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Economic liberalism is often associated with support for free markets and private ownership of capital goods, and is usually contrasted with similar ideologies such as social liberalism and social democracy, which generally favor alternative forms of capitalism such as welfare capitalism, state capitalism or mixed economies. Economic liberalism also contrasts with protectionism because of its support for free trade and open markets. Historically, economic liberalism arose in response to mercantilism and feudalism. Today, economic liberalism is also generally considered to be opposed to non-capitalist economic orders, such as socialism, market socialism and planned economies.[3]
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Ideological basis
Theories in support of economic liberalism were developed in the Enlightenment in opposition to mercantilism and feudalism, and is believed to be first fully formulated by Adam Smith, who advocated minimal interference of government in a market economy, though it does not necessarily oppose the state's provision of basic public goods with what constitutes public goods originally being seen as very limited in scope.[4] Smith claimed that if everyone is left to their own economic devices instead of being controlled by the state, then the result would be a harmonious and more equal society of ever-increasing prosperity.[5] This underpinned the move towards a capitalist economic system in the late 18th century, and the subsequent demise of the mercantilist system.Private property and individual contracts form the basis of economic liberalism. The early theory was based on the assumption that the economic actions of individuals are largely based on self-interest (invisible hand), and that allowing them to act without any restrictions will produce the best results for everyone (spontaneous order), provided that at least minimum standards of public information and justice exist, e.g., no one should be allowed to coerce, steal, or commit fraud, and there is freedom of speech and press.
Initially, the economic liberals had to contend with the supporters of feudal privileges for the wealthy, aristocratic traditions and the rights of kings to run national economies in their own personal interests. By the end of the 19th century and the beginning of the 20th, these were largely defeated.
Today, economic liberalism is associated with classical liberalism, "neoliberalism", "propertarian" libertarianism, and some schools of conservatism.
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