Liberalism is a political ideology portrayed as the ideology of the industrialized West. Although liberals of all time never waver in their faith in protecting the “liberty” of individuals, the meaning of the word keeps changing over time.
The main purpose of this essay is to examine the differences of classical liberalism and modern liberalism. The first part will provide the definition of “liberalism” in general, focusing on the shared elements in all forms of liberalism. The second part will introduce the history of liberalism, from classical and modern liberalism till contemporary neoliberalism, and try to illustrate the connection between their main doctrines and historical contexts. In the last part, I would closely examine the differences between classical and modern liberalism, and discuss the boundary between liberty and government intervention in contemporary society.

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Definition of Liberalism
Liberalism, as implied in its name, is a political ideology whose main concern is to protect and enhance the liberty of individuals. As a political doctrine, liberalism did not emerge until the early nineteenth century. However, liberal thoughts and values had been developed through enormous social changes from the sixteenth century, and can even be traced back to as early as ancient Greece and Rome, although there are some distinctions in the main elements. (Heywood 46)
There are several common elements shared by all variants of liberalism. According to John Gray, they can be summed up in 4 points(x). Firstly, individualism. It reflects the belief that human beings are foremost individuals, rather than subjected to any collectivity. Therefore, liberals aim at constructing a society in which individuals are provided the freedom to pursue his or her own good or happiness. Secondly, egalitarian or equality. Liberals believe that all individuals are born equal, in terms of two equal rights, namely “legal equality” and “political equality” (Heywood 46). However, as people have different talents or abilities, liberals are devoted to provide equal opportunities for everyone to realize their uneven potential. Thirdly, universalism. They affirm that the human process a unified morality. It should be taken in account ahead of the difference of their cultural. Fourthly, meliorism. By meliorism, liberalism firstly implies a belief in the reason of human beings. Through reasoning, individuals can make wise judgments and resolve disputes by the means of debate and discussion. In this way, the society, which is the collection of individuals and its construction are generally progressing. On this premise, liberals believe that people should be offered enough toleration in order to pursue their own interests. It is under this circumstance that the balance and progress of a society can be achieved.
However, liberalism has several different sources. “It owes something to Stoicism and to Christianity, it has been inspired by scepticism and by a fideistic certainty of divine revelation and it has exalted the power of reason” (Gray: x). Apart from its multiple sources, liberalism is also sensitive to the variation of time and conditions. French liberalism and English liberalism have many significant differences. Classical liberalism and modern liberalism are notably different in many ways. For these reasons, liberalism is sometimes seen as a meta-ideology, which consists of rival beliefs and values.
History of liberalism
Classical liberalism
The political foundations of classical liberalism root in a series of social changes from the sixteenth century. The late Medieval saw the dissolve of feudalism and the rise of absolutism. Meanwhile, the power of papacy was weakened and religious reformation was seen in European countries. Rulers had to enforce the conformity either to Roman Catholicism or Protestantism. This process triggered conflicts within and among the states. One example was the Thirty Years’ War from 1618 to 1648, which brought Europe an enormous damage. In the next century, as industrialization gained pace, a new social class, namely the middle class emerges. They yearned for more political participation and economic freedom. These factors triggered the revolutions in the seventeenth and eighteenth century, the most notable of which were the Glorious Revolution in England in 1688, the American Revolution from 1775-83, and the 1789’s French Revolution. In this circumstance, liberalism gradually emerged as a political doctrine. (Encyclopædia Britannica)
In the light of the philosophy of English liberals John Locke , French political philosopher Montesquieu , and even earlier the individualism of Thomas Hobbes , early liberals aimed at restricting the power of the government over individuals. In the word of UK-born political activist and pamphleteer Thomas Paine, the government is a “necessary evil”. (Heywood, 2007:47) Opposing feudal privilege and absolutism, liberals emphasize the importance of constitution and a representative government. The structure of a minimum government was supplemented by Montesquieu. He designed a mechanism of check-and-balance by advocating the separation of three power of the government: legislative, executive and judiciary.(Gingell, Little and Winch 105) Classical liberals, such as Locke also asserted that private poverty is the foundation of liberty of individuals (qtd. in Gingell, Little and Winch 71-79).
Another crucial element of classical liberalism is economic liberalism. This principle was mostly provided by Adam Smith in The Wealth of Nations. In a word, classical liberals advocate Laissez-faire, believing in the self-regulating of the market and the minimum of government intervention, which guarantees liberty of individuals and the prosperity of the market (Heywood 47).
The philosophical justification of classical liberalism is supplemented by utilitarianism. It was put forward by Jeremy Bentham, James Mill and J.S. Mill. They believe that the goal of a society is to obtain “the greatest happiness of the greatest number”. In achieving this goal, a representative government which upholds liberty is necessary. (Gingell, Little and Winch 225-228)
Classical liberalism had a profound impact on the politic throughout the centuries. It inspired the creation of unified, independent, constitutional states which based on representative principles and the rule of law. In After the Glorious Revolution, under influence of the Whigs, who was the precursor of today’s Liberal Party, precepts of classical liberalism had long governed England. In France, liberal goals were achieved in 1871 by the Third Republic. Another significant success was the found of the United States in 1776.
In the economic realm, numerous feudal restrictions on manufacturing and internal commerce were abolished. Meanwhile, tariffs and restrictions on imports intended to protect domestic manufactures were put into end. (Encyclopædia Britannica)
Modern Liberalism
By the end of nineteenth century, problems had gradually revealed in the free market economy in England and North America. Profits of the booming industry were concentrated in the hand of big companies, while the mass benefited very little. Consequently, the gap between the rich and the poor was significantly enlarged. Moreover, as the poor mass was not able to consume, there were a large surplus of supply, which led to depressions. Meanwhile, as the rich gained more and more power, they were increasingly able to influence politic and limit competition. (Encyclopædia Britannica)
In this circumstance, liberals of the late nineteenth century and early twentieth (e.g. T.H. Green and L.T Hobhouse) started to seek for reforms. Their ideas were strongly influence by J.S Mill, who was widely recognized as the watershed philosopher in liberalism. (Grey 30-31; Heywood 48)
Generally, modern liberals hold that freedom does not equal to being left alone. Being left alone, human beings are weaker instead of stronger. They would be stuck in poverty, hunger, illness and helpless and that enjoy less liberty to realize themselves. Hence, Social welfare in particular is to be provided by the government.
Meanwhile, the laissez-faire capitalism was rejected by new liberals. Ideas of classical liberals were proved defective in the industrialization and were further challenged by the two world wars and the Great Depression in the 1930s. In The General Theory of Employment, Interest, and Money , UK economist J.M. Keynes argued that it was laissez-faire policies that resulted in huge unemployment and economic instability, thus the government should manage the “aggregate demand” in the economy through tax and spending policies. (Heywood 190)
From 1950 onwards, government intervention had expanded into various areas of life. (Grey 28) Social welfare starting from free public education and workers’ accident insurance were established.
Modern liberalism reached its peak in the post war period, when everything, from industries to the dignity of individuals, was to be reconstructed. Welfare programs were further expended throughout western world, including social insurance, pensions, family allowances, medical care, and government-funded higher education. (Encyclopædia Britannica)
In economic sector, “visible hand” of the government had achieved remarkable results. For example, President Franklin Roosevelt’s New Deal (1933-1939) successfully lifted American out of the Great Depression.
Neoliberalism
Neoliberalism is a retrieve of the political economy in classical liberalism. The ideas were developed by twenty century’s economists, e.g. Friedrich Hayek and philosophers such as Robert Nozick (Heywood 52). They address the problem of the slowing down economic growth which starting from the mid-1970s in the western world. (Encyclopædia Britannica)
Neoliberals hold that intervention, whether with a good intention or not, would have negative effects. The best solution should still be found in “self-help, individual responsibility and entrepreneurialism” (Heywood 52). One expression of the idea was Margaret Thatcher’s policies. She also asserted that “there is no such thing as society, only individuals and their families” (Heywood 52).
Comparison of classical and modern liberalism
Negative liberty vs positive liberty
The distinctions between classical and modern liberalism root in their different understanding of liberty.
English philosopher Isaiah Berlin made a profound distinction between two concepts of liberty, which he called “negative liberty” and “positive liberty”. By being free in a negative sense, Berlin meant “not being interfered with by others” (123). While in the second case, freedom means the capability of the individual “to be his own master” (131). Classical liberals focus on the maximizing of negative liberty, while by contrast, modern liberals hold that the government should assistant individuals to realize their positive freedom.
Minimum state vs social welfare
By advocating a minimal state, classical liberals focus on the maximizing of negative liberty. In a minimal state, only three core functions are left in hand of the government. Firstly, maintaining domestic order with organizations such as police force. Secondly, it should enforce contracts or agreements between citizens, which means the function of judiciary. Thirdly, the state should protect the people from external threat, thus a military is needed. (Heywood 99)
By contrast, modern liberals hold that the government should assistant individuals to realize their positive freedom. Therefore, social welfare programs are strongly upheld. However, there was still a boundary. According to T.H Green, when and only when individuals are in threat of being enslaved by liberty should the government intervene (Tyler).In another word, social welfare should help those who cannot help themselves.
Laissez-faire vs government intervention
Adam Smith asserted that the “invisible hand”, namely the self-interest of the individual in a free market would lead to the well-being of the economy. In order to benefit himself, one has to produce according to the demand of the market, which Smith phrased as “invisible hand” (Smith vol. 2a) On the contrary, government intervention is dangerous as it was exercised “in the hands of a man who had folly and presumption enough to fancy himself”. (Smith vol. 2a)
By contrast, modern liberal economists, such as Keynes, pointed out that economy is not perfectly self-managing. Only under the rule of supply and demand, monopolization is unavoidable. Profits fall into the hands of a few people while the mass are incapable of consuming, which doom the end of capital circulation economic prosperity. Only with government intervention can the economy maintain a prolonged prosperity. (John Maynard Keynes).
However, it is notable that the idea of free market was never fully abandoned by modern liberals even Keynes. Unlike socialists, they had no intention to nationalize the economy or interfere with the mechanism of supply and demand. According to Keynes, the “visible hand” functions not by cutting wages to insure full employment, but by “expansionary fiscal policy”, such as spending money on public projects to expand demand.(Sharpe)
In order to evaluate both concepts of liberalism, we should take in to consideration their historical contexts. Because every political philosophy is the product of a certain time and circumstance and therefore has its limitation.
As showed above, classical liberalism was born in a time of the transformation from feudalism to absolutism. It was a time when the government still ruled over people. Hence, the deep suspicion of the government is reasonable. In a time when the negative liberty of individuals were everywhere under threat, it is important to introduce the concepts of “social contract” and restrict the power of government at any cost.
Modern liberalism however, addressed mainly the problem emerging in industrialization. It had been observed that even if free from all external restrictions, sometimes people are still vulnerable and incapable to realize themselves. In addition, with the development of representative democracy, government itself had gained more trust that it can represent the will of the individuals.
Nowadays the idea of social welfare and economic intervention has been widely accepted in most western countries. However, there are still a lot of questions. One of them is that if government is justified to intervene, what should be the limitation?
With respect to social welfare, modern liberals have provided the answer themselves.
In his Theory of Justice, John Rawls suggested two principles to justify redistribution. The first one, which he called equal principle, suggests that individuals should have equal rights to basic liberty. The second principle, which is difference principle, inequality is justified, only if it promotes the well-being of the worse-offs compared to in the condition of equal liberty. (Rawls, John)
This boundary is of great importance. Because, firstly, equality is an indispensable principle of liberalism. Policies in favor of the weak should be designed to compensate the existing inequality, not to create new inequality. Excessive protection would jeopardize social equality and lead to negative consequences. Take the debate over Affirmative Action in the United States as an example. This action was aimed to redress the disadvantages caused by historical discrimination. However, the clauses had aroused intensive controversy, being accused of generating “inverse discrimination”. For example, in the 1978 Regents v. Bakke case, student Bakke sued the Medical School of University of California at Davis, for it reserved sixteen present of studying slots to minorities, which was ruled by the Supreme Court as unconstitutional. (Fullinwider) In this case, intervention did not only help the worse-offs, but also harm the better-offs.
Secondly, excessive welfare would make the people depend too much on the state and lose the motion of self-realization. As a result, the drive for social progress will be impeded. For instance, nanny state, which provide social care “from curdle to grave” are always criticized for  creating an underclass of welfare dependents. (Nanny state)
However, as for economy, the line is much vaguer. Neoliberals of our time remind us the warning of Adam Smith that economic planning was doomed to fail. The reason is however, according to Von Hayek, that even if with good intention, the government would never have enough knowledge to make the right decision. Hence, they rejected the direct government intervention to promote demand, but suggested that government should maintain a stable value of money. (Ingham)
From the 1970s, Keynesianism seemed to reach its bottleneck. Regulations concerning the insurance, banking, and financial industries were eliminated in the next decades. (Encyclopædia Britannica). Relaxed regulations have brought good effects, but would that be the permanent prescription?
The answer is in the negative. The economic crisis of 2007-08 originating in the financial system in the U.S. exemplified the shortcoming of insufficient regulation. In his last term, President Barack Obama undertook a series of policies that re-regulate or nationalize the bank (Encyclopædia Britannica). In Neoliberalism: A Critical Reader edited by Alfredo Saad-Filho, the defects of contemporary Laissez-faire policy were examined. These include unemployment, enlarged domestical and international inequality, and the destruction of environment. (Saad-Filho and Johnston 5)
The development of society sometimes shows a pattern of a waving pendulum. Capitalism is and will always trying to find a balance between efficiency and equality.
Conclusion
From its sprout in the seventeenth century, to its transformation starting in the late nineteenth century, and until the revival of its original ideas in the recent decades, liberalism constantly adjust itself according to time and circumstances. Due to different historical contexts, Classical and modern liberalism explained “liberty” from different perspectives. Compared with classical liberals, modern liberals have more confidence in the government and that uphold more intervention in social and economic affairs. Nevertheless, the belief in the supreme value of individuals and the reason of human beings, the respect for equality and universality of morality remain unchanged. In contemporary society, although it have been widely accepted that government should protect the positive liberty of individuals, what is the limitation of government intervention will remain a question.