interpretation of the Separation of Powers that stressed the independence of the administration from the ordinary courts. In the south, however, and especially in Baden and Wurttemberg, there developed a more active group of liberal theorists around the Staatslexicon of C. von Rotteck and C. T. WeIcker, which in the period before the revolution of 1848 became the main centre of German liberal thought. The failure of that revolution brought another short period of reaction, but in the 186os and early 1870s it seemed for a time as if Germany, too, were rapidly moving towards a liberal order. It was during this period that the constitutional and legal reforms intended definitely to establish the Rechtsstaat were brought to completion. The middle of the 1870s must probably be regarded as the time when the liberal movement in Europe had gained its greatest influence and its easternmost expansion. With the German return to protection in 1878, and the new social policies initiated by Bismarck at about the same time, the reversal of the movement began. The liberal party which had flourished for little more than a dozen years rapidly declined.


Both in Germany and in Italy the decline of the liberal movement set in when it lost its association with the movement for national unification, and the achieved unity directed attention to the strengthening of the new states, and when, moreover, the beginnings of a labour movement deprived liberalism of the position of the 'advanced' party which until then the politically active part of the working class had supported.


5. Classical British liberalism


Throughout the greater part of the nineteenth century the European country which seemed nearest to a realization of the liberal principles was Great Britain. There most of them appeared to be accepted not only by a powerful Liberal Party but by the majority of the popula­tion, and even the Conservatives often became the instrument of the achievement of liberal reforms. The great events after which Britain could appear to the rest of Europe as the representative model of a liberal order were the Catholic emancipation of 1829, the Reform Act of 1832, and the repeal of the corn laws by the Conservative, Sir [128] Robert Peel, in 1846. Since by then the chief demands of liberalism concerning internal policy were satisfied, agitation concentrated on the establishment of free trade. The movement initiated by the Merchants' Petition of 1820, and carried on from 1836 to 1846 by the Anti‑Corn‑Law League, was developed particularly by a group of radicals who, under the leadership of Richard Cobden and John Bright, took a somewhat more extreme laissez faire position than would have been required by the liberal principles of Adam Smith and the classical economists following him. Their predominant free trade position was combined with a strong anti‑imperialist, anti interventionist and anti‑militarist attitude and an aversion to a expansion of governmental powers; the increase of public expenditure  was regarded by them as mainly due to undesirable interventions in overseas affairs. Their opposition was directed chiefly against the expansion of the powers of central government, and most improvements were expected from autonomous efforts either of local government or of voluntary organizations. 'Peace, Retrenchment and Reform' became the liberal watchword of this period, with 'reform' referring more to the abolition of old abuses and privilege than the extension of democracy, with which the movement became more closely associated only at the time of the Second Reform Act of 1867. The movement had reached its climax with the Cobden Treaty with France of 186o, a commercial treaty which led to the establishment of free trade in Britain and a widespread expectation that free trade would soon universally prevail. At that time there


emerged also in Britain, as the leading figure of the liberal movement W. E. Gladstone who, first as Chancellor of the Exchequer and the as liberal Prime Minister, came to be widely regarded as the living embodiment of liberal principles, especially, after Palmerston death in 1865, with regard to foreign policy, with John Bright as hi chief associate. With him also the old association of British liberalism with strong moral and religious views revived.


In the intellectual sphere during the second half of the nineteenth century the basic principles of liberalism were intensively discussed In the philosopher Herbert Spencer an extreme advocacy of a individualist minimum state, similar to the position of W. von Humboldt, found an effective expounder. But John Stuart Mill in his celebrated book On Liberty (1859), directed his criticism chiefly against the tyranny of opinion rather than the actions of government and by his advocacy of distributive justice and a general sympathetic [129] attitude towards socialist aspirations in some of' his other works, prepared the gradual transition of' a large part of' the liberal intellectuals to a moderate socialism. This tendency was noticeably strengthened by the influence of the philosopher T. H. Green who stressed the positive functions of the state against the predominantly negative conception of liberty of the older liberals.


But though the last quarter of the nineteenth century saw already much internal criticism of liberal doctrines within the liberal camp and though the Liberal Party was beginning to lose support to the new labour movement, the predominance of liberal ideas in Great Britain lasted well into the twentieth century and succeeded in defeating a revival of protectionist demands, though the Liberal Party could not avoid a progressive infiltration by interventionist and imperialist elements. Perhaps the government of H. Campbell Bannerman (1904) should be regarded as the last liberal government of the old type, while under his successor, H. H. Asquith, new experiments in social policy were undertaken which were only doubtfully compatible with the older liberal principles. But on the whole it can be said that the liberal era of British policy lasted until the outbreak of the First World War, and that the dominating influence of liberal ideas in Britain was terminated only by the effects of this war.


6. The decline of liberalism


Though some of the elder European statesmen and other leaders in practical affairs after the First World War were still guided by an essentially liberal outlook, and attempts were made at first to restore the political and economic institutions of the pre‑war period, several factors brought it about that the influence of liberalism steadily declined until the Second World War. The most important was that socialism, particularly in the opinion of a large part of the intellectuals, had replaced liberalism as the progressive movement. Political discussion was thus carried on mainly between socialists and conservatives, both supporting increasing activities of the state, though with different aims. The economic difficulties, unemployment and unstable currencies, seemed to demand much more economic control by government and led to a revival of protectionism and other nationalistic policies. A rapid growth of the bureaucratic apparatus of government and the acquisition of far‑reaching discretionary powers by it was the consequence. These tendencies, already strong during [130] the first post‑war decade, became even more marked during the Great Depression following the US crash of 1929. The final abandonment of the gold standard and the return to protection by Great Britain in 1931 seemed to mark the definite end of a free world economy. The rise of dictatorial or totalitarian régimes in large parts of Europe not only extinguished the weak liberal groups which had remained in the countries immediately affected, but the threat of war which it produced led even in Western Europe to an increasing government dominance over economic affairs and a tendency towards national self‑sufficiency.


After the end of the Second World War there occurred once more a temporary revival of liberal ideas, due partly to a new awareness of the oppressive character of all kinds of totalitarian régimes, and partly to the recognition that the obstacles to international trade which had grown up during the inter‑war period had been largely responsible for the economic depression. The representative achievement was the General Agreement on Tariffs and Trade (GATT) of 1948, but the attempts to create a larger economic unit such as the Common Market and EFTA also ostensibly aimed in the same direction. Yet the most remarkable event which seemed to promise a return to liberal economic principles was the extraordinary economic recovery of the defeated Germany which, on the initiative of Ludwig Erhard, 'had explicitly committed herself to what was called a 'social market economy', and as a result soon outstripped the victorious nations in prosperity. These events ushered in an unprecedented period of great prosperity which for a time made it seem probable that an essentially liberal economic régime might again durably establish itself in western and central Europe. In the intellectual sphere, too, the period brought renewed efforts to restate and improve the principles of liberal politics. But the endeavours to prolong the prosperity and to secure full employment by means of the expansion of money and credit, in the end created a world‑wide inflationary development to which employment so adjusted itself that inflation could not be discontinued without producing extensive unemployment. Yet a functioning market economy cannot be maintained under accelerating inflation, if for no other reason than because governments will soon feel constrained to combat the effects of inflation by the control of prices and wages. Inflation has always and everywhere led to a directed economy, and it is only too likely that the commitment to an inflationary policy [131] will mean the destruction of the market economy and the transition to a centrally directed totalitarian economic and political system.


At present the defenders of the classical liberal position have again shrunk to very small numbers, chiefly economists. And the name 'liberal' is coming to be used, even in Europe, as has for some time been true of the USA, as a name for essentially socialist aspirations, because, in the words of J. A. Schumpeter, 'as a supreme but unintended compliment, the enemies of the system of private enterprise have thought it wise to appropriate the label'.