Political Ideologies: Liberalism - Why do classical liberals defend unregulated capitalism?

Here is an essay I wrote back in 2009 while studying liberalism

Robyn, UK

Why do classical liberals defend unregulated capitalism?

Economist Adam Smith argued that the economy works best when left alone by government. The economy is a series of inter-related markets that operate according to the wishes and desires of free individuals. Freedom within a market means freedom of choice as businesses choose goods to make and consumes goods to buy. Relationships within the market are voluntary and contractual, made by self-interested individuals for whom pleasure is equated with the acquisition of wealth. This drew on the classical liberal belief in utilitarianism through the idea of the ‘economic man’ where humans are egotistical and bent on material acquisition. It can therefore be argued that unregulated capitalism provides ‘the greatest happiness for the greatest number’, a principle used by utilitarians to establish which policy’s or institutions will benefit society at large.

The economy is thought to operate according to a set of impersonal market forces that tend naturally to promote economic prosperity and well-being. The market is a self-regulating mechanism that needs no guidance from the government because it is managed by an invisible hand. This reflects the liberal belief in a naturally existing harmony amongst the conflicting interests within society and suggests that unregulated capitalism benefits civil society while limiting government power and helping to establish a minimal state as the government do not get involved with the individuals freedom provided by unregulated capitalism.

Economic individualism is based on the belief that the unrestrained pursuit of profit will ultimately lend to general benefit. This theory remained strong until the 1930s and since the 20^th century, faith in the free market has been revised by the rise of neoliberalism. Neoliberalism believes the market has near miraculous qualities and tends towards long term equilibrium so they are self-regulating and naturally efficient and productive. Markets are responsive, democratic mechanisms that deliver fairness and economic justice because all people have the opportunity to rise and fall on the basis of talent and hard work. Neoliberalism therefore reflects the liberal belief in meritocracy and defends unregulated capitalism on the grounds that material inequality reflects a natural inequality amongst humankind.