O economic liberalism it is a doctrine that emerged in the 18th century and its main representative is the Scotsman Adam Smith (1723 -1790).
Economic liberalism defends the non-intervention of the State in the economy, free competition, free exchange and private property.
Summary
Economic liberalism emerged when the National States were being constituted. Thus, a group of thinkers criticized what they considered excessive state intervention in the economy, leaving little room for free enterprise.
Liberals countered the ideas of the mercantilism and of the Physiocrats who defended the State's control of the economy through monopolies, high taxes and protection of professional associations.
Thus, economic liberalism is characterized by the non-intervention of the State in the economy, the defense of private property and free competition.
"Laissez Faire, Laissez Passer"
The expression in French “laissez faire, laissez passer” (Let it go, let it go) sums up a principle dear to liberals who defend economic freedom.
For liberals, the individual is the economic agent and, for this reason, the State should not interfere in economic activities with too many rules. If there is any maladjustment, the market itself will correct it naturally, that is, it is self-regulating.
It is up to the State, in the liberalism, maintaining order, preserving peace and protecting private property.
Free competition
Free competition encompasses the freedom for commerce to produce, fix prices and control the quality of production. The market itself, with its law of supply and demand, would adjust the demand and value of goods, without the need for state interference.
Free exchange, in turn, aims to reduce customs tariffs that lead to protectionism.
Comparative Advantage
In this current, each country should specialize only in articles that they had the capacity to produce at an advantage compared to other nations.
It would be a kind of international division of labor, with each country maintaining its productive tradition.
Example: in country X it is possible to plant wheat and soy. However, soybean yields are much higher than wheat. In this way, country X should give up planting wheat and dedicate itself only to planting soybeans.
In the eighteenth century, however, when colonies existed, liberalism asserted that some countries should supply only agricultural products, while others would compete with industrialized goods.
Liberalism thinkers
The 18th century that saw the emergence of the political liberalism and the French Revolution it was full of thinkers who defended freedom in the economic and political field.
Let's focus only on thinkers of economic liberalism:
Adam Smith (1723-1790)
Liberal thought was defended by Adam Smith, regarded as the father of liberalism and founder of the classical school.
Likewise, English philosophers and economists Thomas Robert Malthus and David Ricardo expanded the ideas of economic liberalism.
Thomas Malthus (1776-1834)
Thomas Robert Malthus studied the growth of populations and the ability of natural resources to sustain them. In this way, he believes that resources grow in arithmetic proportions and population grows in geometric proportions.
Thus, wars, natural disasters and epidemics would act as a regulator of consumption needs in line with the size of the population.
Malthus' thought was published in 1798, in the work "Essay on the Population Principle".
David Ricardo (1772-1823)
The English philosopher David Ricardo exposed the theory of comparative advantage where he argued that international trade should be divided according to the possibility of each country. In this way, transactions would be fair and there would be no need for customs barriers.
Transposing this theory to companies, Ricardo states that companies also find competitive advantages when they differentiate products and services, have a monopoly on the market or find policies favorable to Business.
Reviews
Economic liberalism will be harshly criticized in the nineteenth century by the Marxism which declared that liberalism was to blame for the concentration of wealth of the bourgeoisie and the poverty of the working class.
Likewise, it lost strength after World War II (1939-1945) when national economies had to be reorganized from the state. At this time, the economic school that predominated was the Keynesianism.
neoliberalism
Liberal ideas returned in the 80s and 90s when they were renamed neoliberalism.
Privatization, the reduction of civil servants and the opening of the internal market were defended. They were applied worldwide, including in Brazil, in the government of Fernando Henrique Cardoso.
read more:
- Capitalism
- Characteristics of Capitalism
- questions about capitalism
- Market economy
- Supply and Demand Law
- Neomalthusian Theory
- Margaret Thatcher
- Ronald Reagan
