Today, in common talk, in English-speaking North America, "liberalism" refers to some form of moderate communism* in which the government regulates the labour industry in some respect, such as minimum wage laws and union privileges, and in which the government holds a monopoly on certain other industries, such as education or health care. By these standards, Canada is the archetypal "liberal" country. We have strong labour laws, health care for many services is exclusively public, and we have a strong public education system.
"Liberalism" has only come to refer to this kind of program after over two hundred years of mad semantic twisting.
Cletus the Foetus takes a deep breath.
"Liberalism" is one of those political words that has undergone as much semantic kerfuffling in its two hundred year stint in the public vocabulary as has its sister term, "democracy." The word "liberalism" means something different in English-speaking North America than it does in other places. An American "liberal" is a British "Labourist," and an English "liberal" is (to use JerboaKolinowski's turn of phrase) a milquetoast libertarian; an Australian "Liberal" is an American "conservative," and both are "neo-liberals" (though an Australian "liberal" is an American "libertarian"). Furthermore, even in North America, the word "liberalism" means something different in English than it does in French; la libéralisme refers to different ideas than does "liberalism." This makes matters particularly complicated in Canada, where the provincial Liberal Party actually represents an opposite policy in Québéc than do the other provincial Liberal Parties, or the federal Liberal Party (in so far as "liberal" and "conservative" even mean anything here any more); so a member of the PLQ (the Québécois Liberal Party) who wants to run federally will have to (nominally) change parties, running under a "conservative" billing. (On the other hand, in a recent editorial for his Web zine Le Québécois libre, Martin Masse remarked, "Le Parti libéral n'a, depuis quarante ans, de libéral que le nom" – "For fourty years, the Liberal Party [of Québec] has nothing liberal about it except the name.") In Germany, there is also an ambiguity. In general "Der Liberalismus" refers to the principles of free trade, but even in 1927 Ludwig von Mises complained that "what is understood by the term 'liberalism' today, especially in Germany, stands in direct opposition to what the history of ideas must designate as 'liberalism'". To make matters even worse, the word "liberalism" is also being used in its old sense (and incorrectly) in conjunction with something called "neo-liberalism" – which wouldn't be considered "liberal" according to either old definition – this is the Reagan/Thatcher school of "liberalism," or as Loinen calls it without too much exaggeration, "market fascism;" it might be better described as national corporativism, a set of institutions that could rightly be compared to mercantilism, which the original "liberals" opposed vehemently.. Except in Sweden, where "neo-liberal" means libertarian.
Got it?
The least we can say is that liberalism has something to do with liberty. What, exactly, we aren't sure.
The term itself was coined during the 19th Century constitutional debates in Spain; it became the name of the policy platform of the advocates of democracy and capitalism, as opposed to the servilists. Originally, liberalism was associated with the free market – an absolute separation of market and state on a par with that of church and state. In many ways, it is similar to what we today refer to as libertarianism, except that the reasons they offer to support their position are quite different. Libertarians are often casuists and Jefferson-worshippers** who advocate "freedom for freedom's sake," the poor be damned. The initiatory exercise of force, or the threat of its imminent initiatory exercise, is a moral wrong in itself, they tell us. They say, for example, that they shouldn't be forced to have to pay for someone else's medical bills, or their kids' education, even if this materially benefits the majority rather than the minority.
Classical liberalism advocated almost the exact same program as libertarianism, but for completely different reasons. It arose in Britain in the latter part of the Eighteenth Century, mostly inspired by the work of the French Physiocratic school, who advocated what they called laissez-faire as a policy for improving the productivity of agriculture. The original classical liberals – Adam Smith, David Hume, Jeremy Bentham, David Ricardo, and John Stuart Mill in his early career – were utilitarians.*** They weren't what we would call "conservatives," and believed (rightly or wrongly) that a truly free market would tend to alleviate and, in the long term, eliminate poverty. Their primary justification for laissez faire was that it helped the poor even more than it helped the rich. They advocated against "conservatism," which in those days meant conserving the guild system in which established artisans had legal privileges over those who might want to try to start a business without being associated with the guild.**** The classical liberals opposed the guild system because they believed (to use modern terminology) that any corporation that didn't have consumer support (in the form of capital which would be used to run the guild) should not have the right to demand support from the aristocracy (who took money by force from their subjects, in the form of "tax"). Their argument was that people shouldn't be forced to pay for other peoples' expenses, because this only provides the illusion of general betterment; in fact, in the long run, relying on force programs actually makes everyone worse off than in a free market, by providing scarce resources to firms providing services people don't think is worth the cost. In the twentieth century, the most important classical economist was Ludwig von Mises, who argued against "mixed" economies, Nazism, and Communism, and advocated a government program of total laissez faire. He was also a utilitarian.
"Liberalism" came to have its more common meaning in North America (the pinko meaning) by virtue of two trends. First, those who advocated government support of labour collectives said that this program would bring "true" freedom, because no one would be forced by necessity or desperation to take dangerous or undesirable jobs. Classical liberals considered this to be hypocritical, artificial, and more than a little sly ("liberty," for the classical liberals, meant freedom from human coercion, not freedom from natural circumstance, which bind all of us, or the lack of support of peers and consumers).
Secondly, in North America, conservatives who advocate economic liberalism usually have socially un-liberal policies (legal privileges for whites and for Christians, laws against certain sexual practices, etc.), and those who advocate protectionism usually have socially liberal policies (absolute freedom of religion, zero tolerance for discrimination on the basis of race, sex, or sexual preference). For these reasons, "liberal" is generally used to refer to someone with a socially liberal program, and these people usually also have protectionist economic opinions. "Conservative" applies to people with liberal economic opinions, but who want to conserve laws and policies which are very much non-liberal.
Neo-liberalism is a special kind of poison. This is the goût du jour among "economic conservatives." Think Margaret Thatcher, Ronald Reagan, and George Bush sr. Neo-liberalism is the practice (if not the preaching) of giving corporations special legal privileges or special government sponsorship. Neo-liberalism has been a part of American jurisprudence since 1886. It's also an integral component of the modern global economy, where a corporation (unimpeded by his own government, who believe in "free trade") can approach a foreign government and say, "I would set up shop in your country, but you have these pesky labour laws like freedom of speech, association, and peaceful assembly which your subjects are using to agitate against us by forming unions. If you abridge these rights, we'll set up shop, and you can get our trickledown."
This practice is particularly odious for two reasons. First, it is harmful. Trickledown only works if all individuals, regardless of political affiliation or employment association, are free to speak, associate, and assemble to protest or spread information – only when no faction receives actual support from the government can negotiation take place between free traders. Neo-liberalists are willing to overlook this plain and simple fact, and are eagerly willing to tell these lies to the desperate governments of impoverished countries, in the name of "freedom."
Secondly, neo-liberalism advocates protectionism in the name of the free market, which turns people off of the idea of a free market altogether. Because neo-liberalism involves or implies giving corporations special rights as a collective (including the rights of a human being or the right to ask the government to use force to prevent anyone from approaching a position in which they could peacefully mobilize a work-force to strike), it represents the opposite of a free market, and therefore the opposite of what classical liberalism advocated; neo-liberalism represents a plutocratic welfare state for the rich. It's much more like the guild system which the classical liberals attacked than it is like liberalism itself. This is ruinous to poorer countries and is a slow, torturous poison for more prosperous ones. But because neo-liberals say that what they're doing represents laissez faire capitalism, anyone who recognizes how detrimental these practices are is liable to just throw liberalism out the window.
Cletus the Foetus sighs.
It bothers me to see people attack the free market for the failings of its participants; this is why I node things like Grameen Bank and yufu, to show people that there are socially responsible free market alternatives to state-sponsored social programs. But it really upsets me to see people turned off the idea of a free market altogether because of the lies of "neo-liberals." Their mentality is, "If this is freedom, to hell with it." That's why I'm writing this. Know your terms. Always hold speakers responsible to their claims.