The Evolution of Liberal-Democracy, Part II — The Industrial Revoltion, Capitalism and the Grand Compromise


In Part I of The Evolution of Liberal Democracy, we witnessed the birth of democracy in ancient Greece and followed the development of liberal values within the confines of the absolute monarchies of feudal Europe.  We saw these liberal values, as well as the democratic impulse, emerge volcanically in the American and French revolutions.  However, it was an upheaval in economic relations that would mould liberalism and democracy into the political system called liberal-democracy, embodied in the parliamentary system of checks and balances, that we know today.

While America and France were rocked by political upheaval, English society was being transformed by a revolution of its own: the industrial revolution.  During the late-eighteenth century, the invention of the steam engine to pump water out of flooded English coal mines led to profound changes in the socio-economic and cultural conditions of English society.  During the nineteenth century, it spread throughout Europe, North America, and eventually the world.

The onset of the industrial revolution marked a major turning point in human history, impacting on almost every aspect of daily life for the people of industrialised societies. Millions of peasants abandoned their lives as bonded labourers on feudal estates to take up work in the new industrial factories that sprang up in cities like Manchester and Birmingham.  It ushered in an era of great upheaval, a transformation of life away from the cyclic rhythms of nature into the mechanistic forms of social organisation that are familiar to us today.

This was a dirty era.  The huge mass-migration of peasants from the land into industrial cities created horrible living conditions in which people lived in filthy, over-crowded, disease-ridden slums.  The new industrial workforce was subjected to inhuman working conditions.  In this environment, as you can imagine, social unrest was rife.

The industrial revolution saw the rise of a new class of property owners, known as the bourgeoisie (or factory owners) in Marxist terminology, who appropriated the liberal political ideas of Locke and Rousseau to challenge the old aristocratic elite for a share of political power.  From this point onwards, liberal thought has tended to reflect the interests of the bourgeois industrialists.

So what are the key ideas of modern liberalism?  Liberalism is a set of ideas about the rights of individuals and about market-based mechanisms for economic production and distribution. The rise of liberal ideology accompanied the development of the economic system known as capitalism.

Liberal ideas continue to legitimise essential elements of the capitalist system: the ownership of private property, the accumulation of private wealth, and the use of markets for production and exchange of goods and services.

The public interest is advanced when individuals are guided—as if by an ‘invisible hand’—by their desire to maximise their own individual economic welfare.  This is because a free market will reward individuals who satisfy the preferences of others, and hence create incentives for individuals to act in that way.

Serving the public interest thus does not require the very visible hand of government.  Rather, government should stand back and let the market economy function according to its own logic of the profit motive, the price mechanism and the division of labour in a hands-off approach known as laissez faire.

These are the principles upon which you will have heard calls from various politicians and pundits promoting ‘smaller government’, lower tax levels, the privatisation of government-owned enterprises, and an emphasis on the rights of individuals in relation to the interests and wishes of the broader community.

Genesis of the Compromise: Property Rights versus Political Participation

Changing economic and social relationships stemming from industrialisation led to greater demands to broaden the democratic franchise to include members of the working class.  Political awareness became a spin-off effect of the need of industrial economies for a skilled, literate workforce.  Therefore, not only was the labour movement a reaction to the exploitative conditions of early industrial economies, but it was also a consequence of the increased levels of literacy and education within the working class.

In Britain, the political awakening of the industrial working class found expression in Chartism, a movement for political and social reform between 1838 and 1850. The movement took its name from the People’s Charter of 1838, which argued for six major reforms:

  2. A secret ballot – To protect the elector in the exercise of his vote.
  3. No property qualification for members of parliament.
  4. Payment of members, thus enabling an honest tradesman, working man, or other person, to leave his occupation and serve in parliament.
  6. Annual parliaments, to curtail the practice of vote buying.

Chartism had an influence of political thought in Australia.  Many leading members of the Chartist movement were punished by transportation to Australia as convicts, which led to the diffusion of Chartist ideas amongst the working classes of the Australian colonies.

During the summer of 1848, revolutions exploded across Europe as the socio-economic stresses of the industrial revolution drove the desperate lower classes to open revolt.  None was ultimately successful in altering the social order, but the lessons for property owners and liberal thinkers were to reverberate to the present day.

Liberals were afraid that a democracy would not respect the property rights of employers.  They argued that people were short-sighted, especially ignorant hungry people, and it would be in their short-term interest to confiscate and redistribute the property of the rich.

With the French Revolution still in living memory, they interpreted the Chartist movement and the European revolutions of 1848 as a threat to their wealth and social position.

T.B. Macaulay, later Lord Macaulay, famous as an essayist, historian and politician, was one of the leading liberals of the first half of the 19th century. He was a member of British Parliament in 1848 when the Chartists presented their petition. This is what he had to say about the Chartists demands:

“My firm conviction is that, in our country, universal suffrage is incompatible, not with this or that form of government, but with all forms of government, and with everything for the sake of which forms of government exist; that it is incompatible with property, and that it is consequently incompatible with civilisation.”


In the wake of 1848, liberals came to the conclusion that the best way to ward off revolution was to adopt a liberal or generous attitude toward the lower classes. The upper classes should make concessions to the lower classes gracefully and in good time, and not wait until the lower classes took to the streets in open revolt.

By yielding to the democratic impulses of the masses, liberals came to believe that social and class antagonisms could be managed to protect the property rights of the privileged while at the same time keeping a lid on any popular unrest that would threaten those rights.

Goal of the Liberal Democratic Compromise: Political Stability

The great great liberal-democratic compromise stemming from the tumultuous upheaval of the industrial revolution revolves around the core idea that political stability is best ensured when all members of a society are politically enfranchised, which, for liberals, is the most effective way to preserve private property rights.

Both the liberal and democratic traditions share common ground with respect to the rule of law, respect for the legitimacy of institutions and due process, and commitment to fundamental liberties such as freedom of speech and association.  Indeed, it is these political rights as defined in liberal philosophy that make democratic participation possible.

Liberalism and democracy also provide moderating constraints on each other that contribute to the stability of Australia’s liberal democratic political system.  Liberalism places limits on notion of majority rule, which means we still have to respect the rights of individuals and avoid the tyranny of the mob.  On the other hand, regular democratic elections give powerful legitimacy to the political order, demonstrating that the government of the day is legitimate because it has the support of people.

Despite the stability of liberal-democratic governance, the inherent tensions between liberal and democratic philosophies do arise in a number of public policy contexts today.  The following policy questions provide fertile ground for debate about the liberal-democratic tension:

Should we privilege individual rights or the broader well-being of the collective in policy areas such as internal security and anti-terrorism, and the fight against organised crime?

What, if any, should be the legitimate role of the state in controlling women’s reproductive health?

Should disadvantaged groups be given government assistance to equalise for social inequality, and if so, what level of assistance is appropriate to avoid dependency?

Are market-based solutions the most efficient means of achieving positive policy outcomes, or is some level of state regulation or intervention desirable?

As these examples amply demonstrate, the liberal-democratic tension regularly presents itself political debate and public policy formulation.

If we look at countries around the world that do not have strong elected parliaments, we see that the political process is characterised by guns and violence.  Protesting for change in such countries means that in order to change governments, citizens have to bring down the whole political system.  Not so here in Australia.  Parliament, as an expression of the liberal-democratic compromise, acts as a safety valve, incorporating dissenting views within the governing system so that people need not resort to revolution to maximise their welfare or mediate competing interests via the barrel of a gun.






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