Liberal Economic Reform

Abstract: Liberal economic reforms propounded the idea of a laissez-faire economy which originated from the theory of liberalism which was formulated by Adam Smith, The father of economies. Liberal economic reforms laid stress on free market economics without intervention from the government.

Liberal economic reforms were based on the concept of economic liberalism which originated in the eighteenth century and was associated with the Laissez-faire political ideology. The origin of liberal economic reforms can be attributed to the theory of liberal economics which was formulated in the eighteenth century by Adam Smith who is regarded as the father of economics.

Liberal economic reforms advocate free market economics encouraging free trade with least government interference. These reforms emphasize the role of markets in an economy and seek to reduce the interference of government regulations. Liberal economic reforms follow the doctrine of liberalist economic thoughts that open market economic conditions are more conductive to growth than under government intervention through specific regulations.

Liberal economic reforms had significant impacts on the role of the government in an economy. The government was expected not to play any role in wealth creation and distribution under liberal economic reforms. The government's role in creating or breaking monopolies, granting special privileges, and setting up barriers to foreign trade was also argued against by the liberal economic reforms.

Liberal economic reforms were introduced in Europe in the eighteenth and nineteenth centuries to usher in a laissez-faire capitalist economic system as opposed to the mercantilist system prevailing at that time. The reforms laid importance on personal property, unregulated price system, and increased private investments. The liberal economic reforms maintained that price should be determined by the interaction of supply and demand in a market, free from regulatory controls.

Features of liberal economic reforms

The important features of liberal economic reforms can be outlined as follows -

Liberal economic reforms were in favor of personally owned capital including land. The reforms argued that forceful equal distribution of wealth would loose effectiveness in the long run as there would be differences in the magnitude in which different individuals would utilize equally owned wealth to generate further income.

The reforms were in favor of reducing taxes. Reduction in taxes would enable individuals to save more and fulfill their needs ore effectively. On the other hand it would also reduce economic dependence on the government.

Liberal economic reforms argued in favor of privatization of social security measures.

These reforms were of the view that under paper currency, a government could increase money supply in the economy thereby causing inflation. Hence the liberal economic reforms were in support of maintaining the gold standard.