Economic liberalism is the belief that the economy needs to be organized on individualist lines. This means economic decisions should be carried out by individuals rather than collective organizations or institutions. While this kind of liberalism is supportive of regulations put into place by governments to certain degrees, it often opposes interventions by governments in free market as such inhibit open competition and free trade. While this is the case, there are instances when it accepts the intervention of governments for purposes of removing private monopoly as the same is essential for limiting decision power held by certain individuals.
The origin of the term can be traced to the eighteenth century which is also known as Age of Enlightenment and was a replacement for European mercantilism which stated international trade ought to be under the control of the state. Economic liberalism is also referred to as laissez-faire economic and promotes the notion that governments ought to keep out of economics and instead, allow the governments to control themselves.
Adam Smith is attributed as the one who introduced the concept of economic liberalism. He advocated for minimal government interference in market economy though he did not necessarily oppose the provision made by the state of public goods which were limited. He asserted that once people are left to apply their preferred economic devices rather than being under the control of the government, then it could result to a more equal and harmonious society that could lead to ever increasing prosperity. Economic liberalism underpinned a move that was driven towards an economic system that was capitalism towards the end of the eighteenth century as well as mercantilist system demise.
Economic liberalism is based on individual contracts and private property. The theory was devised from the assumption economic actions are as a result of self interest which makes people behave in a manner that is without restrictions for purposes of achieving best results for all involved. Further, the theory holds that this is only acceptable as long as one does steal, commit fraud or coerce others and if press freedom and speech exists.
Liberal, classical economists also believe as long as people act in self interest, then the markets are able to self regulate. What this means therefore is that market for services and that for products determines the availability and price of the services and products. The set prices in turn determine the wages as well as profitability of those making provision of the services or the goods.
More importantly, economic liberalism upholds private property sanctity. The government should own minimal property because when it is held by individuals, they are more able to maximize and protect the property as a result of self-interest.
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