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Choosing Between Classical Liberalism and Social Liberalism

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Choosing Between Classical Liberalism and Social Liberalism FEATURE CHOOSING BETWEEN CLASSICAL LIBERALISM AND SOCIAL LIBERALISM Social liberals support markets, but also government action to promote a firm safety net and equal opportunity, with more confidence in the role of government, writes Fred Argy lassical liberals and social liberals share easy it is for entrepreneurs to start and manage some common views. Contrary to state their business); the extent of deregulation of labour paternalists, they both see benefit in markets (how much freedom managers have in market reform, but are less radical than setting pay structures and in hiring and firing); Clibertarians. Contrary to social conservatives, they and the size of government (scale of government often agree that the state should use a light hand expenditure). Libertarians also tend to have a when regulating personal morality. Yet there is still laissez-faire attitude to the environment.1 a lively debate between classical and social liberals Some people on the political Right (and some on the scope of welfare, the scale of measures to on the Left) also demonstrate elements of ‘social promote substantive equality of opportunity, and conservatism’ in areas such as homosexuality, on the degree of economic intervention consistent drugs, obscene literature, abortion, or federal with economic liberalism. funding for human embryonic stem cell research. These issues stir up deep passions when people Libertarians generally divorce themselves from with prior beliefs and values dominate the debate social conservatism as they believe people should (ideologues). The discussion becomes more be able to pursue whatever ideals they like. civilised when people have regard for a realistic Some people on the Left actively support state ‘set of political values’ (academics and journalists). paternalism, a mix of democratic socialism and And when the war of words becomes central to welfare ‘rights.’ The methods and instruments government, ideology loses much of its sting—at chosen include guaranteed social minima; trade least on the surface (politicians). barriers; exchange controls; a managed exchange The ideological debate At the ideological level, there is little room for Fred Argy has advised governments sensible argument. from Menzies to Keating. He was ‘Libertarians’ reject any sort of state intervention awarded an OBE and AM for services apart from a minimal role that protects against force, theft and fraud. Under libertarian to economic planning. He is the author individualism, failing to help people in need does of many articles and several books, not restrict liberty. Economic freedom, as measured including Australia at the Crossroads in the so-called ‘index of economic freedom,’ is (Allen & Unwin) and Equality of calculated by reference to the security of property Opportunity in Australia: Myth and rights; the openness of the economy to external Reality (The Australia Institute). trade; levels of business and credit regulation (how 14 Vol. 25 No. 2 • Winter 2009 • POLICY CLASSICAL LIBERALISM AND SOCIAL LIBERALISM rate; a rigid, inflexible wage structure; public classical liberal sees a need to redistribute income, ownership; and foreign investment regulation. it would be not to reduce inequality per se but Social liberals divorce themselves from these instead address specific individual needs such as policies, which seem unnecessarily costly for increasing incentives or assistance for the elderly. productivity and flexibility. There are more This explains why classical liberals are sceptical effective ways of achieving good distribution of the use of ‘composite indexes designed to effects through the social security, the tax system, aggregate different liberties or inequalities’—such and moderate wage regulation. as the Gini coefficient or shares of income—and The doctrines of libertarianism, social why they are more ‘flexible’ on the issue of tax conservatism, and state paternalism are held cuts relative to expenditure.3 mostly by ‘political outsiders.’2 Most academics Like libertarians, classical liberals refuse to see and political participants, while drawing heavily themselves as ‘moral conservatives’; instead, they on prior ideology, lean toward a more realistic generally oppose censorship and support improved view of politics. This is what we call ‘progressive legal recognition of gay relationships and abortion liberalism’—a pragmatic mix of markets and rights for women.4 government intervention to promote economic Classical liberals are ‘at least first cousins’ to growth while promoting equality, opportunity, libertarians, with a similar stress on the role of and a welfare safety net. Progressive liberalism is government. However, classical liberals are more the governing orthodoxy of the day. pragmatic, and their ideas are somewhat closer to political realities. The academic debate How much social liberalism? At the academic or journalistic level, there is an One aspect of ‘equity’ that is widely accepted ongoing debate between organisations such as (by both sides of the fence) is that people in the the Institute of Public Affairs, the Centre for same circumstances should be treated the same Independent Studies, and the Australia Institute (i.e. ensuring processes are transparent and non- and between bloggers and individual writers. They discriminatory on the basis of race, religion, sex, contribute to, and scan through, learned articles— or sexual preference). and use the ideas in them to pursue particular But social liberals (the principal topic of this political ends. Two of the main exponents are paper) go further with their ideals of equity. They classical liberals and social liberals. believe in a strong safety net, and they support How much economic freedom? substantive equality of opportunity. These two Classical liberals can be viewed as ‘less extreme’ equity wings of social liberalism interact with a than libertarians. For example, they adopt a third—a strong belief in economic liberalism. more intellectually eclectic set of justifications instead of a simple assertion of rights. While Strong safety net favouring libertarian institutions, such as limited Classical liberals and social liberals have much in government, protection of personal freedoms, and common regarding the existing distribution of free markets, they rely on rules of thumb derived income, although they are likely to differ regarding from experience—for example, that governments individual needs and degree of opposition to tend to mess things up and individuals are the further redistribution of incomes. best judges of their own interests. They see the The social liberal insistence on a firm safety net libertarian label as too narrow and as representing can cause some differences with classical liberals, a too absolutist view of politics and policy. but three considerations pull them together. Classical liberals like Policy editor Andrew First, income distribution in Australia happens Norton see ‘an inherent, massive complexity’ in to fall mid-way in OECD circles, and appears income inequality, which is the result of ‘billions to be roughly consistent with public opinion. of individual decisions, actions and transactions Second, many social liberals share the classical taken over a long period of time’ and reflecting liberal view that governments need to identify a different talents, abilities, effort, and luck. When a specific individual instance of ‘inequity’ before Vol. 25 No. 2 • Winter 2009 • POLICY 15 CLASSICAL LIBERALISM AND SOCIAL LIBERALISM intervening to alter income distribution. They be offered a special system of wage insurance. If differ from social democrats, who tend to be such ideas fail (e.g. it might be hard to precisely guided by particular points in income distribution. identify the victims), government could invest in Third, social liberals also fear that the economic socially active yet productive programs. efficiency costs of a marked shift in distribution It is worth noting that this kind of social can often exceed the welfare benefits. In particular, liberalism, like libertarianism, is committed to those able and willing to work should have every individualism—but includes protecting individuals incentive to gain employment or train. from acts of omission as well as commission. However, differences emerge on proposed Substantive equality of opportunity policy changes likely to affect income distribution. Social liberals also attach much importance One route—the one chosen by classical liberals— to the achievement of substantive equality of is to simply look at the effects of new economic opportunity—the opportunity available to well- reform on GDP. If these effects are positive, it motivated, capable, and hard-working people is assumed that winners will potentially be able to get ahead in life and achieve their maximum to compensate losers and still remain better off. potential, no matter what their social background There is no need for actual compensation. and starting opportunities. Equality of opportunity But social liberals start with the presumption is not simply about money. Governments also have that an extra dollar (the incremental benefit of an obligation to ensure that sufficient assistance is policy-induced reform) is worth more to a poor available to directly address capability deprivation, person than a rich person, so the distribution e.g. in health, education, training, housing, and effects of economic reform need to be considered transport infrastructure. in order to assess its aggregate welfare benefits.
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