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Drishti IAS Blog

The Liberal Theory of State

  • 20 Nov 2020


In today’s times with increasing importance granted to the interventionist measures of the states, the study of the origins and role of the state becomes necessary in order to facilitate the understanding of the reasons and of the consequences of such measures through the opinions of some of the most important philosophers and economists about the formation and the role of the state in the life of individuals.

Concept of the state comprises the core of political thought.

Political thought has been defined as 'thought about the state, its structure, its nature, and its purpose'. Several political thinkers and schools of thought have developed ideas about the nature and purpose of the state according to different points of view. When new ideas appeared, old ideas were criticized or modified. In the realm of political philosophy, it is not necessary that old ideas be dead before the new ideas become acceptable. Unlike the principles of natural sciences, the old and new principles of political theory exist simultaneously, claiming their rightful place.


Liberalism is ‘an ideology based on a commitment to individualism, freedom, toleration and consent’.

The liberal theory of the role, its functions and the nature of state power would invariably focus on:

  • Ensuring, protecting and enlarging individual freedom
  • Limiting the role and functions of the State
  • Allowing state interference only when it helps an individual gain more liberty and freedom
  • Making individuals the source of State and governmental power
  • Advocating a doctrine of a limited political obligation

Liberal Conception of State

The liberal state focuses on individual rights and freedom. It also argues for a neutral and minimal state. It replaces the divine right theory* of the state and argues that a legitimate rule must be based on the consent of the people.

*the doctrine that the right of rule derives directly from God, not from the consent of the people.

States work for the common good of the society and its major activity is understood as to be maintaining law and order and ensuring that everyone is treated with equality without any discrimination. In other words, a liberal state regards individuals as moral and rational agents. State’s role is seen as providing them with the conducive conditions for growth and prosperity. 

Its origin and growth can be traced back to the political struggles that took place in England and France with the rise and growth of capitalism which had led to a free market economy. These struggles focused on individual dignity, self-respect, private property and, power and status particularly of the emerging middle class of the society.

With the coming of the liberal state, there were some significant changes occurring in the political organisation of the society like representative and constitutional forms of government, rule of law, and governments based on the consent of the ruled. It stressed on a new discourse on rights, to uphold the natural and basic human-like rights - to life, property, freedom, justice and so on. For example, Adam Smith, a liberal thinker, emphasized on the individual urge to maximise economic interest or to achieve material gains and thereby improve their living standards or fortunes.

Smith argued that if a state provides the condition of freedom to individuals to make material and moral decisions concerning his/her life, the resulting society would be a free and prosperous society. He talks about a free market economy and less interference by the state. He said that the role of the state should be like an ‘invisible hand’. For liberals in general, commerce and trade would create a good and welfare-oriented government.

For liberals, the role of the state is to carry out a legal framework under which the market can function well. And, it should also maximise the opportunity and prosperity of everyone. State should thus focus more on adjudicative and legal roles. Liberals also argue that citizens have the right to overthrow a government if it does not fulfil the desired roles and functions such as creating conditions for human happiness and well-being.

Liberals wanted to ensure maximum freedom to individuals and therefore regard the state as a necessary evil. As per them, without legal authority in the form of state, individual lives and property would be under constant threat. And that would be detrimental to peace and prosperity of the society. Thus, State in a liberal framework should perform the minimum role of maintaining law and order and enforcing a contract.

Within this broad focus, however, along with the changing notion of individual liberty and freedom, the liberal tradition has journeyed through changing notions of the State and its role.

Three distinct phases or streams of liberal tradition can be identified. These are:

  1. Negative liberalism or theory of laissez-faire individualism which is also known as classical liberalism
  2. Positive liberalism or welfare liberalism, and
  3. Neo-liberalism or libertarianism

Negative Liberalism or Theory of Laissez-faire

Philosophical and political roots of negative liberalism can be traced in the social contract theory of Hobbes and Locke. Subsequently, it was developed, revised and amplified by Bentham and J. S. Mill's utilitarianism, Spencer's ‘survival of the fittest’ doctrine, Paine's doctrine of State as a ‘necessary evil’ and others. On the economic front, the Physiocrats, Adam Smith, David Ricardo, Thomas Robert Malthus and others provided the ground and arguments for economic liberty. The two—negative liberty and economic liberty—combined were destined to give birth to what we call classical liberalism or laissez-faire individualism.

Features of negative liberalism include the following:

  • Inalienable natural rights of individuals’ life, liberty and property.
  • Sphere of individual action defined and demarcated in political and economic activity.
  • Individual liberty as the absence of interference from the State or external regulation—negative liberty.
  • Concept of an atomic or possessive individual—individual as a proprietor of their persons and capacity, self-sufficient and owe nothing to anyone or society (Hobbes, Locke and Smith).
  • State as ‘necessary evil’ (Paine), utility provider for happiness of the greatest number (Bentham) with a minimal and limited role.
  • Laissez-faire or economic liberalism—self-regulated economic activity by individuals as the best guarantee of general prosperity.
  • Capitalist-market economy and liberal democratic political system.

Positive Liberalism

Nineteenth-century, however, ruefully confessed the inherent shortcomings of free economy and the limited state. The conflict of interest between the landed or the aristocratic class and the rising capitalist class was already won in favour of the latter. Now, the growing problem of inequality and economic hardship in terms of working conditions, poor sanitation, health and habitation and other attendant problems were staring in the eyes of the labour class. While negative liberalism dealt with the issue of liberty, it neither thought of nor required to deal with the issue of equality. The latter was to get its due when the ‘self-interested individual’ has come to face a class of its own creed having neither the same psychology nor capacity to use it. The condition and plight of the proletariat, the working class, was in no way an expression of their self-interest. They had neither economic freedom nor political liberty. Thus came positive liberalism, remorseful, espousing the cause of equality, morality and self-development of the individual and ready to compensate for the wretchedness that its earlier avatar, negative individualism, has created. The features of positive liberalism include the following:

  • Individual liberty not merely absence of interference and external regulation but the condition of self-development and moral development—positive liberty.
  • Relationship between liberty and equality and economic freedom to be balanced.
  • State not a necessary evil but an agency of common or public good and welfare.
  • Interventionist government and social and economic regulation.
  • More emphasis on ‘moral freedom’, ‘distributive justice’, Public Good and expansion of capabilities.


As a reaction to the growing thickness of the state as a welfare flag-bearer and interventionist mechanism in the economic sphere, a new stream of critique emerged. This is led by the neo-liberals or the Libertarians, chiefly amongst them are Friedrich A. Hayek, Milton Friedman, Isaiah Berlin and Robert Nozick. Their main opposition to the growing intervention of the state emerges from their concern for liberty and freedom. All of them support the negative view of liberty and argue for non-interference in the economic liberty of the individual. In short, they take the debate back to a possessive individual and laissez-faire state.

The features of Neoliberalism include the following:

  • Minimalist and night watchman state
  • Priority to economic liberty - economic liberty includes political liberty (Friedman, Nozick)
  • Liberty as absence of coercion
  • No relationship between liberty and equality or justice
  • No welfare state

India’s Liberalism

India's liberalism has evolved through stages that first emphasised earthly life and materialism, then social reforms and political independence, and now economic and social freedom:

  • Ancient Liberalism of Materialism: A culture as old as India's would obviously have a strand of thought that is labelled today as liberalism or libertarianism. Liberalism is a philosophy for living life on this earth; it does not directly concern itself or rather leaves individuals free to choose their beliefs about after-life. The major focus of much of Indian philosophy has been on the life before and after the one on earth and their interconnections: To explain the status in the current life by considering what was done in the previous lives and to predict the future life by evaluating the conduct in this life. Nevertheless, many thinkers brought in earthly enjoyments and material aspects to articulate a philosophy of living this life, Charvak being the most prominent of these thinkers. Their focus on the good and virtuous life to be lived on this earth could be seen as the first stage of liberalism in India.
  • Modern Liberalism of Social Reforms: Modern liberalism in India took roots during the social reform movements of the middle and late nineteenth century. Raja Ram Mohan Roy, Gopal Krishna Gokhle and others launched a systemic attack on anti-life social practices like sati and ban on widow remarriage through Arya Samaj and Brahmo Samaj movements. These movements influenced a large section of the population, particularly in eastern and western parts of India, where they still have a following. Despite the early start much remains to be done in this area of social reforms.
    • With the rise of demands for independence from the British, the social reform liberalism gave way to the liberalism of political independence.
  • Liberalism of Political Freedom: Under the banner of Congress Party, all activists were engaged in discussion about the political and economic system that India should adopt after independence. The socialist Sect formed a separate Congress Socialist Party and the liberal group formed the liberal group but they all worked under the umbrella of the Congress Party. ? India started with a Soviet like welfare state with the five year plans and a planning Commission, however non essential things were left to the private trade and industry.
    • With the war against Pakistan and formation of Bangladesh, the political system went through a drastic change. The Swatantra Party tried to bring collectivisation of agriculture which turned out to be a big failure.
  • Liberalism of economic freedom: After the reforms in the 1990s, the role of the state reversed, from a welfare state India transformed into a liberal state with minimum intervention. This marks the start of India’s exponential growth in terms of its economy.


To conclude, liberal theory of the state overestimates the individual and conversely underestimates the potentials of the state. Its zeal to protect and promote the individual in his rights, liberties and autonomy, it seeks to build a capitalistic system where the state is reduced to the position of an instrument serving the exploitative tendencies. The focus of liberal theorizing concerns the definition of individual rights and the state's role in protecting those rights, analysing such issues depends not only on how one views the source of individual rights but also on how one conceives the state itself.

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