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The early 19th century also saw the primary ideological conflict within liberalism brought forward. The two key concepts of liberalism are the dignity of the individual and the right to individual liberty, particularly to own and control private property. These two principles found themselves in conflict, when it became obvious that the property rights of some individuals could not be reconciled with the dignity of others. The extreme case of this was chattel slavery, where one person was viewed as another person's property. Generally, in this conflict, the weight of liberal thought tilted towards the importance of human dignity, viewed increasingly by liberals as more fundamental than the claims of property. However, balancing these two fundamental values still explains a series of conflicts within liberal thought.
The late 19th century saw the expansion of voting rights, education and economic progress in the form of industrialism. It also saw the expansion of trade, and therefore opportunity, as well as an explosive growth in the spread of culture and literacy. At the same time, it produced vast inequalities of wealth, and vast human misery in the form of famines, child labor, polluted urban centers, and deep poverty for the majority of the population. The conflict between property and dignity came forward. One strain of liberal thought demanded laws against child labor, and requiring minimum standards of work and wages, while the laissez-faire strain argued that such laws were an unjust imposition on property and a hindrance to economic development.
Another important principle of liberalism was the rationality of government and its institutions. The late 19th century saw the rise of standardization and internationalization of such things as time keeping and weights and measures, as well as money systems and international commercial transactions. Liberalism's insistence that the individual, real or corporate, was the important unit of law, made it the only framework within which the increasingly interdependent trade could be governed. Feudal notions of property, in many nations still in force, were gradually stripped away. For example, serfdom was still practiced in Russia well into the 19th century, and commerce restrictions dating from the middle ages existed in German states right up to unification under Prussia in 1871.
John Stuart Mill (J.S. Mill, 1806- 1873) was influential in developing modern concepts of liberalism. He opposed collectivist tendencies while still placing emphasis on quality of life for the individual. He also had sympathy for female suffrage and (later in life) for labor co-operatives. His support for utilitarianism grounded liberal ideas in the instrumental and pragmatic, allowing the unification of subjective ideas of liberty gained from the French thinkers in the tradition of Jean-Jacques Rousseau and the more rights-based philosophies of John Locke and the British tradition.In the late 19th century and early 20th century, there was a growing body of opinion which asserted the idea that, in order to be free, individuals needed to have access to all of the requirements of fulfillment: in that view, individual liberty requires that society take responsibility for providing a basic level of opportunity, protection and education.
With the beginning of the 20th century, the conflict between dignity and property became even more acute. Industrialization produced vast fortunes, and a great increase in the potential standard of living. It also produced vast misery and poverty, as well as powerful engines of war. While in the late 19th century industrial nations had been able to seize land and materials from less technologically advanced and politically organized nations (during the age of imperialism), by the early 20th century the globe had been already carved up, and, in order to expand, industrial nations would have to turn on each other. World War I soon began.
In 1911, L.T. Hobhouse published Liberalism [1], which, while it summarized the liberalism of the 19th century, also included qualified acceptance of both government intervention in the economy, and the collective right to equality in dealings, what he called "just consent", which included trade unions.
In the mid-20th century, a new philosophy (or rather, a collection of philosophies) arose: totalitarianism. Totalitarian ideas were centered on the principle that absolute centralized control over all aspects of society was necessary in order to achieve prosperity, stability, and many other goals. Most totalitarians also wished to discredit and destroy liberalism in one way or another. In reply, liberalism spent most of the 20th century defining itself as an opposition to various strains of totalitarianism.
With the Great Depression of the 1930s, liberalism as an ideology received a crippling blow. Most rational people felt that the market failures of the late 1920s and early 1930s had discredited the liberal experiment in politics and economics. In Italy and Germany, nationalist governments arose that linked corporate capitalism to the state, rather than to individual liberty, and promoted the idea that conquest and national superiority would give these nations a rightful "place in the sun". The totalitarian states argued that democracy was weak and incapable of decisive action, and that only a strong leader could impose the kind of discipline that was necessary.
The rise of totalitarianism became a lens for liberal thought. The majority of liberals began analyzing their own beliefs and principles to find out where they had gone wrong. Eventually, they came to the conclusion that totalitarianism rose because people in a degraded condition turn towards dictatorships for solutions. From this, it was argued that the state had a duty to protect the economic well being of its citizens. As Isaiah Berlin put it, "Freedom for the wolves means death for the sheep." They also argued that rationality of governance required the government acting as a balancing force in economics, as shown by the recently developed theory of Keynesianism. It became necessary to "save capitalism from itself", and for free nations to accept the burdens of defending democracy and liberty with force if need be.
People like Lujo Brentano, Leonard Trelawny Hobhouse, Thomas Hill Green, John Maynard Keynes, Bertil Ohlin and John Dewey theorized why and how a government could intervene in the economy without the country becoming a socialist planned economy. The above mentioned liberals took the name of new liberals, to underline how they endorsed the evolving tradition of personal liberty and dignity, while rejecting the radical capitalist element from the classical liberal school of economic thought, as well as the revolutionary elements from the socialist school.
The origins of the new liberal current can be found in the Liberal Party in Britain, particularly since Lloyd George's People's Budget . This is the "liberal tradition" that John Maynard Keynes claimed to uphold in the 1930s (although he was also influenced by Fabianism). The Oxford Liberal Manifesto of 1947 of the world organization of liberal parties, the Liberal International, also represents this form of liberalism. The influence of Keynesianism on Franklin D. Roosevelt's New Deal has led liberalism to be identified with the welfare state in the United States and in Canada.