'The new liberalism' is a term clearly not bound in time or space, but it is usually used to refer to a school of political thought in Britain in the late Victorian era. Specifically, it is taken to have mainly come about after the extension of the franchise in 1884 and to have been modified beyond recognition by the first world war. This period includes the Liberal Party's zenith, their largest election victory ever in 1906. Highly disparate and varied, the school included thinkers such as L. T. Hobhouse, Joseph Rowntree, J. H. Hobson, and Beatrice and Sidney Webb.
Scholars have often found the new liberalism hard to pin down. The last century was one of apocalyptic all-or-nothing ideologies like fascism and Communism in their various forms. Just a little over halfway through that century Hannah Arendt, in The Origins of Totalitarianism, described an ideology as a worldview which its adherents hold without reference to reality. Nothing that happens in the empirical world can change the mind of such an idealogue, his views are fixed. Such ideologies can end only in dekulakisation and Auschwitz. Victorian ideologies were of a different character, and mainly constituted the way in which people responded to information gathered by their senses. Such people were not closed to the facts of reality in the way an avowed Nazi is - they were just predisposed to respond to it in a certain way. The archtypical quote is that of Keynes who, when criticised for changing his opinion by a reporter, said "Sir, when the facts change, I change my opinion. What do you do?"
New vs. classical liberalism
The new liberalism was 'new' in that it wasn't 'classical'. Classical liberalism predominated in most of the Victorian age, and found its most complete expression in Adam Smith's The Wealth of Nations. Classical liberalism believed in the 'nightwatchman state', seeing civil society as an evil which should exist to the extent necessary to protect life, liberty and property. The power of the executive should be limited lest it interfere with the natural harmony of things. The economy and society were best left to self-interested individuals, who would by their actions automatically bring about the public good. Some, such as Bernard Mandeville, held that private sin brought about the public good: 'Every Part was Full of Vice / Yet the whole Mass a Paradise' ran his couplet in the Fable of the Bees. Others believed, as the Thatcherites later would, that the vigorous virtues of the British people would, if left alone, produce the common good. 'Briefly,' chided the Fabian Essays, 'the Liberal Plan was to cut off the King's head, and leave the rest to Nature'.
The new liberalism saw things differently. It brought to the table new ideas about how to do things, and set about trying to construct a concrete political programme to carry its ideas out. Broadly, its aim was to gradually increase the material and the moral condition of people through the utilisation of state power. Many new liberals considered themselves to be different from socialists in kind and not just in degree, because they did not propose the destruction of the market economy. Rather, the new liberals represented the start of a methodology of government that dominated British politics for nearly a century - the state is a tool that should be used to identify problems and then fix them.
Central to the new liberalism was a new conception of community and society. To the classical liberal, as to the Thatcherite, society is nothing more than the sum of its parts; this is what Mrs. Thatcher means when she says "there is no such thing as society". To the new liberal, there was a metaphysical 'public good' which transcended the good of the public's constituent parts. The utilitarian idea of aggregate good was conceptually separated from the public good, which was held to be more important. 'Society' was seen as having a life of its own distinct from the aggregate of its members, and it was this life which had to be nourished for society to develop. Unlike the socialist, the new liberal did not think that all assets were social - but they did postulate the existence of a sphere of 'social goods' which had to service 'social utility'.
What this all meant in practice was that it was justifiable to use the state to redistribute wealth and carry out ameliorative programs for the benefit of 'society'. Naturally, most of the programs of the new liberals were directed at the working class, and a lively debate thus ensued on the dangers of 'sectionalism' if the focus on the working class, rather than 'society', became too strong. They could not however escape the fact that most of the problems they diagnosed in society, such as poverty, lack of education, poor housing, and disease, afflicted the working classes most strongly. They got around this with the theory that the amelioration of any particular part of society benefitted the whole, by strengthening society's interdependent parts. For instance, government grants in aid of education benefitted the industrialist by providing a better-educated workforce.
Hence the policy of new liberals on taxation. They believed in taxing the rich and redistributing this money to the poor, a policy which has become the cornerstone of all of the West's industrial democracies to a greater or lesser extent. The excessive savings of the rich were held to be bad for society as a whole, and hence for the rich themselves, as they encouraged the evil of under-consumption. The concept of under-consumption was mostly enuciated by Hobson, who claimed that 'unearned income' (from investment, for instance) was useless to the economy and hence excessive savings should be confiscated and spent to raise the condition of the people, and hence to improve the national economy in the long-run. Hobson saw the economy's problem as a lack of demand for goods as those who had the monopoly on wealth were satiated, and hence by redistributing the means to consume the economy would be stimulated. This was new liberalism's answer to Say's law.
To redistribute, first you must produce
It should be noted that theories of 'under-consumption' and making economies more efficient are different in kind from a rejection of the market altogether and an embracing of Marx. New liberalism was an early attempt at a 'third way' between socialism and classical liberalism, and never repudiated competition and the market altogether. New liberals showed themselves to be aware of the basic principle which escapes many extreme redistributionists and socialists, namely that to redistribute first you have to produce. Its debt to classic liberalism is here must apparent, as is its connection to future types of British liberalism and (more tenuously) neoliberalism.
The pragmatism it embraced in applying the state to social problems was very much in line with past traditions of British utilitarianism, and most of its adherents never lost faith in the British belief in the ability of man to decide his own destiny. Some adherents of the new liberalism did however also mark a complete break from this tradition, which had its most obvious embodiment in the Poor Law Amendment Act 1834. This break entailed recognising that it was not always the fault of an individual that he or she was out of work, or poor - sometimes the will of the individual could not overcome structural circumstances. Norman Tebbit, in contrast, would have told them (as he later did) to "get on your bike".
The spirit of the new liberalism was best captured, strangely, in the words of Winston Churchill. He is usually considered a tool of the new liberals or an opportunist, but I rather see him as a man capable of assimilating new ideas quickly and moving with the times - especially in his early years. In a speech in 1906, he encapsulated the spirit of the new liberalism and what were its perhaps contradictory goals, and I quote him in conclusion -
I do not want to see impaired the vigour of competition, but we can do much to mitigate the consequences of failure. We want to draw a line below which we will not allow persons to live and labour, yet above which they may compete with all the strength of their manhood. We want to have free competition upwards; we decline to allow free competition to run downwards.
This is part of a series on social democracy and its critics in the Anglo-Saxon world. Also of interest may be Social democracy in post-war America, ratchet theory of government growth, Poor Law Amendment Act 1834 and Thatcherism.