The below is an excerpt from The Cause: The Fight for American Liberalism from Franklin Roosevelt to Barack Obama that addresses the frequently asked question: How did classical liberalism morph into New Deal liberalism?
Classical liberalism is synonymous with a faith in reason, which had arisen out of the Enlightenment as a reaction to claims of divine rule by the clergy and royalty of the late Middle Ages. It found expression in the thoughts of many writers across Europe and the British Isles, including John Stuart Mill, John Locke, Baron de Montesquieu, Voltaire, David Hume, and Immanuel Kant, as well as in the political arguments of America's founders, particularly Thomas Jefferson, Thomas Paine, and James Madison. Liberal freedoms were primarily freedoms of the mind: freedom of thought, of expression, of religion, and of self-invention without regard to the customs of caste, creed, or crown. Above all, liberalism implied both an ability and a responsibility of people to think for themselves, to create their own destinies, and to follow their own consciences. Examining the evolution of liberal belief since its founding, the liberal theologian Reinhold Niebuhr observed in an article published on July 4, 1955, in The New Republic, that liberalism in the broadest sense was characterized by a commitment "to free the individual from the traditional restraints of a society, to endow the 'governed' with the power of the franchise, to establish the principle of the 'consent of the governed' as the basis of political society; to challenge all hereditary privileges and traditional restraints upon human initiative."
Over the course of the nineteenth century, however, the traditional or "classical" understanding of liberalism came to represent a kind of conservatism, as powerful institutions (including, primarily, corporations and trusts) found ways to constrict the freedom of individuals through the onerous working conditions of early industrial factories while at the same time paying tribute to the liberal virtues of self-reliance and freedom to choose one's own path to prosperity. To address these developments the great liberal philosopher John Dewey called upon liberals to rethink some of their most fundamental assumptions. Dewey defended the same Enlightenment-based liberalism of old but redefined it so as to allow its believers to adapt to contemporary conditions. Liberalism, he wrote:
[C]ame into use to denote a new spirit that grew and spread with the rise of democracy. It implied a new interest in the common man and a new sense that the common man, the representative of the great masses of human beings, had possibilities that had been kept under, that had not been allowed to develop, because of institutional and political conditions. ... It was marked by a generous attitude, by sympathy for the underdog, for those who were not given a chance. ... [And] it aimed at enlarging the scope of free action on the part of those who for ages had had no part in public affairs and no lot in the benefits secured by this participation.
Although Dewey, who was a much better philosopher than he was a political strategist, spent most of Roosevelt's career denouncing the president as a sellout and supporting Socialist and other marginal candidates, Roosevelt's political career did embody the new liberal spirit that Dewey had identified.
In his famous 1932 speech at the Commonwealth Club in San Francisco, Roosevelt expressed his admiration for Woodrow Wilson as a politician who "saw the situation" of industrial power "more clearly." Even though, for political reasons, he needed to demonstrate his respect for his former boss and predecessor in office as America's most recent Democratic president, FDR likely felt a greater affinity, as an example of the presidency, between his older cousin Teddy rather than Wilson. TR had been a rarity: a successful politician who was a genuine man of ideas (and a historian himself). He gravitated toward other such men, and in Herbert Croly, the founding editor of The New Republic, he found one able to articulate the kind of grand sweeping notion upon which he could not only base an entire political lifetime of proposed reform but even found a movement that almost succeeded in displacing the two established political parties.
The "promise" in Croly's The Promise of American Life (1909) referred to his belief that the United States would avoid the grotesque social and economic inequality found in Europe and could chart an independent course premised on its democratic faith. This faith was grounded in the Jeffersonian worldview, which was now being challenged by the closing of the frontier and the "concentration of economic power" in corporate trusts. Suddenly Alexander Hamilton's vision of America as a future industrial powerhouse with a strong central government was looking a great deal more prophetic than the agrarian republic envisioned by his famous philosophical adversary. By the turn of the century, Croly reasoned, the only power capable of counteracting the transformation of the American economy would have to be national in scope, for the nation itself remained "the best machinery as yet developed for raising the level of human association." But because he viewed the Hamiltonian tradition in American history as corrupted by its attachment to wealthy interests, particularly banking, he sought to employ Hamiltonian mechanisms in order to achieve a Jeffersonian vision of political equality: "The whole tendency of his programme," he explained, "is to give a democratic meaning and purpose to the Hamiltonian tradition and method." The result would be a new definition of the hallowed tradition of American individualism.
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