(This essay was published in Hong Kong Economic Journal on 16 March 2016.)


Liberalism is a political philosophy that embraces liberty and equality as its core value. Liberals generally support ideas and programs such as freedom of speech, freedom of the press, freedom of religion, free markets, civil rights, democratic societies, secular governments, and international cooperation.


Liberalism first appeared during the Age of Enlightenment among philosophers and economists who rejected the prevailing social and political norms of hereditary privilege, state religion, absolute monarchy, and the Divine Right of Kings. In England and America, liberalism as a political movement gave priority to the pursuit of liberty, but in France the pursuit of liberty was quickly transformed into a fascination with equality under the influence of Rousseau’s ideas.


In the 20th-century the word liberalism has been used to cover a wide array of views depending on the emphasis and understanding of the principles of liberty and equality. Indeed, liberals have attacked other liberals and denounced them as non-liberals or anti-liberals.


By the 1980s it became apparent that liberalism had three faces: (1) classical liberalism, (2) social liberalism (or social democracy), and (3) “liberalism of deep diversity” (a concept the great liberal Isaiah Berlin had attempted to articulate).


In modern America, the term liberalism has taken on a new meaning best described as social liberalism with its stress on equality. This is a departure from the liberalism of the Age of Enlightenment that gave priority to liberty. As a consequence, the original liberalism is now called classical liberalism and in America it is also called libertarianism.


In Europe, the word liberalism has retained its original meaning, that is classical liberalism, but to avoid confusion with social liberalism in America, it is called European liberalism. Europe in the 20th-century, particularly on the continent, placed even more emphasis on equality than American social liberalism, and it is more accurate to describe this ideology as social democracy.


The growing emphasis on equality in the modern conception of liberalism in America and Europe also implies a shifting focus concerning the conception of liberty. Classical liberalism viewed liberty as the freedom of individuals from external constraints. Social democracy viewed liberty as the freedom to be the master of one’s life through collective participation in political life.


In Isaiah Berlin’s terminology, liberty in classical liberalism is “negative liberty” and is centered on the individual, but liberty under social democracy is “positive liberty” and resides with collective participation in the political life in either the large society or a small community. American social liberalism embodied more elements of “negative liberty” than European social democracy, and vice versa in terms of “positive liberty.”


Under classical liberalism, the primary duty of a classical liberal democracy is to protect political and economic liberties. Classical liberalism sees the preservation of private property rights, free markets, low taxes, balanced budgets, and limited government as critical factors in preserving liberty in economic and political life.


For the classical liberal, economic equality means equality of opportunity (or a level playing field) for all, but not equality of economic outcomes. It accepts that government may have a role to ensure equal opportunities for all, but opposes setting a political goal to equalize economic outcomes because this would violate both economic and political liberty,by expropriating private property rights.


In a connected world, a country will from time to time be adversely affected by economic and political shocks originating from abroad. This is inevitable. Citizens of that country will find themselves suffering, through no fault of their own, from foreign shocks. Very often these are economic shocks that are propagated through an interconnected world of markets.


To many citizens, the economic and political values of interconnectedness are not well understood; even if they understand their long-term values, they still expect their government to shield them from such immediate shocks.


A democratic government has the duty to help its suffering citizens to weather such storms. Classical liberal democracies have a further duty to adopt the most appropriate policies to help their citizens and at the same time preserve economic and political liberties as well as they can under the circumstances.


The opening of China in 1979 and economic globalization (including its financial and economic crises) had deep and profound impacts on Hong Kong. The myriads of economic and social problems that have since emerged dwarf the problems that America is facing. Hong Kong’s problems have not been adequately addressed. Most societies would have fallen further apart if they had Hong Kong’s problems.


American liberalism and European social democracy emerged in response to the crises in the early 20th-century: the Great Depression (1929-39), two World Wars, and the rise of communism in the Soviet Union. The social welfare state was a middle ground solution to the problem of economic suffering that private capitalist market alone was unable to provide. It provided relief without having to embrace either socialism or communism outright, which would have entailed taking draconian illiberal actions such as abolishing private property rights.


European social democracy was more statist and populist than American social liberalism. In Continental Europe there is greater inclination to address economic suffering through the nationalization of industries and direct state provision of social services, and aggressive income redistribution through higher taxes. In Britain and America state intervention tends to favor correcting market failures through regulating private industries and changing market incentives through subsidies and taxes.


The different intellectual traditions in the English-speaking world and in Continental Europe, and the institutions associated with them may have something to do with their different histories.  Continental philosophers in the French and German tradition were more populist and statist due to the influence of Rousseau and Hegel, in contrast to the much stronger tradition of classical liberalism in Britain and America due to the influence of John Locke and Adam Smith.


It is worth pointing out here that some 20th-century classical liberals viewed the ideals of social democracy and social liberalism to be dangerous. Hayek’s Road to Serfdom (1944) warned of the danger of tyranny that inevitably results from government control. He challenged the general view among British academics that fascism was a capitalist reaction against socialism. In his view, communism, socialism, fascism, German National Socialism, social democracy, and social liberalism were all threats to classical liberalism because they put the state above the individual. So they were different only in degree.


John Rawls defended American social liberalism in A Theory of Justice (1971, 1975, 1999), appealing to individual self-interest to justify income redistribution. Borrowing the concept of a “veil of ignorance” first proposed by James Buchanan and Gordon Tullock, two classical liberal economists, in The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962), Rawls argued that a person not knowing his income position in society would be willing to pay a premium for an insurance policy to receive an income transfer to alleviate his condition should he end up in poverty. Rawls’ philosophy became the gospel of American social liberals looking for an intellectual defense for social liberalism.


But the tide was beginning to turn against social liberalism in the 1970s. The “War on Poverty” initiated in 1964 had not delivered the intended results. Post-war Keynesian ideas that had provided an intellectual alternative to classical liberalism in economic affairs during the Great Depression, were unable to explain why stagflation had appeared in America let alone offer solutions to tackle it.


The period 1980-2005 saw a revival of classical liberalism: Reagan and Thatcher were voted into power, Deng opened up China, and the communist regimes collapsed in the Soviet Union and Eastern Europe. But the ascendance has halted since 2008, as new economic problems have returned and remain unresolved. Although social liberalism in America was the first to tackle poverty and inequality (without success), classical liberalism is now blamed for the rise of inequality in the rich nations of the world.


The principles of liberty and equality underlying classical liberalism, social liberalism, and social democracy are all based on a set of universal moral values and truths applicable to all men, everywhere. The contractual relationship between men and state are derived solely on the basis of an abstract conception of man, of all men, as equal and free. Family, community, history, place and all other ties that encumber a person are never mentioned, not even age and gender. This is a characteristic of the Age of Enlightenment.


A universal conception of man gives liberalism its enormous moral appeal across time and place, and in different communities. When the idea of organizing the Occupy Central movement in Hong Kong first started, participants claimed to be fighting for universal values. But in the last days when the movement was ending, Mongkok had become a place to vent nativist anger. That anger would later rear its head again in Yuen Long and Shatin. Nativism appears to be the exact opposite of universalism.


In the late 18th-century, German scholars responded to Enlightenment ideas with deep suspicion. They rejected the liberal view that laws could be found to order human society according to the principles of equality and liberty, in the same manner that scientists discovered the laws of nature.


The view of human society as ordered by rules was unappealing to German Romantic thinkers, who emphasized history, tradition and community in the formation of local cultures and beliefs. In particular, they resented intensely the idea that human morals and ethics could be separated from cultures and beliefs.


These German thinkers gravely damaged the notion that absolute truth exists and knowledge about it can be discovered. Instead we now have relative truths, ethnocentric truths, subjective truths – this is the lasting legacy of these Romantic thinkers. Existentialism and postmodernism are the heirs of German Romanticism in the 20th-century. Subjectivism and irrationality have now entered the human discourse.


So what happens when I do not really understand what you are saying and doing, but you happen to live in my building?


Can liberalism still survive when subjectivism, irrationality, and relativism become part of the human discourse? The challenges are non-trivial and demanding. Without the common yardstick of an absolute standard to decide what is right and wrong, we need deep tolerance and understanding. But this can work only if opposing sides are willing to forsake confrontation and mutual defamation as the protocol of engagement. This is what is necessary when we have a “liberalism of deep diversity.” It will test our humanity.


Religious, ethnic and cultural conflicts are more difficult to resolve, as they are often conflicts over subjective beliefs. Economic and social conflicts arising from inequality in the use of resources are less difficult because they are primarily objective conditions that can be addressed by correct policy incentives. Fortunately, even religious, ethnic and cultural conflicts have economic dimensions, and one could start working first on the easier parts of a complicated problem.


The growing political conflict in highly civilized Hong Kong does not have religious, ethnic and cultural origins; it is primarily economic and social in nature and has its origins in the socioeconomic consequences of the opening of China and the effects of economic globalization. The resulting problems can be solved by government engaging those in opposition to forge a consensus on the way forward. Imposing a solution from above is unlikely to work, as the failures of past efforts here and elsewhere have demonstrated. When we have a “liberalism of deep diversity”, a top down solution will fail even more totally. It requires power to be shared.

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