AI assisted translation of Il lento suicidio del liberalismo

Classical liberalism is dying. The reasons are many, but one must never be overlooked: the responsibility of liberals themselves, who have decidedly lost their way.

The Rise of Illiberalism

Illiberal, plebiscitary forces, acting in the name of “the people” and a distorted interpretation of democracy, are eroding its principles—both political and economic: principles that have so far been respected because they are enshrined in constitutions. The constitutions themselves, the principle of separation of powers, judicial impartiality, pluralism in lifestyle choices, and individual freedoms are being contested everywhere.

France, Germany, Italy…

Radical forces, especially those on the right, are gaining votes at the polls: the Rassemblement National and La France Insoumise in France, Alternative für Deutschland and Swa in Germany, Fratelli d’Italia and the Lega in Italy. Parties more closely tied, albeit timidly, to liberalism are unable to unite. This is the case in France and Germany; in Italy, the party that nominally aligns with conservative liberalism (albeit with many contradictions) is allied with the most radical right-wing forces.

From the Tea Party to Trump

The most emblematic case, however, is the United States, where the Republican Party has undergone a dramatic identity shift: from John McCain, the last of the traditional Republicans, to Donald Trump, the transformation has been both swift and extreme, though not entirely unpredictable. The radicalism of Trumpism, which now encompasses racist, supremacist, and anti-democratic factions once excluded, was preceded and prepared by the Tea Party movement—a conservative and populist group but “libertarian” in economic terms. Meanwhile, liberals have surrendered to a culture often marked by intolerance, in the name of an unquestionable moral code.

The Milei Case

The fervor that many self-proclaimed liberals exhibit for Javier Milei, an authoritarian “anarcho-capitalist,”, is a striking example of how far off course the liberal tradition has drifted. Milei is celebrated primarily for reducing inflation—from 25.5% in December 2023 to 2.4% by November, and from an annual high of 289.4% in April to 166% last month—but this fixation on results overlooks the authoritarian methods employed.

Classical liberals and Pinochet

This is not the first instance of such missteps. In the past, Chilean “classical liberal” economists who had studied at the University of Chicago (the “Chicago Boys”) supported and aided the dictatorship of Augusto Pinochet, praised by Friedrich Hayek, often considered the greatest classical liberal thinker of the 20th century, though he eventually preferred to identify as a Whig. Milton Friedman was more reserved, considering the relationship between dictatorship and economic liberalism temporary and unsustainable—predicting that one would inevitably give way. Some classical liberals in the postwar period even expressed admiration for António de Oliveira Salazar.

Von Mises and Fascism

Can we ignore the support some classical liberals lent to early Fascism? A liberal economist like Ludwig von Mises, committed to the values of peace and democracy, acknowledged Fascism’s less savory aspects and was convinced of its transient nature. He nevertheless praised its historical role in defeating Bolshevism in Italy: “[It] saved European civilization. The merit Fascism thus gained will live on eternally in history.”

Mussolini the Free-Marketeer

It should not be overlooked that the finance minister in Mussolini’s first government, Alberto de Stefani, was both a squadrista and a free-marketeer. Mussolini’s policy was also free-market-oriented. In his Udine speech on September 20, 1922, Mussolini declared:

“We want to strip the state of all its economic attributes. Enough of the state as a railway operator, postman, insurer. Enough of the state running businesses at the expense of all Italian taxpayers and further straining the state’s exhausted finances.”

On March 18, 1923, at the Second International Congress of Chambers of Commerce in Rome, he added:

“I believe the state must relinquish its economic functions, especially monopolistic ones, for which it is inadequate. I believe a government seeking to quickly lift populations out of the postwar crisis must leave free rein to private initiative and abandon all interventionist or regulatory legislation, which may satisfy the demagoguery of the left but ultimately proves, as experience shows, utterly fatal to economic interests and development.”

Benedetto Croce’s position on “Liberalism and Free-Market Economics”—a term not of his invention —cannot be understood without considering the free-market economic policies of early Fascism.

Classical Liberalism Off Track

It is as if classical liberalism lost the antibodies that should have prevented the rise of autocracies, at some point in its history. It’s not the whole history. Classical liberal culture has also stopped offering solutions—despite having once provided excellent ones—to the inevitable problems created by contemporary, highly dynamic economies. Even non-radical citizens of Western countries have turned elsewhere: to social democracy or Christian democracy, where liberalism principles were subordinate to other, typically social, political goals, or to conservatism. Some political forces have even appropriated the name “liberal”: the “liberals” of the U.S. Democratic Party are effectively social democrats; while conservative liberals are genuine conservatives, ready to abandon classical liberal principles when they conflict with business interests.

The Two Reasons for Disorientation

What happened? Why have classical liberals lost control of their core values? The reasons are diverse but can be traced to two central elements: the loss of the delicate balance underpinning classical liberalism and the example set by Bolshevism.

Ethics and Utility

From its inception, classical liberalism sought a delicate balance between values and efficiency, between ethics and utility, between the great ethical doctrines— culminating in Immanuel Kant’s procedural approach—and the best utilitarianism, beginning with David Hume and Jeremy Bentham, though even the finest scholars have often misinterpreted it. The transformation of utility into efficiency eventually led to a tendency to defend the current deep structure of the society.

Croce’s Lost Lesson

The “false,” “belated,” “anomalous” liberalism of Benedetto Croce, as he described it, rests on an inevitable overlap between ethics and utility, as explored in Filosofia della Pratica. Economica ed Etica. For the Neapolitan philosopher, everything ethical—and his ethics are Kantian—inevitably falls under the concept of utility, albeit in a specific and nuanced sense; while, for example, an amoral utility exists in political and economic action.

Hayek, the Steamroller

Hayek is perhaps the thinker most responsible for the abandonment of classical liberalism’s ethical tension and its flattening into a defense of the status quo. His skepticism toward reason is typically conservative and enables the defense of those “at the top” of the conservative social hierarchy without addressing contradictions. The principle of spontaneous order, a crucial concept, is based, as Hayek framed it, on tradition and leaves little room for leaps in innovation—not only technological—that the Industrial Revolution made frequent (and which economic theory has otherwise handled well). Similarly, Hayek’s market concept, as a system for transmitting and unifying information dispersed among participants, leaves no space for innovation, as economist Edmund Phelps pointed out.

The Challenge of Socialism

The challenge posed by socialism and communism emphasized this defensive stance and prevented the recognition of issues created by economic development. Even the unrealistic “economic harmonies” of Frédéric Bastiat were revived.

Joint-Stock Companies

The emergence of joint-stock companies radically transformed the economic landscape. Henry C. Simons, a prominent classical liberal, lamented that such entities were “simply taking over our economic (and political) system due to absurd generosity and inattention by states in granting powers to these legal creatures”. The strong and rightful emphasis of classical liberals on individualism—always understood as social individualism—did not prevent new corporations from being almost automatically granted the rights and freedoms of individuals, creating significant imbalances between individuals and businesses.

Trusts

By the late 19th century, trusts had emerged almost spontaneously, under laissez-faire conditions: in the United States, they were partially restrained by the Sherman Act and subsequent regulations; in Germany, a 1897 court ruling legitimized the agreements underpinning them. In 1928, German jurist Franz Böhm—who, with Walter Eucken and Hans Grossmann-Doerth, founded the journal Ordo, which gave rise to ordoliberalism—authored a foundational essay on economic power (The Problem of Private Power: A Contribution to the Monopoly Question), charting the way forward.

The Monopoly of Unions

This discourse was largely forgotten after World War II. With von Mises first and Hayek later, monopolies came to be seen as temporary phenomena—their persistence depends however on the economic system’s real dynamism—or protected by legal and governmental systems. The only monopoly to be combated became… unions, in blatant contradiction of the principle of freedom of association. In the postwar period, U.S. legal doctrine, fueled by the Volcker Fund, altered antitrust law interpretations based on principles of efficiency. It is worth noting—despite exceptions—that liberals have rarely contested intellectual property rights and patents, which are, after all, legal monopolies.

The Imitation of Marxism

The most troubling development, signaling liberalism’s fundamental subordination, has been its imitation of Marxism. Paradoxically, opposition to the more radical strains of socialism pushed classical liberals to adopt certain of its principles, albeit inverted.

From Classical Liberalism to Anti-Communism

Faced with the rapid growth of socialism—and to a far lesser extent, Christian social economy— classical liberals’ primary goal shifted from promoting liberal principles to combating communism. Mises’s praise for Fascism stemmed from its supposed, albeit superficial, opposition to Bolshevism. However only a Hegelian—or Marxian—orientation could equate a negative objective with a positive one.

Marxian Social Hierarchy

Marxian socialism established a social hierarchy in which specialized workers were deemed the revolutionary or “intermodal” class, capable of transitioning the economic system from a bourgeois mode of production to a communist one. This class was expected to liberate everyone. Other social classes were destined to disappear—bourgeoisie included, due to industrial concentration—or assimilate into the industrial proletariat. The revolution would serve as midwife to this transition.

Elite Theory

Conservatism responded with an opposing social hierarchy through its theory of elites, which identified the ruling class primarily by its numerical minority relative to the “masses.” Von Mises easily pointed out that the formation of a political elite (or any elite, for that matter) arises from the division of labor. Any economic or social activity is conducted by a minority, but this does not confer special rights or privileges. Imagine, if you can, a world without janitorial staff: in cities, streets, hospitals, offices… For the economic system to thrive, it requires an innovative mindset—from investors, bankers, entrepreneurs, managers, technicians, workers, and consumers alike, as Phelps again emphasizes.

Classical liberalism and Horizontal Society

Liberalism is incompatible with any form of social hierarchy. A truly liberal economic system and legal framework must allow anyone willing to try, for instance, and become an entrepreneur (though not to shield them from failure—individuals remain responsible). Until recently—though this is changing—the United States, while far from perfect, offered significant opportunities to anyone with a viable entrepreneurial idea (as discussed in *Saving Capitalism from the Capitalists* by Luigi Zingales and Raghuram Rajan). Europe, by contrast, decidedly does not; it is a bank-centric, inherently elitist, and thus conservative system.

From Freedom to Property

Mises—an author not to be underestimated, as his errors and contradictions are preferable to Hayek’s—took, in his 1927 work Liberalismus, the step from a positive to a negative, anti-Bolshevik vision of liberalism. For him, it was possible to reduce liberalism “if condensed into a single word” to “property,” or more precisely, “private property in the means of production.” “All other demands of liberalism derive from this fundamental demand,” even peace, he wrote.

The Centrality of Consumers

Mises was a rationalist, advocating a highly dynamic view of the economy. He was not a classic conservative skeptical of reason, as Hayek was, but it is evident that centering liberalism on the private ownership of the means of production risks creating a new social hierarchy, one focused on capitalists. However, for Mises, this was not the case: he developed the idea of consumer centrality—later amplified into consumer sovereignty. Consumers, who do not constitute a social class, were seen as those to whom even capitalists must answer.

Entrepreneurs and Bankers

Mises’s approach found an interesting parallel in Joseph Schumpeter’s more detailed and impactful vision of economic development, which he entrusted to courageous entrepreneurs and intelligent bankers—two social functions that thus gained centrality. The concept of *trickle-down economics*—justly criticized today—draws its vitality from the same mindset.

From the Liberal System to Capitalism

An even subtler consequence of the fight against communism is the shift in classical liberal discourse: instead of praising “liberal systems” or, more accurately, those “more liberal than others,” classical liberals now praise “capitalism,” as if the battle were still against communism—essentially state capitalism—and not its propagandistic image as “an alternative to capitalism.” This is a grave error.

The Anti-Capitalist Mentality

The closure of classical liberalism mind was sealed by numerous analyses of the so-called “anti-capitalist mentality.” The first of these came from Mises, who did not hesitate to invoke Freud—another modern aspect of his thought that sets him apart from the anti-modern Hayek. Mises’s followers, however, failed to build on this and typically retreated to blaming “social envy” among intellectuals. Once again, the existing capitalist system—often not liberal at all—was conflated with liberalism.

Vices and More Vices…

Discomfort with the inevitable economic challenges of development was often attributed to a “moral vice,” even by authors who elsewhere emphasized the positive role of “private vices.” This approach is not only scientifically unsound but also prevents recognizing the difficulties generated by the current economic system, which is inherently dynamic, and thus the forms—more or less justified and expressed in various ways—of rejecting the status quo and proposing alternatives.

The Difficulties of Capitalism

The hierarchical relationships within modern companies—which bear no connection to the market or liberalism—the uncertainties of the labor market and the matching of supply and demand, collective layoffs caused by the incompetence and irresponsibility of entrepreneurs, consumers finding themselves in a position of weakness in long-term contracts, often per adesionem and unilaterally modifiable, especially with banks and insurance companies, create challenges that have nothing to do with “social envy”- Failing to acknowledge problems like these is tantamount to closing one’s eyes to reality.

After the Great Recession

Mounting discontent and dissent following the Great Recession were not adequately addressed, except in non-liberal forms. During the crisis, imprudent bankers and insurers were even rewarded; after the crisis economic policies prevented workers from fully benefiting from productivity gains, only to let inflation erode their purchasing power. This was inevitable. Classical liberalism is now deeply compromised, overly tied to conservatism, which, in the face of difficulties, has inevitably morphed into populist authoritarianism—and thus into ideology.

The Necessary Liberalism

The world still needs liberalism, in its democratic (and, in a non-socialist sense, progressive) version. It is the only system capable of keeping concentrations of political, economic, or social power in check, guaranteeing the peaceful coexistence of diverse lifestyles, and thereby—though without miracles or preordained harmonies—creating a materially and humanly more prosperous and peaceful system. This outcome, however, is always contingent on the efforts and responsibilities of individuals.

The Possible Liberalism

To emerge from its current coma, liberalism must free itself from the enormous burden of the errors committed by many classical liberals—errors mixed, as in Mises’s case, with correct assessments and ideas. Liberalism cannot become doctrinaire: it is the offspring of a continuous tension between reality and ideal, between efficiency and liberty. There are no inherently liberal authors—much less true or false liberals—but liberal ideas and illiberal ones. No outcomes are predetermined or automatic, and no political or economic harmonies are guaranteed. Everything ultimately depends on the responsibility of individuals. Nothing is set in stone; the boundaries between ideas and evaluations are always porous.

We must start anew with one thought in mind: the social, political, and economic system is not liberal. It is not today, and it will never be enough.