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Economics

Classical liberalism in the Liberal party since 1886

The final death of classical liberalism as a force or element within the Liberal Party has been announced many times over the last hundred and thirty years. Yet, as the need to keep on repeating the pronouncement of final death shows, the tradition has persisted and persists. Ever since Herbert Spencer declared in 1884 that “Most of those who now pass as Liberals, are Tories of a new type” (Spencer, 1884) there have always been within the Liberal Party those who have upheld the old religion of free trade, economic liberalism, limited government, and individualism. Since the climax and crisis of Gladstonian Liberalism in the 1880s two things have repeatedly happened in British Liberal politics. The first is the redefinition of liberalism as a collectivist rather than individualist system of thought, with a corresponding shift of policy towards a position that assigns an active role to government. This has been the work of a series of thinkers from L. T. Hobhouse and J. A. Hobson onwards, passing through figures such as John Maynard Keynes, Beveridge, and Rawls. The second has been not just resistance to this by those who adhere to the older vision of an individualist version of liberalism that looks back to Locke, Bentham and J. S. Mill but a succession of departures by such resisters, typically in the direction of the Conservative Party. Starting with the Whigs in the 1880s, this has also included Coalition Liberals after 1916 and National Liberals in the 1930s, and a series of individuals after 1945.

The outcome of these processes has been transformational, at least on the surface, for the organised forces of both Liberalism and Conservatism. The Liberal Party has become ever more strongly identified, both in commentary and as a matter of self-identification, with the social liberalism of Hobhouse and T. H. Green, which gives a liberating role to an active government. In the Conservative case, although in each instance the Liberal switchers were absorbed and Conservative labels and organisation persisted, the ideas and beliefs of the party were shifted in a classical liberal direction so that the Conservative Party became identified with economic liberalism and free markets, commerce and urbanism while the hierarchical, rural, protectionist and traditionalist identity of the Tory Party gradually faded.  However, as we shall see, not all of those who adhered to the classical liberal tradition ceased to identify as liberals or left the Liberal Party and one reason for their remaining an active element within the Party was the persistence of elements of traditional Toryism that made identification with that party impossible, no matter how much it might take on free markets and economic liberalism as policy. Moreover the remaining classical liberals within the Liberal Party did not simply reiterate old truths in an old way, they also developed them in new directions.

The great crisis of Gladstonian Liberalism following the ‘Hawarden Kite’ and the introduction of the first Home Rule Bill in 1886 led to the first wave of departures from the Liberal Party. While provoked by the issue of Irish Home Rule, in many cases there was also a history of growing uneasiness with the direction of the Party, particularly during the second Gladstone administration, with a move in the direction of what was known as ‘constructive legislation’, i.e. positive activity by government. This certainly lay behind the departure not only of Whigs such as Hartington but also of many of the older generation of Radicals such as A. V. Dicey, who analysed the shift in politics he discerned in his Lectures on the Relation Between Law and Public Opinion. (Dicey, 1914) However the rupture was not a simple matter of the mass of classical liberals and Whigs leaving the party. For one thing the exodus also included Joseph Chamberlain, anything but a classical liberal (as his later career would show) and others who should be seen more as the business or politically conservative elements in the party. Also many others who were classical liberals remained.

The 1890s were a decade of crisis, political defeat and organisational incoherence for the Liberal Party and it seemed that the Unionist coalition forged by Salisbury and Chamberlain had gained a hegemonic position. Partly in response to this the decade saw the articulation of a new form of liberalism that, while still seeing liberty as the highest political good, conceived of it in collective terms and saw large scale action by democratic government as required for its realisation. The early articulation of this view in works such as Hobhouse’s The Labour Movement (1893) and Hobson’s Problems of Poverty (1891), The Evolution of Modern Capitalism (1894), and The Problem of the Unemployed (1896) concentrated on the issues raised by the late Victorian ‘discovery of poverty’ and the growing concern over social insecurity and unemployment. The solutions proposed were state action such as labour exchanges, public works and old age pensions but also such things as eugenics, with forced labour colonies for the ‘incorrigible’ and sterilisation for the ‘unfit’. (See Hobson 1901 for examples of this). The degree to which liberalism had become a doctrine of active government by as early as the start of the decade can be seen by looking through the majority of the entries in Andrew Reid’s “Why I Am A Liberal” (1891 2nd edition).

However many of the entries in Reid’s work and perusal of the pages of Hansard will also confirm that many old radicals did not join the exodus in 1886 and continued to fly the flag of traditional Gladstonian liberalism both within Parliament and outside it. One example was the MP and temperance campaigner Sir Wilfrid Lawson, another the former MP and ardent campaigner against compulsory vaccination, Peter Taylor. The most prominent was Gladstone’s friend and biographer John Morley, who produced one of the great works of British classical liberalism in his Life of Richard Cobden. There were also however younger members of the party who held these views, one them being the young Francis Wrigley Hirst, who would go on the be one of the most important advocates of individualist classical liberalism. In 1897 he and several of his friends put together a collection of essays rearticulating the classical liberal position entitled Essays in Liberalism (1897).

Hirst himself wrote the preface after approaching several leading Liberal politicians including Asquith who declined to do so on the grounds that the book amounted to “a declaration of war against that section of Liberal opinion, which has of recent years gravitated towards modes of thought and fashions of speech which are called ‘Collectivist'”. Asquith added that although not in “substantial disagreement” with the collection he could not associate himself with it because “exception might not unreasonably be taken to my going out of my way (as it would be said) to herald a militant demonstration, avowedly directed against a section (however small) of the party of which I am (for the time being) one of the responsible leaders”. (Gladstone’s response read “I am wholly unable to comply with the requests which so often reach me for the writing of Prefaces, but I venture on assuring you that I regard the design formed by you and your friends with sincere interest, and in particular wish well to all the efforts you may make on behalf of individual freedom and independence as opposed to what is termed Collectivism”) (Hirst, 1947. 157-8).

The last great flourishing of Gladstonian liberalism and its principles however came in the first decade of the twentieth century. In 1899 Sir Henry Campbell-Bannerman became leader of the party, despite being very much one of the surviving Gladstonians, because he was the only suitable candidate who was acceptable to the various factions into which the party had divided. Initially the Boer War, which broke out that year, highlighted these divisions, with the so-called ‘liberal imperialists’ such as Grey and Asquith supporting it while both traditional Gladstonians and new liberals opposed it. Partly because of this the party suffered a heavy defeat in the election of 1900. However the bulk of the party subsequently rallied around Campbell-Bannerman’s robust criticism of the conduct of the war on liberal grounds.

More significantly, at the same time a radical movement grew up on the Conservative side of politics. Headed by Joseph Chamberlain this grew into an organised mass movement that called for a radical break with the political and public economy broadly accepted by both parties since 1846. The central element of the programme was a revival of protectionism on the basis of imperial preference, hence the name given to the movement – ‘Tariff Reform”. However the programme was comprehensive and included much more, such as an active economic role for government in encouraging investment, expansive state welfare measures, a major expansion of the military, aggressive imperialism, a large programme of public works, and a growth of state education and training. This split the Unionists and in 1903 Chamberlain left the cabinet. What this also did was to provoke a dramatic revival of classical liberal argument and organisation. Faced with a serious threat to free trade, organisations such as the Cobden Club (always one of the strongholds of the individualist tradition) recruited new members and set up local groups and organisations around the country. This combined with the articulation of traditional liberal anti-imperialism with regard to the war to give the ideas a new lease of life.

Nor were these the only issues that had this effect at that time. The Unionist administration also revived classical liberal arguments over both education and the proper relation of church and state by the measures contained in the 1902 Education Act. The introduction for the first time in nearly two centuries of immigration controls via the 1905 Aliens Act (the first measure ever to require the use of the Parliamentary guillotine) led to organised resistance that again articulated classical liberal economic and philosophical argument. The opposition in Parliament was led by Sir Charles Dilke who although himself a ‘new liberal’ took, in the words of his biographer, “the hard line classical liberal position in this case”. (Nicholls).  Finally the growing argument over the functioning of the Poor Law suddenly saw the revival of classical individualist argument within the Liberal Party and even the Labour movement. The debate led the government to set up a Royal Commission in 1905.

In 1905 the divided Balfour government resigned and Campbell-Bannerman formed a government. He immediately dissolved Parliament and the following year the Liberals gained the greatest landslide in British political history, fighting on a traditional liberal platform (some of the pro free trade propaganda produced for this election is still worth looking at). (Howe, 1997 and Trentmann, 2008) Given this, it is perhaps surprising that the 1906 to 1916 Liberal administration is remembered as the one that saw a decisive break with classical liberal ideas and the adoption of the programme and ideas of social liberalism in the ‘People’s Budget’ of 1909.  In fact however there was a major shift in the balance and direction of government policy following Campbell-Bannerman’s death in 1908 and his replacement by Asquith. Part of the context for this was the publication of the findings of the Royal Commission on the Poor Laws in 1909, which produced a clear articulation of the two opposed ways of thinking about this question in the Majority and Minority Reports. The government adopted an approach which leaned towards the Minority Report while not going along fully with its proposals and so the individualist approach of the Majority report fell by the wayside. The years after 1909 saw the ‘strange death of liberal England” with strikes, an often violent campaign for votes for women, and an escalating argument over Irish Home Rule and Ulster that left the country on the verge of civil war by the summer of 1914. In this climate liberal arguments of all kinds became hard to make.

Then in 1914 came the catastrophe of World War I. Many at the time (including the Liberal Chief Whip Sir Percy Illingworth) saw this as the death of liberalism of any kind. The aftermath of the war and the inter-war years in general saw not only the collapse of the Liberal Party as a party of government but also the triumph (it is commonly said) of the social variant of liberalism. Classical liberalism, to the extent it survived anywhere took refuge in the Conservative Party. Again this does not tell the whole story. There was a continuing debate within the Liberal Party throughout this period and the advocates of an expansive economic and social role for government did not have everything their own way. This debate is often conflated with the division between followers of Lloyd George and Asquith but while most of the classical liberals adhered to the Asquithian side there were some in both camps.

Francis Hirst had now emerged as a prominent advocate for the classical liberal side and was one of a number of Liberals associated with the Economist who advocated free trade and liberal economics through that journal. Another important figure was Lettice Ilbert (better known as Mrs H. A. L. Fisher) who was a strong advocate of classical liberal economics in popular works such as Getting and Spending and Then and Now  – the latter work compared the situation after 1918 with that pertaining after 1815 and argued for a policy of re-establishing hard money, reduction of government spending and freeing up of trade and commerce. Among the survivors from an older generation, J. M. Robertson, who had previously been on the new liberal wing of the party, now moved in a more classical liberal direction (although some would argue that he had always leaned that way). Another was E. S. P. Haynes who mounted a strong attack on the growth of state power  during the war and argued for the classical liberal position against this in The Decline of Liberty in England (1922).  It is worth noting that many of the new liberals such as Hobhouse, were chastened by the experience of the war and much less sympathetic to expansions of state power in its aftermath. (Freeden, 1986).

However the two major figures who carried the torch – but in significantly different ways – were Sir Ernest Benn and Elliot Dodds. Benn was a successful businessman from a family with a long tradition of Liberal activism. Initially a supporter of an extensive role for government, he was disillusioned by his experiences with Trade Councils and became a convert to economic individualism following a visit to the United States in 1922. He became an active campaigner for traditional Liberal ideas but on a non-party basis, most notably through his own writings and a series of letters to The Times. In 1925 he set up the Individualist Bookshop at 84 Charing Cross Road which became both a meeting place and the centre for the distribution of works advocating individual liberty and economic liberalism. (The bookstore was run by W. H. ‘Bill’ Hutt, who would go on to be an important author for the Institute of Economic Affairs).  He also set up a series of ‘economic luncheons’ on a strictly non-party basis that were aimed at supporters of these ideas among all of the various parties. In 1929 he decided reluctantly that for the immediate future economic liberals would have to vote Conservative, not because that party was consistently in favour of those views (as he made clear he had a low view of all politicians in that respect) but because it was less hopeless and less likely to adopt bad measures than the other two parties. In other words he effectively gave up on the Liberal Party as a vehicle for his beliefs, despite continuing to have links with active Liberals such as Hirst and others. Moreover he continued to regard himself as a ‘true liberal’ rather than as a conservative, the argument was simply that on grounds of political expediency people such as he would have to vote for the Conservatives, until liberal ideas revived in the Labour Party as well.  This was not a wildly unrealistic expectation in the context of the later 1920s or early 1930s, given the presence in the Labour Party of undoubted classical liberals such as Josiah Wedgwood and in many ways Philip Snowdon but this tradition of working class liberalism within the party was destroyed by the events of 1931. (Mulvey, 2010)

Benn typified the route taken by many classical liberals which was to leave the party while not fully moving to another and continuing to advocate ideas such as free trade, economic liberalism, and smaller government on a non-party basis in the hope that these would come to have an influence on people in all of the various parties. Others however remained within the party and were highly involved in its internal structures and policy making procedures. The most important of these was Elliott Dodds, many times candidate for Parliament and long time editorial writer at the Huddersfield Examiner. Dodds was strongly committed to the classical liberal policy of free trade and sceptical of the interventionist programme of the Yellow Book but he was also sceptical of the straightforwardly pro-business arguments that the Conservative Party was putting forward at this time.  In regard to the first position, he worked with others in the party who also put forward traditional liberal economic thought at this time, including S. W. Alexander and Alfred Suenson-Taylor (Lord Grantchester), in opposition to the proposals for import controls being advocated by some in the circle around Keynes, notably Roy Harrod.

The other aspect of his thinking however was to advocate major reforms of the ownership structure of industry so as to encourage a wider diffusion of property ownership. Advocacy of both of these lines of thought came together in 1938 when Dodds chaired the party’s “Ownership for All” committee. The report of the committee, which was adopted by the party at its assembly that year, called for the restoration of free trade and argued against state intervention in the economy except in strictly defined emergency circumstances. It also called for a radical rethink of the structure and ownership of industry through a move to co-ownership, on the liberal grounds that this would help to promote individual autonomy and liberty and would undermine privilege. Dodds and those like him in the party thus supported economic liberalism and a free market economy with limited government intervention but combined this with a vision of a different kind of market economy to the one that actually existed and which was broadly defended by many conservatives and other classical liberals such as Benn. Hirst was also a supporter of this approach and consequently disagreed with the political strategy that Benn and others had adopted.

The period of the war time coalition saw a decisive policy shift in British politics, even if there is argument among historians about the extent of it. What is clear though is that contrary to some popular accounts there was not a simple rallying of not just liberal opinion but the entire nation around the proposals of the Beveridge Report. Sir Ernest Benn was provoked to create a new organisation, the Society of Individualists, a national organisation with local branches which drew much of its membership and leadership from the surviving classical liberals within the Liberal Party. It engaged in a vigorous war of pamphleteering, public campaigning and letter writing against not only the Beveridge Report but many other ideas that were doing the rounds at the time such as central planning and nationalisation, as well as calling inter alia for the BBC to lose its monopoly. In 1944 it merged with the National League for Freedom, an organisation with similar targets but organised by the free-market elements within the Conservative Party, to form the Society for Individual Freedom (still in existence). Benn was very reluctant to do this and several of the original members such as Hirst and Alexander withdrew.

Moreover, Beveridge and his allies did not have things entirely their own way even within the Liberal Party. A rival, classical liberal vision of welfare reform was articulated by several people, most notably Juliet Rhys-Williams who put forward an alternative based on a negative income tax in a number of works, particularly Something to Look Forward To (1942). (She actually has the credit for inventing the term ‘negative income tax’ even though it is more often associated with Milton Friedman). Rhys-Williams argument was that a system of this kind would promote individual autonomy better than the state insurance scheme proposed by Beveridge and that it would not lead to the kind of large bureaucracy that his proposals entailed.

In the years after the war a clear pattern emerged. Many people continued to advocate classical liberal ideas in economic policy within the party. Some of these later went down the Ernest Benn route and withdrew from active involvement in the party. Some then moved into the Conservative party ( for example Juliet Rhys-Williams) and pushed the same ideas within that organisation (this means of course that their movement into the Conservative Party was not the product of a more general ideological change or shift of views). Others continued to advocate the ideas as Benn had done, from an independent or neutral position. This meant of course that they eschewed direct input into the policy formation process of any party but sought rather to influence people in all of the parties and the wider climate of opinion.  The key figures in this group were some of those already mentioned, notably Alexander, and Grantchester. Along with them were a number of younger people, notably Oliver Smedley and Arthur Seldon, both of whom were active party members throughout the 1950s and early 1960s. Smedley, Seldon and Grantchester were of course all involved in the setting up and early years of the Institute of Economic Affairs and the IEA became the major vehicle through which classical liberals who had given up on directly influencing policy in the party continued to advocate the ideas without making a full switch to the Conservative Party. Seldon always continued to regard himself as a liberal even after ceasing to be a Liberal and was always very keen to keep open links to the remaining opponents of big government liberalism within the Liberal party.

These were of course the other group, those such as Dodds who remained in the party and worked on a form of policy and politics that was distinctively liberal and radical while also being individualist and sceptical of state power and action, in the economy and elsewhere. Theses people, including such figures as George Watson and Nancy Seear, came together in the Unservile State Group, formed by Dodds and others in 1953. They published a collection of essays under the title The Unservile State: Essays in Liberty and Welfare (1957) and produced a series of pamphlets throughout the 1960s and 1970s. Although Jo Grimond’s leadership saw the start of the project to ‘realign the left’ that led to an overture to the social democrats within the Labour party, Grimond himself was clearly in the classical liberal tradition as his later writings made clear (Barberis, 2005). While the Unservile State Group ran out of steam by the later 1970s, the 1980s saw a new wave of younger economic liberals joining the party, many of them under Grimond’s influence, and these went on to be involved in the activity that led to the publication of the Orange Book. There were also a number of important intellectuals who were either members of the party or explicit supporters of it and who continued to advocate the kind of radical but free-market liberalism that Dodds and others had put together in the 1930s. One of the most important was James Meade, another important figure was Sir Samuel Brittan.

Since at least the 1920s and maybe as far back as the 1900s or even the 1890s, classical liberals have been a minority within the Liberal Party. However there have always been some people within the party who adhere to this position and they are part of a continuing, living tradition of thought within the party. Periodically people of this persuasion have left the party or given up active involvement, but in many or most cases they have not then gone on to join another party but have adopted an independent position at think tanks and organisations such as the IEA or in academia or the media. All this obviously raises a number of questions. One is simply that of why this tradition persists so stubbornly? This however is relatively easy to answer, it is because firstly such people can always appeal to the history of the party and many of its greatest figures and secondly (and more importantly) because for all liberals the basic commitment to liberty means that government and overt power is always questionable, so there is always a space for a view that emphasises scepticism on this point. The more difficult question is that of why so many remain active in the party when it is clear that they are very much in the minority or why having left they so often refuse to make the definitive jump and join the Conservative Party? The answer tells us a great deal about both liberalism and conservatism in the recent past and today.

One obvious set of reasons is simple inertia or historical loyalty and affection, inherited tribalism in other words. We should not underestimate the power of this, as the recent history of the Labour Party demonstrates. However there are also more intellectual reasons, having to do with the continued ultimate differences between liberalism and conservatism. For many individuals, while they may agree with many Conservatives and conservatives on matters economic there are other parts of the conservative world view that they find rebarbative or impossible to accept. One is nationalism and the common conservative attachment to political communities such as nation or (in an earlier period) empire. In the case of classical liberals within the liberal party this has meant historically that the issue of Europe or such questions as immigration have been a barrier. Another, particularly more recently, has been the Conservative Party’s attachment to cultural conservatism and the wider conservative idea of a moral community of shared and substantive moral norms on matters such as sexual behaviour and conduct. As the twentieth century went on, many of those who espoused economic liberalism also came to support sexual and lifestyle libertarianism and they found this a barrier to full identification with conservatism (Brittan and Grimond are both examples of this).  In fact, just as old liberalism has persisted in the liberal party so old Toryism has remained alive within the conservative party and its continued presence makes individualist liberals uneasy or unwilling to go for a full or enthusiastic switch of affiliation.

Perhaps the most important factor however is that over a basic question which divides those who otherwise agree on free markets, free trade, and limited government. What should the institutional framework and organisational structure of a free economy look like? While free market conservatives and some free market liberals can support the existing forms of organisation there is a persistent tendency among liberals, going back as far as J. S. Mill at least that believes individual autonomy is threatened by private power and forms of business organisation as well as state power. People who take this view, such as Meade and Dodds have therefore advocated a political economy that while free market or even laissez-faire in its orientation is also supportive of radical redistribution of property or dramatic reorganisation of the ownership and organisation of productive industry and commerce. Given the association of the Conservative Party with established business since at least the 1880s, this makes the Liberal Party the most likely home for this form of market political economy.

A version of this article was previously published in Economic Affairs.


Peter Barberis Liberal Lion: Jo Grimond: A Political Life. (London: I. B. Tauris, 2005)

Albert Venn Dicey Lectures on the Relation Between Law and Public Opinion in England During the Nineteenth Century (2nd Edition) (1914).

Michael Freeden Liberalism Divided: A Study in British Political Thought 1914 – 1939. (Oxford: OUP, 1986)

Francis Wrigley Hirst In the Golden Days, 1947.

J. A. Hobson The Social Problem (London: Nisbet, 1901)

Anthony Howe Free Trade and Liberal England. 1846-1946 (Oxford: Clarendon Press, 1997).

Paul Mulvey (2010) The Political Life of Josiah C. Wedgwood: Land, Liberty and Empire, 1872-1943

Jaime Reynolds, ‘The last of the Liberals – The career and political thought of Francis Wrigley Hirst (1873-1953)’, Journal of Liberal History, Issue 47, Summer 2005.

Frank Trentmann, Free Trade Nation. Commerce, Consumption, and Civil Society in Modern Britain (Oxford University Press, 2008)