POL113H5 Lecture Notes - Lecture 5: Classical Liberalism, Exchange Economy, Totalitarianism
1) Capitalism & Freedom- M. Freidman (1962)
• “The role of competitive capitalism the organization of the bulk of economic activity through private
enterprise operating in a free market as a system of economic freedom and a necessary condition for
political freedom”
• The great threat to freedom is the “concentration of power”
o Government is necessary to preserve our freedom, but also a threat to freedom (by concentrating
power in political hands)- must limit their power
o The scopes of government must be limited to only preserving law and order, to enforce private
contracts and to foster competitive markets
• The private sector is a check on the powers of government and is used to protect the freedom of speech,
religion and thought
• He argues that the great advances of civilization did not come from centralized government (e.x. Newton,
Einstein, etc. we the product of “individual genius”)
• Liberalism initially: emphasized freedom as the ultimate goal and the individual as the ultimate entity in the
society- supports laissez-faire at home to reduce the role of the state in economic affairs to enhance the role
of the individual
o FAVOURED POLTIICAL DECENTRALIZATION
• Liberalism today: associated with a readiness to rely primarily on the state, catch words like “welfare” and
“equality” rather than freedom, but as a “prerequisite or alternative to freedom”
o Favors parliamentary institutions, representative government, civil rights, etc
o FAVOURS POLITICAL CENTRALIZATION
• 19th century liberalism is now coined as CONSERVATISM
• How are modern and classical liberalism the same? Different?
o Radical: going to the root of matter, and in the political sense of favoring major changes in
social institutions
o Do not wish to conserve state interventions that interfere with out freedom, but want to
conserve those that have promoted freedom (classical)
• Claim: there is an intimate connection between economics and politics- a socialist society cannot also be
democratic in the sense of guaranteeing individual freedom
• Freedom in economic arrangements is a component of freedom overall- is an end in itself
• Economic freedom is an “indispensable means toward the achievement of political freedom = ECONOMIC
FREEDOM GUARANTEES POLITICAL FREEDOM
o WHY? It separates economic power from political power and in this way it enables the one to offset
the other
o “I know of no example in time or place of a society that has been marked by a large measure of
political freedom, and that has not also used something comparable to a free market to organize the
bulk of economic activity”
o “the typical state of mankind is tyranny, servitude and misery.”
• Cannot be inversed: capitalist societies are not necessarily free
o Can have a capitalist society in a totalitarian regime
• “Free private enterprise exchange economy” = Competitive Capitalism
o Central feature of the market organization of economic activity: prevents one person from
interfering with another in respect of most of his activities (market is impersonal, unbiased)
o The seller is protected from coercion by the consumer bc of other consumers to whom he
can sell
o The employee is protected from coercion by the employer for whom he can work, and so on
• Government is essential both as a forum to determine the “rule of the game” and to interpret and
reinforce the rules established
• The market reduces the range of issues that must be decided through political means, permits wide
diversity; a system of proportional representation (do not have to submit to the majority)
