1. Modern Liberalism
In part because of the continued democratization of the state, the experience of the Great Depression, and WWII, Liberalism came to be altered and modified – less skeptical of government action, more concerned with substantive equality, more skeptical of “free-markets”.
FDR’s New Deal signaled a stark change in that government was now seen as responsible for ensuring the economic well-being of the nation and for providing basic material guarantees to citizens e.g. unemployment insurance, social security, Medicare and Medicaid.
Market Failures known through many years of experience as well as through the study of economics were fully recognized.

2. Modern Liberalism cont...
Market failure is a concept in economic theory wherein the allocation of prices, goods and services by a “free market” is not efficient or socially beneficial. There are at least five well-known ones:
1. Propensity to avoid competition or tendency toward monopoly.
2. Information Asymmetries: producers/sellers know more than customers.
3. Principal-agent problem (conflicts of interests)
4. Externalizing Costs (externalities such as air pollution)
5. Public Goods (socially necessary goods that free markets won’t provide such as the military and infrastructure).

3. Modern Liberalism cont…
Liberals today believe that government must protect individuals from the inequities of modern society and correct the injustices and failures of “free-market” capitalism including environmental degradation.
Liberals extend broad tolerance to different lifestyles and favor limiting government interference in individual rights e.g. the ACLU.
Modern liberals tend to be members of the Democratic Party because of its support for wide ranging welfare programs and government support of the public sector as well as tighter corporate regulations.

4. Modern Liberalism cont…
In foreign policy, liberals tend to oppose military interventionism and unilateralism (going it alone) as insufficient remedies for complex problems. They tend to support foreign aid, arms control, and multilateral efforts (engaging and acting in unison with allies).