Daniel Klein of George Mason University has been leading an intellectual campaign for restoring the original meaning of "liberalism" as devoted to individual liberty and limited government. As part of that campaign, he has presented evidence that the use of the word "liberal" in its political sense originated with Adam Smith and other Scottish thinkers as a term denoting what Smith called "the system of natural liberty." He has presented his research as an essay on the website of The Atlantic, which includes a video of a lecture that elaborates his reasoning.
Scholars who have traced the history of the English word "liberalism" have often claimed that "liberal" as a political term originated on the European Continent at the beginning of the nineteenth century, which was then imported into Great Britain in the 1820s, when a suffix was added to coin the word "liberalism." In The Constitution of Liberty, Friedrich Hayek noted that it was often suggested that the word "liberal" derived from the early nineteenth-century Spanish party of the liberales (first edition, 530; definitive edition, 529). But Hayek indicated that he believed that this political sense of "liberal" derived from Adam Smith's language in The Wealth of Nations, where Smith identified "the liberal system of free exportation and free importation" (Liberty Fund, 538), and where he spoke of "allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty, and justice" (Liberty Fund, 664).
Klein argues for the Hayek thesis as opposed to the importation thesis. Google has scanned millions of books, and Googles Ngram Viewer allows researchers to study this digital data to see how words have been used over the centuries. Klein has used this to study the meaning of the adjective "liberal." Prior to 1769, "liberal" had only non-political meanings, such as being generous, noble, or having superior status (as in "liberal arts" and "liberal education"). Beginning in 1769, there was a sudden jump in the number of times that writers used political terms such as "liberal policy," "liberal plan," "liberal system," "liberal views," "liberal ideas," and "liberal principles." In 1769, William Robertson was the first writer to use such terms in his book The History of the Reign of the Emperor Charles V.
Robertson was a friend of Adam Smith, who began to use "liberal" in this way in 1776, in his Wealth of Nations. He argues in favor of "the liberal system of free exportation and free importation," which would turn all of Europe into a single great empire bound together by free trade (538). In explaining this "liberal system," he thinks it applies as much to free trade in religion as to free trade in corn. "The people feel themselves so much interested in what relates either to their subsistence in this life, or to their happiness in life to come, that government must yield to their prejudices, and, in order to preserve the public tranquility, establish that system which they approve of" (539). As long as the laws secure "to every man that he can enjoy the fruits of his own labor," the "natural effort of every individual to better his condition" will carry a society to wealth and prosperity (540). Smith also speaks of this liberal system of freedom to trade as "allowing every man to pursue his own interest his own way, upon that liberal plan of equality, liberty, and justice" (664).
Smith's description of the "liberal system" suggests that it coincides with what he calls the "system of natural liberty," because in both cases, he speaks of a man's freedom "to pursue his own interest his own way":
"All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society" (687-88).Thus, the "liberal system" or the "system of natural liberty" does require government, but the duties of government are limited. The first two governmental duties are clear--protecting the individuals of a society from foreign attack and from the unjust attacks of other members of the society. But the third duty--providing public works or public institutions--is more open to debate. What Smith says about this in Book 5 of Wealth of Nations has been interpreted by some readers as suggesting that Smith might today be a left liberal or even a Marxist in favoring an interventionist government with a welfare state and redistribution of income. If you look at the video of Klein's lecture, you will see that the commentator on the lecture raises this point, and Klein acknowledges that this is a possible reading of Smith, although Klein favors the reading that sees Smith as a classical liberal who would not have supported left liberalism.
In any case, Klein has, I think, proven that Hayek was right in seeing the political sense of "liberal" as originating with Smith, so that the "liberal system" is to be equated with Smith's "system of natural liberty." Later, in Great Britain, the English noun "liberalism" was coined to refer to this Smithian understanding of "liberal" thought. The earliest use of "liberalism" that I have noticed is by Alexander von Humboldt in a letter to Thomas Jefferson on May 24, 1804, in which Humboldt writes: "Your writings, your actions, and the liberalism of your ideas have inspired me from my earliest youth." Later, Jefferson himself, in a letter to John Adams (January 22, 1821), spoke of "the advance of liberalism" that was shown in the 1820 revision of the Massachusetts Constitution favoring religious liberty.
Although Smith does not use the word "evolution," his account of the "liberal system" does have an evolutionary character to it. Hayek noticed this and developed it in his account of the liberal idea of "spontaneous evolution" or "spontaneous order." Smith's system of natural liberty is a spontaneous order that evolves from the bottom-up rather than being designed from the top-down. It is a natural evolutionary order in that it arises from the natural desire of all individuals to better their condition, which leads to wealth and prosperity whenever the laws secure to individuals the liberty to enjoy the fruits of their own labor.
In the nineteenth century, Herbert Spencer elaborated the principle of equal liberty as fundamental for liberalism, and he presented it as part of a cosmic evolution of order in which the whole history of the Universe could be seen as an evolution from simplicity to complexity.
In 1859, the Liberal Party of Great Britain was established under the leadership of William Gladstone; and Charles Darwin's Origin of Species was published. Darwin became an enthusiastic supporter of the Liberal Party, and one can see his liberalism in his Descent of Man, particularly in his criticism of slavery.
I will be writing more about the cosmic evolution of Darwinian liberalism.