Ideology supporting both civil and economic liberties
Classical liberalism is a political tradition and a branch of liberalism that advocates free market and laissez-faire economics and civil liberties under the rule of law, with special emphasis on individual autonomy, limited government, economic freedom, political freedom and freedom of speech. Classical liberalism, contrary to progressive branches like social liberalism, looks more negatively on social policies, taxation and the state involvement in the lives of individuals, and it advocates deregulation.
Until the Great Depression and the rise of social liberalism, classical liberalism was called economic liberalism. Later, the term was applied as a retronym, to distinguish earlier 19th-century liberalism from social liberalism. By modern standards, in the United States, the bare term "liberalism" often means social or progressive liberalism, but in Europe and Australia, the bare term "liberalism" often means classical liberalism.
Classical liberalism gained full flowering in the early 18th century, building on ideas dating at least as far back as the 16th century, within the Iberian, French, British, and Central European contexts, and it was foundational to the American Revolution and "American Project" more broadly. Notable liberal individuals whose ideas contributed to classical liberalism include John Locke, François Quesnay, Jean-Baptiste Say, Montesquieu, Voltaire, Marquis de Condorcet, Thomas Paine, Thomas Malthus, and David Ricardo. It drew on classical economics, especially the economic ideas espoused by Adam Smith in Book One of "The Wealth of Nations", and on a belief in natural law. In contemporary times, Ayn Rand, Murray Rothbard, Friedrich Hayek, Milton Friedman, Ludwig von Mises, Thomas Sowell, Walter E. Williams, George Stigler, Larry Arnhart, Ronald Coase and James M. Buchanan are seen as the most prominent advocates of classical liberalism. However, other scholars have made reference to these contemporary thoughts as "neoclassical liberalism", distinguishing them from 18th-century classical liberalism.
In its defense of economic liberties, classical liberalism may be described as conservative or right wing, while in its defense of civil liberties, it has more in common with modern liberalism (the left). Despite this, classical liberals tend to reject the right's higher tolerance for economic protectionism and the left's inclination for collective group rights due to classical liberalism's central principle of individualism. Additionally, in the United States, classical liberalism is considered closely tied to, or synonymous with, American libertarianism.
Evolution of core beliefs.
Core beliefs of classical liberals included new ideas – which departed from both the older conservative idea of society as a family and from the later sociological concept of society as a complex set of social networks.
Classical liberals agreed with Thomas Hobbes that individuals created government to protect themselves from each other and to minimize conflict between individuals that would otherwise arise in a state of nature. These beliefs were complemented by a belief that financial incentive could best motivate labourers. This belief led to the passage of the Poor Law Amendment Act 1834, which limited the provision of social assistance, based on the idea that markets are the mechanism that most efficiently leads to wealth.
Drawing on ideas of Adam Smith, classical liberals believed that it was in the common interest that all individuals be able to secure their own economic self-interest. They were critical of what would come to be the idea of the welfare state as interfering in a free market. Despite Smith's resolute recognition of the importance and value of labour and of labourers, classical liberals criticized labour's group rights being pursued at the expense of individual rights while accepting corporations' rights, which led to inequality of bargaining power. Classical liberals argued that individuals should be free to obtain work from the highest-paying employers, while the profit motive would ensure that products that people desired were produced at prices they would pay. In a free market, both labour and capital would receive the greatest possible reward, while production would be organized efficiently to meet consumer demand. Classical liberals argued for what they called a minimal state and government, limited to the following functions:
Classical liberals asserted that rights are of a negative nature and therefore stipulate that other individuals and governments are to refrain from interfering with the free market, opposing social liberals who assert that individuals have positive rights, such as the right to vote, the right to an education, the right to healthcare, and the right to a minimum wage. For society to guarantee positive rights, it requires taxation over and above the minimum needed to enforce negative rights.
Core beliefs of classical liberals did not necessarily include democracy nor government by a majority vote by citizens because "there is nothing in the bare idea of majority rule to show that majorities will always respect the rights of property or maintain rule of law". For example, James Madison argued for a constitutional republic with protections for individual liberty over a pure democracy, reasoning that in a pure democracy a "common passion or interest will, in almost every case, be felt by a majority of the whole ... and there is nothing to check the inducements to sacrifice the weaker party".
In the late 19th century, classical liberalism developed into neoclassical liberalism, which argued for government to be as small as possible to allow the exercise of individual freedom. In its most extreme form, neoclassical liberalism advocated social Darwinism. Right-libertarianism is a modern form of neoclassical liberalism. However, Edwin Van de Haar states although classical liberal thought influenced libertarianism, there are significant differences between them. Classical liberalism refuses to give priority to liberty over order and therefore does not exhibit the hostility to the state which is the defining feature of libertarianism. As such, right-libertarians believe classical liberals do not have enough respect for individual property rights and lack sufficient trust in the free market's workings and spontaneous order leading to their support of a much larger state. Right-libertarians also disagree with classical liberals as being too supportive of central banks and monetarist policies.
Typology of beliefs.
Friedrich Hayek identified two different traditions within classical liberalism, namely the British tradition and the French tradition: 
Hayek conceded that the national labels did not exactly correspond to those belonging to each tradition since he saw the Frenchmen Montesquieu, Benjamin Constant, Joseph De Maistre and Alexis de Tocqueville as belonging to the British tradition and the British Thomas Hobbes, Joseph Priestley, Richard Price, Edward Gibbon, Benjamin Franklin, Thomas Jefferson and Thomas Paine as belonging to the French tradition. Hayek also rejected the label "laissez-faire" as originating from the French tradition and alien to the beliefs of Hume and Smith.
Guido De Ruggiero also identified differences between "Montesquieu and Rousseau, the English and the democratic types of liberalism" and argued that there was a "profound contrast between the two Liberal systems". He claimed that the spirit of "authentic English Liberalism" had "built up its work piece by piece without ever destroying what had once been built, but basing upon it every new departure". This liberalism had "insensibly adapted ancient institutions to modern needs" and "instinctively recoiled from all abstract proclamations of principles and rights". Ruggiero claimed that this liberalism was challenged by what he called the "new Liberalism of France" that was characterised by egalitarianism and a "rationalistic consciousness".
In 1848, Francis Lieber distinguished between what he called "Anglican and Gallican Liberty". Lieber asserted that "independence in the highest degree, compatible with safety and broad national guarantees of liberty, is the great aim of Anglican liberty, and self-reliance is the chief source from which it draws its strength". On the other hand, Gallican liberty "is sought in government ... . [T]he French look for the highest degree of political civilisation in organisation, that is, in the highest degree of interference by public power".
History.
Great Britain.
French physiocracy heavily influenced British classical liberalism, which traces its roots to the Whigs and Radicals. Whiggery had become a dominant ideology following the Glorious Revolution of 1688 and was associated with supporting the British Parliament, upholding the rule of law, defending landed property and sometimes included freedom of the press and freedom of speech. The origins of rights were seen as being in an ancient constitution existing from time immemorial. Custom rather than as natural rights justified these rights. Whigs believed that executive power had to be constrained. While they supported limited suffrage, they saw voting as a privilege rather than as a right. However, there was no consistency in Whig ideology and diverse writers including John Locke, David Hume, Adam Smith and Edmund Burke were all influential among Whigs, although none of them were universally accepted.
From the 1790s to the 1820s, British radicals concentrated on parliamentary and electoral reform, emphasising natural rights and popular sovereignty. Richard Price and Joseph Priestley adapted the language of Locke to the ideology of radicalism. The radicals saw parliamentary reform as a first step toward dealing with their many grievances, including the treatment of Protestant Dissenters, the slave trade, high prices, and high taxes. There was greater unity among classical liberals than there had been among Whigs. Classical liberals were committed to individualism, liberty, and equal rights, as well as some other important tenants of leftism, since classical liberalism was introduced in the late 18th century as a leftist movement. They believed these goals required a free economy with minimal government interference. Some elements of Whiggery were uncomfortable with the commercial nature of classical liberalism. These elements became associated with conservatism.
Classical liberalism was the dominant political theory in Britain from the early 19th century until the First World War. Its notable victories were the Roman Catholic Relief Act 1829, the Reform Act of 1832 and the repeal of the Corn Laws in 1846. The Anti-Corn Law League brought together a coalition of liberal and radical groups in support of free trade under the leadership of Richard Cobden and John Bright, who opposed aristocratic privilege, militarism, and public expenditure and believed that the backbone of Great Britain was the yeoman farmer. Their policies of low public expenditure and low taxation were adopted by William Gladstone when he became Chancellor of the Exchequer and later Prime Minister. Classical liberalism was often associated with religious dissent and nonconformism.
Although classical liberals aspired to a minimum of state activity, they accepted the principle of government intervention in the economy from the early 19th century on, with passage of the Factory Acts. From around 1840 to 1860, "laissez-faire" advocates of the Manchester School and writers in "The Economist" were confident that their early victories would lead to a period of expanding economic and personal liberty and world peace, but would face reversals as government intervention and activity continued to expand from the 1850s. Jeremy Bentham and James Mill, although advocates of "laissez-faire", non-intervention in foreign affairs, and individual liberty, believed that social institutions could be rationally redesigned through the principles of utilitarianism. The Conservative Prime Minister Benjamin Disraeli rejected classical liberalism altogether and advocated Tory democracy. By the 1870s, Herbert Spencer and other classical liberals concluded that historical development was turning against them. By the First World War, the Liberal Party had largely abandoned classical liberal principles.
The changing economic and social conditions of the 19th century led to a division between neo-classical and social (or welfare) liberals, who while agreeing on the importance of individual liberty differed on the role of the state. Neo-classical liberals, who called themselves "true liberals", saw Locke's "Second Treatise" as the best guide and emphasised "limited government" while social liberals supported government regulation and the welfare state. Herbert Spencer in Britain and William Graham Sumner were the leading neo-classical liberal theorists of the 19th century. The evolution from classical to social/welfare liberalism is for example reflected in Britain in the evolution of the thought of John Maynard Keynes.
Helena Vieira, writing for the London School of Economics, argued that classical liberalism "may contradict some fundamental democratic principles as they are inconsistent with the "principle of unanimity" (also known as the "Pareto Principle") – the idea that if everyone in society prefers a policy A to a policy B, then the former should be adopted."
Ottoman Empire.
The Ottoman Empire had liberal free trade policies by the 18th century, with origins in capitulations of the Ottoman Empire, dating back to the first commercial treaties signed with France in 1536 and taken further with capitulations in 1673, in 1740 which lowered duties to only 3% for imports and exports and in 1790. Ottoman free trade policies were praised by British economists advocating free trade such