CAPITALISM IN THE CLASSICAL AND HIGH LIBERAL TRADITIONS* By Samuel Freeman I. Essential Features of Liberalism Liberalism holds that there are certain individual liberties that are of fundamental political significance. These liberties are fundamental or basic in that they are preconditions on the pursuit of other social values, such as achieving economic efficiency, promoting the general welfare, and mod- erating the degree of inequality in the distribution of income and wealth. None of these liberties are absolute, but the reasons for limiting their exercise are to protect other basic liberties and maintain essential back- ground conditions for their effective exercise. For example, freedom of speech and expression can be limited when it imminently endangers others’ safety or the freedom of their person, but not because the ideas expressed are found to be offensive by vast majorities of people. Liberal basic liberties are also inalienable: they cannot be given up voluntarily or permanently transferred to anyone else, though some liberties are forfeit- able upon criminal conviction for serious crimes. No liberal government would enforce a contract in which a person sold himself into permanent servitude, or alienated his freedom to change religions, or legally bound himself to vote only as his employer insisted. An integral feature of a liberal constitution is the protection of the basic rights and liberties nec- essary to establish and maintain the equal civic status of citizens. What liberties do liberals generally find to have this extraordinary status? Liberals now would all agree that among the basic liberties are freedom of thought, expression, and inquiry, freedom of conscience and of association, freedom and security of the person, and free choice of occupation. They also agree that the right to hold personal property is part of freedom of the person, since control over personal belongings and security of one’s living space is necessary to individuals’ independence and sense of self-respect. Finally, nearly all contemporary liberals accept that individuals have a basic right to live under a democratic government with universal franchise (though this was not seen as a basic liberty by * For their helpful comments on a draft of this essay, I am grateful to David Reidy and other members of the philosophy department at the University of Tennessee; to Frederick Rauscher and other members of the philosophy department at Michigan State University; to Ellen Paul for her many helpful suggestions and editorial remarks on this essay; and to other contributors to this volume for their criticisms and comments. doi:10.1017/S0265052510000208 © 2011 Social Philosophy & Policy Foundation. Printed in the USA. 19 20 SAMUEL FREEMAN classical liberals prior to the twentieth century). All citizens, then, should enjoy equal political rights and liberties, including the right to vote, hold office, and freely participate in political life. Where liberals primarily disagree is on the nature and status of eco- nomic rights and liberties, including the extent of freedom of contract and rights to private property in land, raw materials, and other productive resources. Classical liberals generally hold that the economic liberties are to be regarded and guaranteed as among the basic liberties; or if they are not strictly basic liberties, then economic liberties resemble basic liberties in that they can only be restricted for special reasons.1 Freedom of con- tract and rights of property are not absolute for classical liberals; for example, the inalienability of the basic liberties itself puts restrictions on freedom of contract and rights of property. Nor would classical liberals, or liberals generally, accept or see as legally enforceable individuals’ attempts to permanently alienate their rights to equal opportunities to educate themselves and compete for open employment positions, or their right not to be discriminated against on grounds of race, religion, gender, or other classifications. One of the primary distinctions between classical liberalism and libertarianism is that libertarians regard freedom of coer- cively enforceable contracts as of such fundamental importance that it overrides the liberal restriction on the inalienability of basic liberties and also overrides equality of opportunity and equal rights to apply and compete for open positions.2 For liberals, by contrast, one cannot alienate 1 Following Joseph Schumpeter, I associate classical liberalism with the economic liber- alism of the classical economists, starting with Adam Smith in the eighteenth century, and David Ricardo, Thomas Malthus, and other classical economists (including J. B. Say in France) in the nineteenth century (with the exclusion of John Stuart Mill, for reasons to be discussed). Classical liberalism in the nineteenth century was associated with the doctrine of laissez-faire, “the theory that the best way of promoting economic development and general welfare is to remove fetters from the private enterprise economy and to leave it alone.” Joseph A. Schumpeter, History of Economic Analysis (Oxford: Oxford University Press, 1954), 395. Friedrich Hayek and Milton Friedman are major twentieth-century representa- tives of classical liberalism, along with James Buchanan and the “Virginia School” of public choice theory, Gary Becker and other members of the “Chicago School,” Ludwig von Mises of the Austrian School of economics, David Gauthier among philosophers, and Richard Posner and Richard Epstein among legal scholars. While each of these thinkers may not strictly endorse each and every one of the features of liberalism I discuss that distinguish it from libertarianism, each does subscribe to a predominant majority of them. Some thinkers (Loren Lomasky perhaps) may not fit neatly into either category, and would reject my distinction between classical liberalism and libertarianism. For a more extensive discussion of the primary differences between liberalism and libertarianism, see my essay “Illiberal Libertarians: Why Libertarianism Is Not a Liberal View,” Philosophy and Public Affairs 30, no. 2 (Spring 2001): 105–51. 2 By “libertarianism” I mean primarily the doctrine argued for by Robert Nozick, and also accounts by Jan Narveson, Murray Rothbard, John Hospers, Eric Mack, and others (includ- ing perhaps Ayn Rand). There is also a school of thought known as “left-libertarianism.” This position resembles libertarianism primarily in recognizing self-ownership and absolute freedom of contract. Otherwise, it bears little resemblance to traditional libertarianism, since it envisions qualified property rights along with extensive government redistribution to enforce egalitarian measures that (for example) neutralize the consequences of luck. See CAPITALISM IN THE CLASSICAL AND HIGH LIBERAL TRADITIONS 21 the basic rights, liberties, and opportunities that define one’s equal status as a person or citizen. While classical liberals regard the economic liberties as having great importance, they do not really regard them as basic liberties in every respect. Classical liberals have generally recognized that freedom of eco- nomic contract and rights of property differ from basic liberties in that they can be restricted for reasons other than maintaining others’ basic liberties and rights to equal opportunities. For example, classical liberals today accept that contracts for the purpose of fixing prices or putting restraints on trade and competition should not be enforceable; for in addition to foreclosing economic opportunities for others, such contracts are economically inefficient. Unregulated monopolies in certain resources are generally forbidden by classical liberals when they lead to economic inefficiencies. Also, contemporary classical liberals accept government’s powers of eminent domain for public purposes (on the condition that compensation is provided for any government “taking”). And most can accept zoning restrictions of certain kinds, for example, noise restrictions or the exclusion of manufacturing and commercial development in resi- dential neighborhoods.3 Zoning restrictions do not protect any basic lib- erty or opportunity but are issued as a matter of convenience, or to maintain property values, or to keep out unwanted neighbors. And clas- sical liberals recognize other restrictions on the economic liberties that they would not extend to the basic freedoms of expression, conscience, association, and other basic liberties. This suggests that however much the economic liberties are revered by classical liberals, they are not really among the class of basic liberties that all liberals recognize. For while classical liberals reject restrictions on the basic liberties (except to protect the basic liberties), they generally allow for restrictions and regulations on economic liberties in order to procure and maintain the conditions necessary for free competitive markets and eco- nomic efficiency, as well as maintaining health and safety, and procuring other public goods.4 The most enduring and (I believe) persuasive clas- Peter Vallentyne and Hillel Steiner, eds., Left-Libertarianism and Its Critics (New York: Palgrave, 2000). 3 Michael Munger suggests that many classical liberals incline toward relying on restric- tive covenants and the law of nuisances rather than municipal zoning laws. Still, unlike libertarians, classical liberals are willing to use zoning and eminent domain powers when restrictive covenants are ineffective or not available. 4 For example,