Its often thought that the two concepts – liberty and democracy are almost synonymous, but they are not. As C.B. Macpherson says,
“Liberal theory proper – the theory of individual rights and limited government – goes back, of course, to the seventeenth century. But, until the nineteenth century, liberal theory, like the liberal state, was not at all democratic; much of it was specifically anti-democratic. Liberal democratic theory thus came as an uneasy compound of the classical liberal theory and the democratic principle, of the equal entitlement of every man to a voice in choosing government and to some other satisfactions. It was an uneasy compound because the classical liberal theory was committed to the individual right to unlimited acquisition of property, to the capitalist market economy, and hence to inequality, and its was feared that these might be endangered by giving votes to the poor.”
(“Post-Liberal Democracy?” in Ideology in Social Science Robin Blackburn Ed., p 19)
Indeed, as Hayek says, in “The Road To Serfdom”,
“We have no intention, however, of making a fetish of democracy. It may well be true that our generation talks and thinks too much of democracy and too little of the values which it serves. It cannot be said of democracy, as Lord Acton truly said of liberty that it ' is not a means to a higher political end. It is itself the highest political end. It is not for the sake of a good public administration that it is required, but for the security in the pursuit of the highest objects of civil society, and of private life.' Democracy is essentially a means, a utilitarian device for safeguarding peace and individual freedom. As such it is by no means infallible or certain. Nor must we forget that there has often been much more cultural and spiritual freedom under an autocratic rule than under some democracies – and it is at least conceivable that under the government of a very homogeneous and doctrinaire majority democratic government might be as oppressive as the worst dictatorship.” (p 52)
The early liberal ideas about individual freedom and the small state can be found in Rousseau. It is a view in which liberty is sought not in the actions of the state to protect it, but by the seeking to minimise the ability of the state to limit it. It is a concept that Marx himself adopted, as seen for example, in his “Critique of the Gotha Programme”. In his Introduction to 'The Social Contract', Maurice Cranston writes,
"In one of his polemical writings Rousseau recalled how, as a youth, he had been impressed by a village that stretched up a mountainside near lake Neuchatel. There, he said, was a community of little wooden houses, each standing in the centre of the piece of land on which the family depended. Each was about the same size. It was a community of equals. The inhabitants were happy peasants, unburdened by taxes and tithes, who supported themselves by their own work. They were all skilled in a great variety of trades; there was no cabinet-maker, locksmith, glazier or carpenter among them, because every man did such work for himself. They built and maintained their own houses. They also provided their own amusements; they could all dance, sing and play the flute.” (Penguin Classics Edition, p 18)
Neuchatel continued to exercise a model of direct democracy, in which the role of the state was kept out, (indeed there is no need for such a state) and decision making was made directly by the community itself, with no requirement for an external state authority to intervene. In such conditions, what elsewhere in Europe was seen as a progressive struggle for representative bourgeois democracy, was actually viewed as conservative and even reactionary, by removing decision making and control, and along with it liberty, for each individual member of the community.
These kinds of small peasant communities of self-sustaining and self-governing peasants were also typical of the United States in the 17th - 19th centuries, and even to an extent, in parts of the US today. They continue to provide a basis for the continued strength of these kinds of libertarian principles, in those areas of the country.
In a sense, the reason why the early liberal theorists saw the relation between liberty and the state in a negative way was because the bourgeoisie itself did not have a secure hold on that state. In Britain, the civil war, had led to the regime of Cromwell, as the nascent bourgeoisie was incapable of exercising state power itself by democratic means. By the time of The Glorious Revolution, the bourgeois liberal ideals of that same bourgeoisie had pervaded the ruling circles of the state, and other institutions of civil society, such as the universities. Its reflection comes in Locke's Second Treatise on Government, published anonymously in the same year.
By the end of the 18th century, as a result of the Agricultural and Industrial Revolutions, the power of the bourgeoisie, concentrated in the towns, which were grossly under-represented in Parliament, was sufficient to begin to demand that, alongside this capitalist state, must also go an adequate representation in Parliament of the bourgeoisie. At the start of the 19th century, less than 2% of the population had the right to vote. The bourgeoisie, therefore, began a struggle for a bourgeois democratic political regime, involving the mobilisation of large numbers, such as that at St. Peter's Fields in Manchester, where around 80,000 people gathered to demand parliamentary reform. The gathering led to the Peterloo Massacre, as the dragoons rode into the crowd to disperse it using their sabres against men, women and children.
The bourgeoisie were seen as representing the interests of the new society growing out of the old, which was trying to suppress its birth. As such, they carried behind them in this struggle, the masses of the proletariat. For that reason, the attempts of the old landed aristocracy to enlist the support of the workers against the rising bourgeoisie, for example, with Disraeli's “Young England” movement, were always doomed to failure. As Marx and Engels put it in “The Communist Manifesto”,
“The aristocracy, in order to rally the people to them, waved the proletarian alms-bag in front for a banner. But the people, so often as it joined them, saw on their hindquarters the old feudal coats of arms, and deserted with loud and irreverent laughter.”
The battle resulted in the Second Reform Act of 1832, which provided the bourgeoisie with greater parliamentary representation, but which still provided no representation for the workers, a consequence which led the workers themselves to demand parliamentary reform, via the Chartist Movement.
Liberal democracy should really be seen as starting from this point, from 1832. It is the point at which the ideas of the earlier liberal ideology of individual freedom, and the need for an unlimited acquisition of private property, of free trade and so on, are reconciled with the need, and the ability for the bourgeoisie, as a whole, to promote these ideals via its own elected representatives. The needs of capital itself were already well established as the basis of operation of the state, by this time, because the economy was itself dependent upon capitalist production. Yet, even after 1832, the power of the old society, of the old landed aristocracy was not entirely subdued within the political regime. As Marx says, in his Inaugural Address to the First International,
“Remember the sneer with which, last session, Lord Palmerston put down the advocates of the Irish Tenants’ Right Bill. The House of Commons, cried he, is a house of landed proprietors.”
The period of liberal democracy is a period based upon the whole bourgeoisie, which in its first manifestation is a bourgeoisie comprising a sizeable number of small private capitalists. Competition amongst them, and the limited means of the infant capitalist production, to provide for the needs of the growing proletariat, necessitated a liberal democracy that focusses on the need for capital accumulation at any price, and which thereby required not only that the political power of the old landed aristocracy be neutered, but that the aspirations for a political voice from the rising working-class be silenced too.
One manifestation of the first part of this requirement can be found in the writings of Adam Smith against the unproductive labour of the clergy, and other social layers related to the landed aristocracy. It is also to be found arising unconsciously in the Physiocrats. The Physiocrats believed that it was only agricultural capital that produced surplus value. They sought to have capital accumulation occur at a rapid pace. On the basis of this belief they considered that as industrial production in the towns increased at this rapid pace, it would necessarily lead to falling prices of manufactured commodities.
For them, the only function of industrial production was to supply these cheap commodities back to the agricultural producers. The policy of laissez-faire pursued by the Physiocrats was driven by a belief that as only agriculture produced the surplus, any taxes are ultimately paid out of the agricultural surplus. To place taxes on industrial production, therefore, was inefficient, because it simply added costs to a tax that would ultimately fall on agriculture anyway. But, as Marx sets out, in Theories of Surplus Value, the actual consequence of this policy was to strengthen industrial capital, and to weaken the countryside, and along with it the appropriators of the agricultural surplus value, the land owners.
The liberal ideology, however, contains a contradiction within it. Its manifestation arises with the utilitarian theories of Jeremy Bentham. Bentham acknowledged the concept of diminishing utility. But, on this basis, that the more you have, the less utility you obtain from any additional wealth/income, arises the idea that if the greatest utility is to be achieved, this requires some redistribution of wealth and income. It is on this basis, that social democracy arises, as a more developed form of bourgeois democracy.
Engels makes the point,
“The Reform Bill of 1831 had been the victory of the whole capitalist class over the landed aristocracy. The repeal of the Corn Laws was the victory of the manufacturing capitalist not only over the landed aristocracy, but over those sections of capitalists, too, whose interests were more or less bound up with the landed interest-bankers, stockjobbers, fundholders, etc....
Chartism was dying out. The revival of commercial prosperity, natural after the revulsion of 1847 had spent itself, was put down altogether to the credit of Free Trade. Both these circumstances had turned the English working class, politically, into the tail of the ‘great Liberal Party’, the party led by the manufacturers. This advantage, once gained, had to be perpetuated. And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class.”
Liberal Democracy had represented the interests of the bourgeoisie as a whole, divided into a mass of individual, small private capitalists, but by the second half of the 19th century, particularly after around 1865, the nature of British capital had changed. Industrial capital was now dominated by very large companies that had burst asunder the fetter of the monopoly of private capital, and been transformed into socialised capital. As the effects of the Limited Liabilities Act began to be felt, these large companies were marked by a separation into the company as a legal entity in its own right, and the money-capitalists that loaned money-capital to it in return for shares.
The interests of the former were represented by the Liberal Party, which drew behind it also the workers, whereas the interests of the latter were represented by the Tories, the traditional representative of the landed and financial oligarchy. The high point of liberal democracy, and its point of transition to social democracy is provided by John Stuart Mill.