The nineteenth-century liberal regarded an extension of freedom as the most effective way to promote welfare and equality; the twentieth century liberal regards welfare and equality as either prerequisites of or alternatives to freedom. In the name of welfare and equality, the twentieth-century liberal has come to favor a revival of the very policies of state intervention and paternalism against which classical liberalism fought.
Jealous of liberty, and hence fearful of centralized power, whether in governmental or private hands, the nineteenth-century liberal favored political decentralization. Committed to action and confident of the beneficence of power so long as it is in the hands of a government ostensibly controlled by the electorate, the twentieth-century liberal favors centralized government.
Both classical liberals and modern-day liberals claim to be on the side of "liberty," but as their goals are diametrically opposed to each other, this isn't possible without playing with the meaning of the word. In The Road to Serfdom, F. A. Hayek explains that the difference between liberals comes from their different definitions of "liberty" and "freedom":
To the great apostles of political freedom [the classical liberals] the word had meant freedom from coercion, freedom from the arbitrary power of other men, release from the ties which left the individual no choice but obedience to the orders of a superior to whom he was attached. The new freedom promised [that of modern-day liberals], however, was to be freedom from necessity, release from the compulsion of the circumstances which inevitably limit the range of choice of all of us, although for some very much more than for others. Before man could be truly free, the "despotism of physical want" had to be broken, the "restraints of the economic system" relaxed.
Freedom in this sense is, of course, merely another name for power or wealth.
Indeed, it is the modern-day liberals who have perverted the English language, first redefining "liberty" to mean "wealth," and then claiming to be "liberal" when in fact they support making people equally wealthy (through methods completely impossible in systems where individual liberty exists).
Classical liberals value equality, but not in the same way, as Friedman explains:
The [classical] liberal will therefore distinguish sharply between equality of rights and equality of opportunity, on the one hand, and material equality or equality of outcome on the other. He may welcome the fact that a free society in fact tends toward greater material equality than any other yet tried. But he will regard this as a desirable by-product of a free society, not its major justification.
Tocqueville, in Democracy in America, argues that the struggle between individual liberty and equality plagues all democratic peoples, and that our natural tendency is unfortunately to prefer equality:
Democratic peoples have a natural taste for liberty. Left to themselves, they seek it out, love it, and suffer if deprived of it. For equality, however, they feel an ardent, insatiable, eternal, invincible passion. They want equality in liberty, and if they cannot have it, they want it still in slavery. They will suffer poverty, servitude, and barbarity, but they will not suffer aristocracy.
This "ardent, insatiable, eternal, invincible passion" must be conquered. History has demonstrated the superiority of true liberalism in bringing wealth, political freedom, and happiness to mankind, and has likewise shown that collectivism, by any name (including today's "liberalism"), results in poverty and tyranny.
Some say that Confucius said that "when words lose their meaning, people lose their liberty." Whether he did or not, surely this is doubly true when the word "liberal" itself loses its meaning. Modern-day collectivists have bastardized the term and assigned it to themselves, hoping to give credibility to their debunked system of political thought. On this blog, however, I refuse to allow such destruction of language to go unchecked, and defend liberty--both the word and the ideal.