There are two problems with this question. The first problem is the definition of the word, “successful”. What do you mean by that? The second problem is the conflating of two similar, but nevertheless separate and distinct, ideas: “a completely free economy” and “Classical Liberalism.".
While the answer to whether it will be “successful” depends on your definition of success, the problem of your conflation of the two ideas means that “a completely free economy" cannot be a “Classical Liberal” economy. Classical liberalism traditionally requires some laws regulating trade, though these the minimum actually necessary to do so, and that furthermore such laws are neutral ones with respect to trade. That means that while a classical liberal economy would not provide for a minimum wage law or for anti-cartel legislation, it also would not prevent the formation and functioning of labor unions. Here is what Adam Smith wrote on cartels but which equally works for labor unions:
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”
Now read this carefully because it isn’t something that most conservatives want to admit but this passage applies equally well to business cartels or to labor unions. Both are anathema to liberty and yet legislating against either would also be anathema to liberty. Instead the government should neither favor the producer nor the consumer in such matters. As John Stuart Mill wrote:
“[T]rade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society... both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for supplying themselves elsewhere. This is the so-called doctrine of Free Trade, which rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay. Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraint, qua restraint, is an evil...”
Yet, even still, what to do about what we refer to as “natural monopolies”, those ones that naturally would arise out of a monopoly? Well, Adam Smith has an answer there as well:
“A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate.”
Now notice what this would entail if carried forth properly. There could be no government monopolies granted, such as you see in cable television, water, sewer, etc. So does that mean that we have a “completely free economy”? It certainly sounds like it, right? However, go back and read what Mill write, “under the sole check of equal freedom to the buyers for supplying themselves elsewhere.” Where monopolies do arise, for whatever reason, there is definitely a right asserted under classical liberalism that such monopolies can be regulated. Thus, while governments ought not grant monopolies, I see nothing in Smith, Mill, Ricardo, or any other proponent of classical economics and classical liberalism that monopoly power cannot be checked to some degree.
There are further limitations placed by classical liberalism on trade even though it is not something we always put forth. Classical liberalism does not allow for force or fraud in economy dealing or political matters. Certainly if I am not allowed to defraud you that is a limitation on my “freedom” but that is because freedom itself cannot be used to infringe upon the freedom of others. Similarly, you do not have the “freedom” under classical liberalism to break contracts without being liable to being hauled into court and forced by the government to provide compensation based on the harm that you caused the other party. Classical liberalism in these regards simply does not allow for a “completely free economy.”
So let’s get back to your original question, as asked. Yes, an economy based on classical liberalism absolutely can thrive and indeed, the ideals of classical liberalism are found (for the most part) in America’s founding document, the US Constitution, and these same ideas were present in Great Britain during the first half of the 19th century. The problem occurred not with classical liberalism but rather from deviations from it. The major industrial companies that rose in the latter half of the 19th century obtained their monopolies through government intervention initially by the railroads (countermanding the express argument that monopolies ought not be granted by government). Interestingly, the classical liberals had a solution to such matters as well. Please read Adam Smith, once again, on infrastructure. If you read this carefully, you will find that Adam Smith, while preferring private ownership to public ownership, nevertheless did not allow such infrastructure to be billed out without some regulation as to its pricing:
”When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tunnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works.”
So that helps us take care of bridges, highways, and railroads. Note that even if private owners were
put in charge of such things, classical liberalism definitely allows for regulation of the pricing of infrastructure.
What about “natural monopolies”, those parts of infrastructure that naturally would occur and how do we deal with the case where individuals cannot pay the costs of such infrastructure, what then? What about, for example, individual streets within a city? Does it make sense to set up a toll road everywhere? How about the provision of water or sewer service where we wish to provide it to the poor for purposes of health and safety and yet the poor cannot afford it? Once again, Adam Smith provides the answer:
“Even those public works which are of such a nature that they cannot afford any revenue for maintaining themselves, but of which the conveniency is nearly confined to some particular place or district, are always better maintained by a local or provincial revenue, under the management of a local and provincial administration, than by the general revenue of the state, of which the executive power must always have the management. Were the streets of London to be lighted and paved at the expence of the treasury, is there any probability that they would be so well lighted and paved as they are at present, or even at so small an expence?”
So, we have taken care of the problem of monopolies (do not grant them or if you cannot avoid them due to the natural monopoly occurring, do not allow their monopoly to be used to fleece the public but instead require their monopolies to be in service to the public). We have also now placed capital and labor on equal footing by allowing both cartels and unions and thus checking each group’s power against one another (though we should not encourage the formation of either). We have stopped trade based on fraud or misrepresentation. What else is there?
Are you worried because workers aren’t going to be paid enough to live? Whose fault is that? Do the workers not have the right under classical liberalism to form a union? They do such a right. Do the workers not have the ability to work elsewhere? They do have such an ability. Furthermore, do not forget that if you set up a law that provides that workers are guaranteed a minimum income, what about the workers who work for themselves? Should they not be guaranteed a minimum income? Why are they disadvantaged in such matters merely because they work for everyone rather than for one person? What about the capitalists? Why are they not guaranteed a minimum profit? After all, most owners of businesses today make little or no more than workers do because businesses are small sole proprietorships.
Are you worried that people will not be able to rent? You should know that classical liberals detested landlords arguing that “they made money in their sleep.” Yet how would you deal with it? If you regulate the rent to be charged, the landlord can merely refuse to rent but instead will sell. That will ensure less space for the poor and more for the rich. Once again, do people not have the right to move elsewhere? Do people not have the right to buy their own property? Do people not have the right to do with their property what they will?
It is the fundamental restrictions on liberty that leads to economic desolation. Look at what happened after “land reform” in Zimbabwe - the bread basket of Africa became a wasteland of famine.
Zimbabwe's Man-Made Famine
Really, my question would be to turn this whole question around: is it really possible to say that societies that have eschewed classical liberalism can be successful?
The fact is that prior to classical liberalism become the mainstream political thought in the 19th century, living standards for ordinary people worldwide had been stagnant for thousands of years. The ordinary Londoner in the 1750s was only marginally better than the ordinary Roman at the time of Jesus:
“Until 1500, as best we can tell, there had been next to no growth in output per worker for the average human for millennia. Even in 1800 the average human had a material standard of living (and an economic productivity level) at best twice that of the average human in the year 1. The problem was not that there was no technological progress. There was. Humans have long been ingenious. Warrior, priestly, and bureaucratic elites in 1800 lived much better than their counterparts in previous millennia had lived. But just because the ruling elite lived better does not mean that other people lived any better. Only after 1800 do we see large sustained increases in worldwide standards of living.”
Source:
Delong - Economic Growth and History
What happened when classical liberalism was in ascend during the 19th century was astounding and it continued well into the 20th century:
“Average rates of material output per capita, which grew at perhaps 0.15 percent per year between 1500 and 1800, grew at roughly 1 percent per year worldwide between 1800 and 1900 and at an average pace of about 2 percent per year worldwide between 1900 and 2000.”
Now it is properly noted that classical liberalism was in retreat in many nation states between about 1930 and 2000. However, it remained the major force for global trade restriction reductions that have driven economic growth in most countries and have propelled our worldwide income increase in the past 70 years. Today, we are starting to see the manifestations of a retreat not only at the nation-state level but also on the global level in terms of free trade. This should worry all of us because it is the (fairly) unfettered ability to trade freely that has lifted economic standards for billions.
You might not like the distributional consequences of classical liberalism but no system is perfect. Yet, all classical liberalism actually did was unleash economic growth. How that growth was distributed was the result of societal structures that transcend the classical liberal framework. Yet rather than rectify these societal structures that have little to do with classical liberalism, we create laws that restrict the very economic growth that has lifted billions out of poverty. Those of us who are classical liberals would argue that the cure for such distributional consequences may be worse than the disease.
So how would this classical liberal “fix” the distributional consequences? The easy and desirable answer from my perspective is not to do it at all. Distributional consequences are a natural byproduct of liberty and is it not better to have more than you otherwise would (and we all have more thanks to the ability to freely trade) even if your neighbor has much, much, much more? Why are you so concerned with what other have rather than just be thankful that you have more than you would have under a system that restricted, or even worse, eschewed, individual liberty?
However I realize that is not a satisfactory answer for most people. That is why I favor, if I must do something about it, the promulgation of a negative income tax (aka guaranteed minimum income). What I am not willing to do, however, is provide bountiful public services and subsidies across an array of goods because I personally think that the poor ought to have them. Give them money and allow them to decide for themselves what they want, whether it be healthcare (beyond certain minimums such as provision of vaccines that protect us all and emergency care that really is not a transaction between a willing buyer and a willing seller, both able to go to a competitor if a meeting of the minds cannot occur), food, or shelter, all of which are now provided to some degree by the state through direct intervention, subsidization, or voucher programs. If someone wishes to have a smaller living space in order to eat a little more, who am I to say otherwise? Who am I to dictate that one must eat a certain proportion or amount of foods and if those foods are not to nutritional standards, even if they are still food, who am I to say that you cannot have such food? After all, I do not place restrictions on what the middle class may procure so why am I assuming that just because someone is poor that somehow they are also mentally incompetent? Similarly, who am I to dictate that you may not reside in a particular home because I deem it of squalor when I am not willing to preclude everyone regardless of income from doing the same. When we place restrictions on what one consumes, solely on the basis of income and the fact that someone is granted something from the public purse, is this not the very height of arrogance and hostility to the poor?
