These days we Liberal Democrats often divide ourselves, broadly and crudely, into “economic liberals” and “social liberals”. Economic liberals tend to start from the market, prioritising entrepreneurship, low taxes and preventing state interference. Social liberals tend to start from human rights and social justice, usually assuming a greater level of taxation and regulation, and thus of state activity, than economic liberals. But there is a substantial overlap in belief, and the crude characterisation of the last two sentences by no means describes all liberals.
The labels are as traditional as the idea, and I suspect have ceased to be useful as the world has changed so significantly since the days when they were forged. In fact in some ways I suggest that they are actively unhelpful. I have not met a social liberal who does not want a functioning market. Many economic liberals value social justice highly, although I have met too many who have difficulty accepting that individual freedom is a higher goal than maximum market efficiency.
Liberalism begins with the freedom of the individual. When liberalism first cohered, the most substantial threat to personal freedom came from the powers that be – the church or the state, the state being in the form of a monarch, an oligarchy, or even an alleged democracy like nineteenth century Britain.
It made sense at the dawn of liberalism, and it still makes some sense now, to link personal freedoms with freedom to transact. In other words, free markets made free people. For much of the history of liberalism that worked. It was possible for selfish actors to manipulate markets, and for the world to remain seriously unequal, but the downside of markets was more than made up for by the diminution of the dominance of the state and the sway it held over people’s lives. The key force to be aware of, and to guard against, was the force of political power, backed up ultimately by the state’s monopoly of the use of violence on a basis that was claimed to be legitimate. (For the purpose of this argument I am ignoring ecclesiastical power despite its persistence. Churches still retain much power e.g. the maintenance of the Lords Spiritual in this country, the spread of megachurches with cult-like characteristics in the USA and many southern countries, the rise of “Christian” nationalism. But, while they can wield great power over individuals and communities, their power globally is much more limited than it used to be.)
Two arguments were deployed if markets worked to the detriment of individuals. The first was that while some suffered, society at large benefited because markets mostly saw to it that populations prospered. (A rising tide lifts all boats.) The second was that the excesses of markets could be tamed through formal (legislation) and informal (consumer power) means.
The world now is different. It has become steadily more different since the rise of globalisation in the eighties, and in particular the impetus given to that movement by the neoliberal policies of Ronald Reagan and Margaret Thatcher. Now markets are globally dominant, and a few individuals and companies dominate the market. Indeed, such is the imbalance of power that any relationship between labour and profit has been broken. (The rising tide no longer lifts all boats.) Current wealth has such a force of gravity that it attracts more wealth to itself, and is largely in the hands of people who want to leave as little as possible to the rest of us. Markets affect the lives of everyone around the whole planet in ways that state power finds hard to match, even when projected by Donald Trump.
In such a world, the link between market freedom and individual freedom has not quite been broken but is more tenuous than at any previous time. It is legitimate to hold a view that the fundamental engine of a viable society is a free market, and to position that as the bedrock of policy positions. But that view can no longer be called liberal, because current market power is such that it can no longer be held to be unproblematically good. For instance, the UK markets in housing, energy and water have made conditions for most of us poorer and nastier in recent years.
Perhaps it is time for liberalism to centre itself fully on the liberty of the individual, ensuring that all policies flow from that and to regard markets, as well as the state, as forces to be tamed for the good of the people.
* Rob Parsons is a Lib Dem member in Lewes. He blogs at http://acomfortableplace.blogspot.co.uk. He curates Liberal Quotes on Facebook
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32 Comments
“Perhaps it is time for liberalism to centre itself fully on the liberty of the individual, ensuring that all policies flow from that and to regard markets, as well as the state, as forces to be tamed for the good of the people.”
Forgive me for misunderstanding this, but isn’t that just social democracy?
NB: specifically referring to seeing the markets and the state as “forces to be tamed for the good of the people.”
@Jack I think “social democracy” has the same problem of the creep of ancient definitions. To be honest, I’m not sure I could say what social democracy means nowadays. On the whole, it refers back to socialist traditions in which broad based movements like unions attempted to embrace democracy. So in the end – and I accept this is very debatable – liberal democracy is different from social democracy in that liberal democracy starts from and remains with individual freedom for all people. Social democracy tends towards collectivist solutions which usually end up with a compromise around individual freedom.
But in the end, in my view, the precise label doesn’t matter as long as the substance is prioritising people.
@Rob “The precise label doesn’t matter as long as the substance is prioritising people”, 100% agreed!
“.. to regard markets, as well as the state, as forces to be tamed for the good of the people.”
This will sound quite socialist to many.
You’re absolutely right of course. Markets tend to work quite well when everyone is sufficiently equal in society, and when they have to perform some physical labour themselves to participate in the markets.
The situation now is that everyone isn’t sufficiently equal. Billionaires can’t possibly have a handle on everything that happens with their billions. Their time is spent trying to ensure that their capital is used to extract wealth from everyone else rather than creating wealth per se.
We’d all be much better off if all billionaires were reduced to being mere millionaires! They too would be happier and wouldn’t have to worry quite so much about how to become multi-billionaires or even trillionaires!
I remember a previous time when it was argued that there is no real difference between social liberals and economic liberals. And then the Coalition happened, we got welfare cuts and austerity economics. Soon after the most deprived communities in the country went on to vote for Brexit.
Many of us hoped that a social liberal government would benefit these communities, mostly based in the Red Wall seats with public sector investment and with the decentralisation of power. It was possible then to argue in favour of “borrow to invest” because interest rates were so low.
Where I do agree with Rob Parsons is that times change and we will not have a government like that again. There are new policies we need to move on to.
So in the end – and I accept this is very debatable – liberal democracy is different from social democracy in that liberal democracy starts from and remains with individual freedom for all people. Social democracy tends towards collectivist solutions which usually end up with a compromise around individual freedom.”
I don’t think this is debatable at all – you have hit the nail on the head. Liberals concentrate on individuals – socialists concentrate on groups.
Adding the “Democrats” emphasises the importance of the people having the power to throw the rascals out if they so decide.
“It is legitimate to hold a view that the fundamental engine of a viable society is a free market”
I don’t think that such a view (that the ONLY engine of a viable societies the free market could ever have been called liberal. There are other essentials. Conversely I say that a free (but properly controlled) market is one of the engines that drives a liberal society and remains one of the mechanisms that limits power when it functions properly.
Thanks for this – helpful for me, even though I’ve left the party. I think I’m a ‘democratic liberal’ in that I think the freely expressed right of democratic scrutiny ultimately trumps politicians’ views of what is for the good of the people, and is a good in itself. (Which suggest I have some points of connection with Tristan’s view).
And your usage of ‘for the good of the people’ is – and I accept this is probably unavoidable – in tension between your emphasis on individualism and your wariness of collectivism/communalism. I probably move toward communalism in that i favour consensualism.
I feel that at times, policies the party advocates can cut across the principles I’ve laid out, as they don’t aways meet the test of supporting the nation’s democratic right to shift its consensus opinion, and instead are trying to nail the national consensus and constitutional framing closer to what the party thinks the nation’s consensus view should be.
Being a democratic liberal / liberal democrat means acknowledging the tension between the freedom to vote for policies that make the invidual (and others) potentially less ‘free’ (although whose definition of freedom being is invoked at any one time?). Not suggesting this is unproblematic, but I don’t think its avoidable.
“Current wealth …………. is largely in the hands of people who want to leave as little as possible to the rest of us”
I don’t think this is the right way to think about this. The real criticism is that too much power is in the hands of people who want to leave as little as possible to the rest of us (*) or indeed control or ignore the rest of us. The liberal project has always been about controlling power and distributing it.
(*) I accept of course that wealth is really helpful if you want to exercise (and abuse) power, and therefore limiting wealth can be an effective way of limiting power. However I think it is important to be clear about where the mischief really lies.
The Bible doesn’t say “The love of money is the root of all evil”: it says “the love of money is a root of all kinds of evil.1 (Timothy 6:10)
@Tristan 12.37
I take your points. It would probably need an entire article to examine the links between politics and money. Both are forms of power, or have power attached, and there has, of course, always been an overlap. My article was born from a sense that the people who dominate the market now interfere much more nakedly and directly both in politics and in the lives of the people who make them their money, whether employees or consumers. So, however you think of it, we can no longer see the market as a friend of liberty. it has to be controlled, just as politicians have to be controlled.
WRT the bible, that is – of course – not what it actually says, because the bible was not written in English. I’m not an expert on New Testament Greek, but all translations are to some extent re-creations. In this case, the verse starts “riza” without an article – it could be either “the” or “a”. And the base meaning of “panton” is “of all”. Adding “kinds of” is not the usual meaning, and in my view is a bit of a stretch. It might be more usual in NT Greek than classical, though.
@Tristan Ward
“Conversely, I say that a free (but properly controlled) market is one of the engines that drives a liberal society and remains one of the mechanisms that limits power when it functions properly.”
I agree. Would you say you support the concept of a social market economy? I’ve always favoured that approach to economics over either extreme (i.e. laissez-faire and state socialism).
“ Their time is spent trying to ensure that their capital is used to extract wealth from everyone else rather than creating wealth per se.”
This is a distinctly Marxist view of the world. Marx was a Classical economist who saw that society was different classes competing for a greater share of the national cake. The interests of Capital and Labour clashed, with workers being denied the full value of their Labour so capital could have greater profit
Sorry, previous comment was in response to comment by Peter Martin
@Jenny for a long time, I have regarded Marx as very accurate and penetrating in analysing the way the world works, but terrible at coming up with solutions for the inequity of it.
Jack Meridith . caring about the community doesnt make you a socialist , We have seen many excesses from the private sector which have been both detrimental to both the individual and to communities and it has been the collective intervention of those communities supported by the state in most cases reluctantly that has led to legislation to curve those excesses . Social and economic liberalism are two sides of the same coin trying to put our cause into a very narrow box only stifles debate and does not enlighten debate.
Matt 12.33 “tension between your emphasis on individualism and your wariness of collectivism/communalism”.
I don’t emphasise individualism. There is a fundamental difference between believing in freedom for individuals and believing that individuals should look out only for themselves. Starting with freedom for individuals means freedom for everybody, and much freedom can be obtained by people working together. For instance, the collective funding of the NHS has meant incalculably more freedom for huge numbers of people than if everybody had to pay their own bills. I would say that maximising freedom for everybody entails everybody making some sacrifices. It’s basic liberalism: everybody should be as free as they can be without impinging on other people’s freedom. Compromise, limits and co-operation are fundamental parts of liberalism.
@ Jenny,
Capitalists not unnaturally want a return on their capital. This is what I mean by extracting wealth. The situation is even more frightening that I put in with my “Marxist” comment. It wouldn’t be so bad if they were prepared to take a risk with their capital. But, not unnaturally they want the rewards and the returns without any of the involved risks.
As Daniella Gabor puts it:
“The key is returns. For this, BlackRock wants the state to “derisk” investments.”
Why are we so gullible to possibly go along with this? If there is a risk to any investment why is the Government not demanding that the rewards should also go to those who are taking the risk? Blackstock, or any other capitalist organisation, want risk free investments they are quite free to buy Government bonds.
An Example Prof. Gabor could have mentioned is the way the soon to be nationalised Rail companies are forced to lease their rolling stock. It’s money for nothing. There’s no risk at all. The leasing companies only pay the manufacturers once the rolling stock is delivered and there’s no risk of not being paid by the rail companies because they are Govt owned.
https://www.theguardian.com/commentisfree/article/2024/jul/02/labour-plans-britain-private-finance-blackrock
Interesting article. But I’m not convinced by some of your assertions. For example, you say UK markets in housing, energy and water have made conditions for most of us poorer . I’d argue it’s wrong to blame ‘the market’ for any of those. For housing, what’s made us poorer is lack of housebuilding + population growth – for which you can largely blame planning restrictions + high immigration. For energy, the culprit is lack of investment in renewables plus becoming too dependant on Russia until suddenly we didn’t want to buy Russian. For water, costs have risen because mainly because we have demanded much more investment and far higher environmental stands in recent decades (though a botched privatisation that created not a market but private monopolies didn’t help). In non of those has any kind of genuine market made us poorer.
More generally, I’m not convinced by the suggestion that the way the market runs and the concentration of wealth/power is fundamentally different now from how it used to be. There has always been a tendency for a few companies to grow and end up dominating (Look at something like Standard Oil – which controlled about 90% of the oil market in the US during the early 1900s, or the state of British shipping up to around the 1950s (a small number of companies openly cooperating to create an oligopoly that controlled almost the entire market).
When you have a near monopoly or oligarchy then you don’t have a free market, and making sure that you take regulatory action to avoid having a few companies becoming too dominant is an essential part of a liberal approach to markets. That does not require any rethinking of liberalism.
” It is legitimate to hold a view that the fundamental engine of a viable society is a free market, and to position that as the bedrock of policy positions. But that view can no longer be called liberal,”
That statement makes no sense. If it was correct, then you’re saying that it is appropriate for a party holding itself out as liberal to put non liberal policies as party positions which is curious. But if, as I believe, putting the, economic emphasis of party policy on a free market is liberal then there is no contradiction between social and economic liberalism
My objection to the way this article is framed is that whilst the author argues that the world has changed and that, by the authors definition, both social and economic liberals need to alter their position to reflect the “new reality” in the proposals for reform almost all the give is from the economical liberals and little or no give is required of social liberals.
Might this article be relevant?
https://www.taxresearch.org.uk/Blog/2025/12/12/inequality-is-a-political-choice-and-the-uk-keeps-choosing-it/
Thank you, Steve, for including reference to the taxresearch.org.uk article which every Liberal should read carefully and absorb. Lack of wealth (i.e. poverty, which includes ignorance and lack of conformity) is the way in which much more than half of the world’s population are denied effective choice or any say over the forces which control their lives. As the article states, for the UK the government choices – whether by Conservatives or by Labour – have been to consistently diminish further that choice for the majority of the population. It should be the primary object of any party which calls itself Liberal to redress that inequality and restore freedom of choice. And that means radical solutions in all aspects of life and in society.
@Simon Robinson 11th 9:51
I think that what you are calling a genuine market is what I woud call a well regulated market. One of the keys to this, I think, is that in the discourse of markets, regulation is seen to be a bad thing under any circumstance. This ignores the fact that markets require regulation. A market without regulation is not a market, it is anarchy. Regulation replaces trust, and without trust there cannot be a market. You can of course regulate too much, but you can also regulate too little, as we found in 2008. (And such is the hold of neoliberalism that subsequent governments have resolutely rfused to learn that lesson.)
I recognise that the idea of energy and water being markets is contestable; arguably those services should never have been turned into what passes for markets, but it is plausible that, for instance, a market in water might hav been sustainable had Ofwat not been designed to be feeble, and consistently lived up to its design.
You rightly note the strategic mistakes and external shocks that have contributed to price rises in energy, but businesses and their investors could have seen such shocks coming, just as many commentators did. The post-privatisation energy sector was designed to allow market forces to cause efficiencies and price reductions and has seen the opposite – because the market was so poorly regulated.
Where housing is concerned, there is most definitely a market and always has been. Its failures are, again, significantly due to poor regulation. Land banking by speculators has forced up the price of land everywhere and thereby contributed to the extraordinary rise in the price of houses. A decent regulatory regime would have cracked down on that oligopolistic practice decades ago.
Simon Robinson 12th Dec – 12:14am
There we differ. While you’re right that capital has always involved monopolies, fortunes and inequality, my premiss is that the world of wealth has changed great deal since the 1980s. Partly because there is substantially more of it (see, for instance, https://wid.world/news-article/first-global-database-of-wealth-accumulation-covering-1800-2025-now-available/) and partly because it has become much more footloose and is therefore able to contest and evade attempts to control it. So its predaotry instincts have become more difficult to contain, and therefore we need to put more and better effort into containing it.
But we agree that preventing monopolies, as well as other undesirable practices, is an essential part of liberalism. And I am not asking to reinvent liberalism; it’s more a question of reclaiming it.
@Andrew Tampion 12th Dec – 2:16am
In a sense guilty as charged. My experience is that there are two kinds of economic liberals. The first kind regards the freedom of markets as very important, and worth spending a great deal of energy to protect, but puts that within a context that the market is there to serve the person, not vice versa. Liberal Reform, for instance, describe themselves in this way: “Liberal Reform exists within the Liberal Democrats to promote personal liberty and a fair society supported by free, open and competitive markets as the foundation of the party’s policy… As such, we seek to put the rights of individuals first, but recognise the importance of challenging concentrations of power where they develop, both within and beyond the state.” (https://www.liberalreform.org.uk/about/) Liberty, fairness, markets – in that order. Between that and social liberalism, there is only a difference of emphasis. But I have seen in action people who describe themselves as economic liberals, who consistently argue against regulation in almost any circumstance. As I said in an earlier comment, markets require regulation. You can have too much regulation, but you can also have too little, and there is a strand of economic liberalism that fails to recognise this.
The position I’m arguing here is exactly as LR describe it: “the importance of challenging concentrations of power where they develop, both within and beyond the state”. The concentration of power in the modern global market is such that it needs robust challenge.
Thanks to Rif Winfield for a much appreciated comment!
@Steve Trevethan 12th Dec ’25 – 1:06pm
I agree!
“It should be the primary object of any party which calls itself Liberal to redress that inequality and restore freedom of choice”
I would put it another way – a Liberal party should seek to ensure a society which no-one is enslaved by poverty, ignorance or conformity.
Of course that puts less emphasis on material equality than some might like.
@ Simon Robinson,
“For housing, what’s made us poorer is lack of housebuilding + population growth – for which you can largely blame planning restrictions + high immigration”
This does sound to be a plausible explanation in a UK context. However, there is an economic factor too. Buying a home isn’t just considered to be for the purpose of having somewhere to live. It’s considered to be a money making asset. Buying up a flat in central London, several years ago would have proved to be a good investment even if kept empty.
Australia has had a similar policy towards housing as ourselves. Building land isn’t as hard to come by. Immigration has been more tightly controlled. Yet the bubble in house prices there is even worse than here.
https://www.theguardian.com/australia-news/2025/jul/13/great-job-good-education-no-home-is-australias-bloated-property-market-destroying-the-middle-class
@Peter Martin: Australia’s population has grown from 19 million in 2000 to 27 million today – that’s an increase of over 40% in 25 years! The country may be huge, but it’s largely desert or arid, with most of the population crammed into a few small coastal areas. And a quick google suggests that they also have planning issues hindering housebuilding. So it looks to me like their housing crisis has much the same causes as the UK’s one.
I agree with you that ideally we’d view houses as places to live, not investments. But if the house actually has people living it, then it makes no significant difference to supply/demand (and therefore to house prices) whether whoever bought it thought of it as an investment or not. (It may make a difference to the proportion of rented vs owner occupied). I’d suggest people viewing houses as investments is mostly a consequence of rising house prices, rather than a cause.
To me the big divide in Liberal Democracy is not between economic liberals and social liberals but instead is between traditional Liberals and Lib Dems who believe in personal liberty, but constrained by the need to live in a community which requires its citizens to accept various responsibilities in particular the need to rub along with each other and show a willingness to accept people having different viewpoints on issues due to their different experiences, and the Progressives who seem to believe in total freedom for themselves and their friends founded on undebatable rights (based on opinions they hold which are part of what they are and so to oppose or even debate them are denying their right to exist) and a willingness to undermine others groups who do not totally agree with these rights but instead seek to find a balance between different viewpoints.
The preamble to our constitution acknowledges this need by stating in its very first sentence where it says ‘we seek to balance the fundamental values of liberty, equality and community’.
Using this inspiring part of our message has to be a key element in our plan for future success and healing that division needs to be addressed and will require some give by all sides.