Individualism is an important concept in both economics and politics. Similar to collectivism it is a foundational principle to understand most ideological systems. At its heart, individualism is a set of principles centered on the belief in the moral worth of the individual. This means, that economic or political systems based on the principles of individualism favor policies that limit the control of the government and instead allow more freedoms for the individual person.
On the economic spectrum, individualism is positioned on the right side. This is because the right side of the spectrum is most often associated with limited government intervention in economic affairs. Therefore, people who support the principles of individualism argue in favor of self-reliance and independence. This means that they support the idea that individual people should be responsible for their own well-being and not count on the government (or any other outside agency) to assist them in their lives. Self-reliance is best understood as the concept upon which people take care of their own interests without assistance. Economically, this would mean that people should not rely on the government for programs such a welfare and instead support themselves financially. Click here to read more about political individualism.
ECONOMIC INDIVIDUALISM OVERVIEW
Economic individualism is centered on the idea of less government involvement or intervention in the economy. People who support individualism prioritize the principles of economic freedom, private ownership, competition, self-interest and self-reliance. Similar to political individualism, discussed above, the principles of economic individualism are foundational elements of liberalism, which is the idea that individual people should be free from government control and intervention. Because of this, economic individualism is best positioned on the right side of the economic spectrum. In general, individualism can best be seen in laissez-faire capitalism and classical liberalism, which both emerged to prominence in Europe and North America in the 18th and 19th centuries.
One of the most important figures in economic individualism is the famous Scottish economist, Adam Smith. His ideas, along with others, are credited with laying the foundation for laissez-faire capitalism. Often, laissez-faire capitalism is also referred to as free-market capitalism or market capitalism. Simply put, laissez-faire translates to ‘leave us alone’ meaning that the government should remain out of the economy and instead allow individuals to freely carry out their own economic affairs. Historically, laissez-faire capitalism was most common during the 18th and 19th centuries in the timeframe of the Industrial Revolution. At the time, it was a revolutionary idea, because in the previous centuries, mercantilism had been the dominant economic system. In general, mercantilism is viewed as an economic system that favored heavy government control and regulation. At the time, absolute monarchs ruled over vast empires and controlled almost all aspects of the economy. However, prominent thinkers, including Adam Smith, began to argue against mercantilism in favor of an economic system with more freedom for individuals. The development of capitalism as an economic system, sought to reject the idea of government control of the economy and instead put the focus on individuals.
Adam Smith expressed his economic ideas in his famous work titled ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ which is just often shortened to ‘Wealth of Nations’. The book was published in 1776 and became one of the most influential economic writings of all time. It challenged the idea that the government should control the economy and instead proposed the idea of free trade and competition with a lesser role of the government. The ideas of this book would eventually lay the foundation for the principles of capitalism, which is an economic system that supports the idea of free trade and choice as a way of achieving prosperity. Like the physiocrats, Smith argued against mercantilism and government control of the economy and instead proposed the idea of the ‘invisible hand’. Simply put, the invisible hand is the idea that the market forces of supply and demand should drive the economy of a country. As such, historians consider Adam Smith and the ideas expressed in ‘Wealth of Nations’ as vital to the understanding of economic individualism, laissez-faire capitalism and classical liberalism.
Classical liberalism is a form of liberalism that emerged during the 19th century in Europe and North America but was most notable in England. As an ideology it is based heavily on both political and economic individualism. This means that classical liberalism is a right-wing ideology that heavily favors liberty of the individual in both matters pertaining to government and the economy. For instance, the following people are considered to be prominent classical liberal thinkers from the time: Adam Smith, John Locke, Baron de Montesquieu and John Stuart Mill. Each of these thinkers argued for less government intervention and for the protection of rights and freedoms for individuals.
As stated previously, economic individualism focused on a few central principles, such as: economic freedom, private ownership, competition, self-interest and self-reliance. Each of these principles demonstrate why economic individualism and its related ideologies of laissez-faire capitalism and classical liberalism are all right-wing systems.
The first main principle of economic individualism is economic freedom. Economic freedom is an important element of capitalist or classical liberal societies because it allows people individual choice in their economic decision-making. For instance, economic freedom in classical liberal societies (ex. England during the Industrial Revolution), is largely centered around free trade and free market economy. Under these systems, government intervention is low and instead most economic decisions are determined by individual consumers and producers. As such, people are given the freedom and choice on how to earn and spend their money, and on what goods and services they would like to produce or consume.
The second main principle of economic individualism is public ownership. It is the idea that individuals should have the ability to own property, which could include: land, businesses, products, ideas, etc. For example, during the Industrial Revolution, entrepreneurs began to use their wealth to establish privately owned factories, mines and mills. This allowed individuals to control what they produced, how it was produced and for whom they were producing it. Before the development of capitalism, these decisions would have been controlled by the government. Thus, private ownership shifted the economic decision-making from the government to the people. Private ownership can be seen in modern societies in that people own their own homes, businesses or other forms of property.
Competition is another central principle of economic individualism. Under more collectivist systems, the government controls the means of production and therefore there is little to no competition. Laissez-faire capitalism introduced the idea that individuals and businesses should compete against each other and their success should be determined by the market forces of supply and demand. Therefore, consumers had the ability to decide the success of a business based upon whether they purchased the good or service. Supporters of economic individualism argue that competition benefits society in a number of ways, including: it lowers the price of goods and service as producers compete for the business of consumers, and it fosters innovation of goods and services as companies compete to outdo each other. For example, modern companies such as Apple and Samsung compete for consumer’s business which causes them to innovate their phones with new features, while still trying to keep costs as low as possible.
Another important principle of economic individualism is self-interest. Self-interest is the idea that individuals should act, economically, in their own best interest. Further to this idea, supporters of economic individualism capitalists argue that individuals should constantly seek to improve their own well-being over that of the collective society. For example, self-interest is apparent in the decision-making process of most business owners during the Industrial Revolution. They generally made decisions to increase their own wealth over the economic or personal well-being of their workers. While this method of thinking led to issues such as child labor, the business workers of the time benefitted greatly. Regardless, supporters of economic individualism argue that self-interest was positive for society as a whole through its indirect impacts. For instance, when wealthy business owners acted based on self-interest they were working to improve the economic standing of their overall company. If the company gained more income, it could then use that income to hire more workers and provide more goods or services. Therefore, the belief was that everyone acting in their own self-interest would in the end create more jobs and economic activity to improve the overall economy of a society.
The final main principle of economic individualism is self-reliance. Similar to self-interest, it is the idea that individuals should be responsible for their own well-being and should not rely on the government for assistance. For example, in modern welfare capitalist states, the government provides many social programs to assist citizens. A social program is a government-funded and program that is, in general, universally provided to all citizens of the country. There are many examples of social programs in modern democratic nations, including: old age pensions, some form of government funded healthcare, public education, welfare, etc. However, as stated previously, economic individualism like laissez-faire capitalism is in favor of people being responsible for themselves and therefore the government should not intervene in the economy in order to provide assistance. It was argued that self-reliance would push individuals to work harder and would therefore benefit the society more as a whole.