(Note: The following is a condensed version of an article that originally appeared in the February 2001 issue of The Freeman, published by the Foundation for Economic Education. It was reprinted in the Summer 2005 issue of Impact, the newsletter of the Mackinac Center for Public Policy.)

Liberalism, as originally and properly understood, is the historic advocate of individual freedom. It has promoted the rule of law and private property, with the free exchange of goods and ideas. Its opposition to censorship and state economic controls is based on the same principle of freedom. Liberalism, as the name implies, is the fundamental belief in a political ideal where individuals are free to pursue their own goals, in their own ways, provided they do not infringe on the equal liberty of others.

Liberalism turned the prevailing doctrines of human rights and politics upside down. For centuries it was assumed that man lived for the sake of the state; that what rights he possessed were gifts, given to him by his king or government. Liberals argued that the opposite was true. People possess rights first, and governments receive their sanction from the people.

The French statesman and journalist Frederic Bastiat explained liberal principles in his classic work "The Law." Bastiat starts first with the fact that all people are given the gift of life. To survive, man must apply his rational mind to natural resources. Life requires freedom, and if man is to survive, he must keep the product of his labor — or in other words, he must have the right to property.

Life, faculties, production — in other words, individuality, liberty, property — this is man. And in spite of the cunning of artful political leaders, these three gifts from God precede all human legislation, and are superior to it. Life, liberty and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty and property existed beforehand that cause men to make laws in the first place.

In a liberal society, the primary function of government is to protect the pre-existing rights of the individual. The government grants no rights, but merely acts to prevent others from infringing on such rights.

Human Interaction

Liberalism establishes a basic principle for how people must interact. This principle is that all interaction must be by mutual consent. Each individual is thus free to pursue his own happiness in a regime of freedom, regulated only by the equal liberty and rights of others. The proper method of interaction economically is one where individuals trade value for value.

Thus in a truly liberal society, the economy is one of free markets and property rights. Individuals seeking their own well-being produce goods and services for exchange with other individuals who are also seeking their own good. No trade takes place in a free economy unless all trading partners believe they will benefit. To improve his own life, each individual must also improve the lives of others, even if this is not his intent.

In a society where government is limited to the protection of rights, individuals may pursue varying sets of values. Thus, liberalism is the only system that allows for pluralism, or the pursuit of contradictory sets of values.

The function of the state is not to impose one set of values on everyone, but to allow the free exchange of goods, services and ideas. It protects equally every group within the society.

No Equal Results

But liberalism recognizes that a society of equal rights will not lead to one of equal results. Wealth will be created — not distributed. Those who can reach for heights will do so, and the rest of us will benefit from their actions. The result, though not the intention, will be an uplifting of the poorest in society. Jobs will be created as a necessary component of the profit-seeking of the entrepreneurs. The poor will have their living standards vastly improved, and the wealthy will be even wealthier.

And this is the crucial difference between liberalism and socialism (or what goes by the name "liberalism" in America today). Liberalism, based on an ethics of achievement, advocates equal freedom, which leads to unequal results. Socialism, based on the ethics of envy, demands equal results, which requires limiting freedom.

Thus with liberalism, we have freedom, prosperity and unequal wealth. With socialism we have equality, poverty and no freedom. As much as we might want there to be a third alternative, it doesn’t exist.

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Jim Peron is the author of "Exploding Population Myths," published by The Heartland Institute. He is executive director of the Institute for Liberal Values in Johannesburg, South Africa. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.