Modern political theory places liberalism at the forefront as the most significant ideology. Its origins trace back to the 17th century and persist as the prevailing ideology in today’s world. The term ‘liberalism’ finds its roots in ‘Liber,’ signifying liberty. Its popularity surged when advocates of the Spanish Constitution in the 19th century embraced the label of liberals. Presently, nations like the United States, the United Kingdom, Canada, and Germany align themselves with the principles of liberalism in both political and economic realms.

Liberalism has evolved through three distinct phases over time. Initially referred to as ‘Negative Liberalism,’ the first phase extended until 1930. Following the Great Economic Depression, the second phase emerged as ‘Positive Liberalism,’ enduring until the 1970s. The subsequent phase, recognized as ‘Libertarianism,’ has been adopted by numerous major countries worldwide over the past four decades.

Negative Liberalism:

Negative Liberalism, identified under various monikers such as ‘Laissez-Faire’ and Classical Liberalism, is associated with John Locke’s articulation in ‘Two Treatises of Government.’ These fundamental political principles found robust application in the United States. Notable advocates of this ideology include Thomas Paine, Montesquieu, and Jeremy Bentham. Adam Smith furthered its economic aspects in ‘An Inquiry into the Nature and Causes of the Wealth of Nations.’

Essence of Negative Liberalism: In the perspective of Negative Liberalism, individuals are seen as rational, competent, and independent beings. Equality and freedom are fundamental; every person understands their own interests and possesses the ability to pursue and fulfill those interests. Society, in this view, is merely a collection of self-sufficient individuals. According to this ideology, there’s no imperative for the State or society to intervene or control the lives of individuals.

The State is seen as both a necessary and troublesome entity. While it’s essential for upholding law and order, and safeguarding the interests of individuals, its mere presence poses a threat to the rights and freedoms of those very individuals. This type of State operates in a negative capacity, refraining from engaging in developmental activities. Often termed a Laissez Faire State—stemming from the French phrase ‘Leave Alone’—its primary directive is to allow individuals the freedom to pursue their endeavors without interference. Within this framework, the State’s role is confined to maintaining law and order and ensuring the execution of legally binding contracts, as stipulated by Negative Liberalism.

Negative Liberalism advocates for a free-market economy governed by the principles of supply and demand, refraining from state intervention in economic activities. It draws an analogy between the State and a cricket umpire, whose role is to observe adherence to the rules rather than actively participate in the game. Similarly, according to this ideology, the State should refrain from intervening in the economy, allowing the market to autonomously regulate its functions. Embracing the concept of natural rights, Negative Liberalism asserts that individuals possess inherent rights bestowed upon them by nature upon their creation. These natural rights, including the rights to Life, Liberty, and Property, are considered essential for human existence and growth. Consequently, the State is urged not to diminish or encroach upon these fundamental rights. Of particular significance within Negative Liberalism is the Right to Property, seen as an unrestricted entitlement wherein individuals can freely acquire, enjoy, and dispose of property without governmental interference.

Positive Liberalism:

Positive liberalism emerged during the 20th century as a transformation from Negative Liberalism. While Negative Liberalism led to significant wealth generation in Western nations, it also brought about considerable suffering among ordinary people. The stark disparities among individuals, the emergence of urban slums, and the exploitation of workers highlighted the shortcomings of Negative Liberalism. Humanist figures such as Ruskin voiced their protest against the widespread misery endured by the populace.

In this context, Negative Liberalism evolved into Positive Liberalism due to two pivotal factors: Democracy and Marxism. The 19th century marked the gradual proliferation of democracy, granting the common people voting rights and sparking their demand for fundamental political reforms. Simultaneously, Marxism emerged, appealing to workers and advocating for the overthrow of the exploitative inequality inherent in Negative Liberalism. Consequently, under the influence of both democracy and Marxism, Negative Liberalism transitioned into Positive Liberalism.

The global liberal sphere faced a profound crisis during the Great Economic Depression starting in 1928, profoundly impacting the economies of various nations, including the United States. Newly elected President Franklin Roosevelt initiated the New Deal Programme as a means to lift the American economy out of the depths of this depression.

The economic advisor to the American President, J.M. Keynes, wielded significant influence in shaping the program, marking a pivotal moment in the rise of Positive Liberalism. Several thinkers contributed substantially to the essence of Positive Liberalism, among whom T.H. Green, Harold Laski, and L.T. Hobhouse stand out as particularly important figures.

Positive Liberalism introduced the innovative idea of a Social Welfare State, which envisions the State as a proactive force for advancing social well-being. In this framework, the State assumes the responsibility of offering essential social services to its citizens. This includes the establishment and upkeep of hospitals, educational institutions, factories, and industries, as well as crucial infrastructure such as roads, railways, and ports. Referred to as the Social Democratic State, this term underscores the intrinsic connection between democracy and the formation of a constructive and caring State.

The adaptability of people’s rights can serve the greater good of society. Positive liberalism advocates for a strong correlation between rights and responsibilities, emphasizing the Social Welfare Theory of Rights. In this view, freedom holds a positive, substantive nature. While Negative Liberalism advocates freedom from State intervention, Positive Liberalism champions freedom facilitated by the State. It posits that freedom doesn’t entail freedom from State influence but rather participation in the State’s social welfare initiatives. The central theme revolves around achieving freedom through the State rather than from it.

Effective regulation of the economy by the State is crucial to prevent the cyclic turmoil of economic highs and lows. Implementing progressive taxation can aid in generating the necessary resources for social welfare initiatives. Furthermore, the State possesses the capacity to employ economic measures such as bank nationalization, setting minimum wages, and allocating certain industries to the public sector. These strategies aim to uplift all segments of society.

For several decades from the 1930s, Western democracies embraced the principles of Positive Liberalism. However, over time, philosophers and political figures started to challenge the effectiveness of the Social Welfare State advocated by Positive Liberalism. Their argument centered on the belief that extensive State intervention in both society and the economy had triggered numerous issues, including industrial decline, economic inefficiencies, reduced productivity, corruption, erosion of individual liberties, and economic stagnation. As a result, they advocated for a reduction in such interventions to address these mounting problems.


Contemporary liberalism, also known as Libertarianism, marks the third phase in the evolution of liberal ideologies. This era emerged in the Western world following the decline of positive liberalism and gradually extended its influence across various political landscapes. Ronald Reagan, during his presidency from 1981 to 1989, implemented libertarian principles in the United States. Margaret Thatcher, the first female Prime Minister of the United Kingdom, played a pivotal role in shaping libertarianism. Additionally, Mikhail Gorbachev, the final president of the Soviet Union, introduced groundbreaking reforms such as Perestroika (Restructuring) and Glasnost (openness), steering the Soviet Union toward a more libertarian direction.

Several influential political scientists have championed libertarianism. Notable figures such as F.A. Hayek, M. Oakeshott, Karl Popper, Milton Friedman, Nozick, and Nock stand out among the proponents of this ideology.

Libertarianism emerged as a reimagining and modern application of Classical Liberalism during the latter half of the 20th century and into the first half of the 21st century. Central to its ideology is the intrinsic value and significance of individuals. It champions individual liberty as essential for human existence, advocating for ‘Personal Autonomy,’ granting every individual unrestricted freedom to shape their lives through personal choices. Its core principle confines the role of the State to upholding law and order. Nozick’s renowned maxim, ‘Minimal State is Inspiring as Well as Right,’ vehemently opposes any expanded governmental roles as unjustified and unnecessary. Another advocate, Oakeshott, contended that the government’s primary duty lies in the pursuit of peace.

Libertarians contend that the expansion of the State’s roles under the guise of progress and societal well-being inevitably fosters collectivism. This, in turn, concentrates power within the State, ultimately eroding the personal liberties of individuals. Such a trajectory, they argue, leads to the detriment of individual freedoms.

End of Ideology:

In the 1950s, a group of political thinkers and sociologists introduced the idea of the ‘End of Ideology’. Championed by Daniel Bell, the author of ‘End of Ideology’, and political sociologist Martin Lipset, this notion posited that humanity’s quest for political and economic ideals had culminated in the emergence of the Liberal Democratic State or the Social Welfare State. They advocated for a societal framework rooted in the foundations of a welfare state, decentralized power structures, a mixed economy, and a competitive party system. These characteristics, they argued, were exemplified by Western nations. They urged an end to the longstanding debate between Liberalism and Marxism, asserting that democracy wasn’t just a governance system but the bedrock of a functioning society, ideal for conflict resolution and governance.

However, a group of thinkers known as the “New Left” contested the validity of the ‘End of Ideology’ concept. While not advocating for class conflict like Marxism, they aimed to refine the principles of a Marxist State. Concurrently, within Western societies, numerous voices arose demanding not the termination of ideology but a departure from the materialistic implications embedded within the ‘end of ideology’ notion.

End of History:

Francis Fukuyama, an influential American political thinker, published ‘The End of History and the Last Man’ in 1992, positing that history reached its conclusion following the Cold War, with liberalism triumphing over communism. According to Fukuyama, humanity’s continuous pursuit of the ideal political, social, and economic system ceased with the victory of liberalism, marking the dawn of a post-ideological era. He argued that the ascent of Liberalism signaled the culmination of humanity’s social, economic, and political evolution, essentially signifying the end of human history.

However, various political scientists and ideologies challenge Fukuyama’s perspective. Postmodernist thinker Derrida contested the notion, stating that liberal democracy fails to resolve fundamental human problems. He highlighted that during the era of liberal democracy, issues such as violence, inequality, exclusion, famine, and economic oppression affected a significant number of people, questioning its efficacy as an ideal political system.

Another opposing viewpoint was presented by American political scientist Samuel Huntington, who proposed ‘The Clash of Civilizations’ theory in contrast to Fukuyama’s End of History thesis. Huntington argued that the end of the Cold War did not ensure the universal and enduring success of liberal democracy. Instead, he foresaw a new ideological rivalry between major civilizations, particularly between Western Civilization and Islam, shaping global politics in the 20th century. According to Huntington, this clash between civilizations, drawing in others besides the Western and Islamic worlds, indicates that history has not concluded but rather entered a new phase characterized by confrontation.

Introduction to Accounting
Accounting Principles

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