A couple weeks ago, The Economist ran a sad editorial that read like the end of an era. It was about the cause of free markets and how they seem doomed in today's world. Governments are on the march. The cause of free trade is on the back foot. Freedom and rights seem like slogans of the past. We're faced with massive economic stresses stemming from policy overreach and now even war. Brutality is on the march.

"We were founded in 1843 to campaign for, among other things, free trade and a modest role for government," the editorial reads, neglecting to mention how it also was a key voice in the anti-slavery cause. "Today these classical liberal values are not only unpopular, they are increasingly absent from political debate."

This use of the term "liberal" (which historically opposed all slave systems while pushing peace, commerce, and the rule of law) is better understood in the UK and other commonwealth countries than in the United States.

In the postwar period, the term "liberal" in the United States has weirdly meant the opposite: illiberal, large states, citizen controls, surveillance, and now even censorship. This leaves us without a word to discuss the great crisis of our times: the decline and fall of liberalism as it's historically understood.

The subject is too big and too widely discussed in serious literature for this column to make a dent. Mapping out the main two theories, they're in tension with each other if not completely contradictory.

In the first theory, liberalism was betrayed by states via an exogenous attack. Governments simply crushed it. We were free, and then we weren't. That's a clean and simple theory, but there's likely more to it.

In the other theory, liberalism was always deficient of something that society needs, namely a means of protecting the commons, of building community, and of knitting together a coherent sense of what it means to be together as a nation, and so liberalism had to undergo a series of compromises that eventually ate the core of it.

Before you decide, consider this complicating feature. In the 18th century and for the next 100 years, the Western world identified the practice of liberalism (again, as it's classically understood) with democracy as the main form of political organizing. Gradually, the old monarchies and ecclesiastical absolutism of the past faded and were replaced by a strong confidence in the capacity of a people to manage their own political affairs through elected representatives.

By the end of the 19th century, there prevailed a sense that it wasn't possible to have too much democracy. More and more voters were given the power to decide, and decide over more and more areas of life. Even the aspects of the U.S. Constitution that once embedded a sense of appointed elitism were wiped out. The 17th Amendment to the Constitution, which was unlawfully ratified after the Civil War took away the appointment feature of the U.S. Senate and replaced it with direct elections.

At the time, no one could see the problem. More democracy is always better. What could possibly go wrong? A century and 10 years later, we see now. The Senate is dominated by interests from large urban centers in states rather than representing the whole of the state via appointment by state legislatures. This has massively skewed the way the bicameral legislature in Congress works. Now we have two bodies that represent popular will, however one defines that, and nothing to put a break on the excesses. So far as I know, the public understanding of this drastic change is almost nil.

In the same year (1913), the Federal Reserve was created as a tool to minimize bank crises, but the power to print money as granted by the government was massively abused almost immediately. The demand was that the new central bank would serve the central government and its ambitions as a first priority. There was no longer any excuse to stay out of the world war because the financing came as if by magic.

Also in the same year, another amendment was fraudulently ratified that allowed the federal government to collect income taxes for the first time. This was sold as an alternative to tariff revenue and hence got marketed as a liberal reform. Plus it only pertained to the rich and hardly anyone else would notice. That lasted for not that long, as rates crept up and spread, and eventually the new system of income taxation invaded ever more areas: a pension program, unemployment benefits, health guarantees, and more.

As you can see, this story smacks of the first theory of liberalism's demise: It was attacked by forces outside of the system of liberty. However, keep in mind that most of these reformers didn't see what they did as a repudiation of liberalism but rather its fulfillment: more democracy, fewer economic crises, and more trade without barriers. Truly, the rhetoric behind all of these regime-changing reforms was highly effective. Surely, these would make us more free, not less!

None of that happened. Gradually, the problems with these changes revealed themselves in ways that have attacked liberty and given rise to ever more oppression.

The trouble with this explanation is that it relies on technical changes in one country, whereas the problem of the decline and seeming fall of liberalism is apparent throughout the whole of the West. It seems as if a wider lens is required to understand the fullness of the issue.

Let's consult the third-most-cited book on social science written before 1950, the popularity of which is bested only by Karl Marx's "Capital" and Adam Smith's "Wealth of Nations." It's "Capitalism, Socialism, and Democracy" by Joseph Schumpeter. In my own reading, I keep returning to it because of its brilliance and counterintuitive plausibility. The book elucidates the forces of capitalism well but oddly turns toward predicting its doom.

The reason: The free economy produces so much wealth and prosperity over such a long period of time that it becomes impossible for a single generation to comprehend the cause and effect behind their good fortune, much less defend the freedoms and competitive market structures that make it possible. The wealth all around us becomes too easy to take for granted, as if it's deserved and just part of the structure of the world, which only tempts bad actors to game the system for their own benefit.

Those who do this aren't just businesspeople but a managerial elite in government who embed themselves deeply in the regulatory and welfare structures of the state. These people grow in power at the expense of the lower levels of society that are ultimately responsible for generating the wealth on which the whole of society lives.

Schumpeter was also deeply suspicious of the intellectual class that serves as the guardians and shapers of the public mind, mainly because they lack all authentic experience in enterprise but rather only specialize in rallying behind crazy systems of control. They become a major, if insular, force in society to demand ever more "rational" systems of management while finding it impossible to tolerate the seeming chaos of freedom, much less the "creative destruction" associated with market processes.

For this reason, he found himself predicting doom for the bourgeois system of liberty that he loved and a final victory of managerial socialism that in practice operates much more like fascism.

When I first read this book, I fought the thesis hard. Also, it seemed to me that the way the Cold War ended had thoroughly refuted his theories, and so I didn't bother with them again for a very long time. Looking back, we should have taken his warnings more seriously when they were first issued in 1942.

It was written in wartime, always the most dangerous time for liberty. It was the second world war in the century that the United States had entered without a thought to the limits of spending necessary to achieve victory. This sense of having no limits was born of the central bank but also of the vast and unprecedented wealth in society, a portion of which flowed to government.

Think about that dynamic without regard to that particular instance. More freedom generates more wealth, which funds larger and richer states that, together with the corporate hangers-on and others close to power, eventually turn on the people and take away their freedoms. That's a bitter irony, essentially an insoluble one, so far as we're willing to concede the need for states at all.

If you understand how this works, you can gain a clearer picture of nearly every empire in history, both its rise and fall. Rome worked this way: rich through freedom and rights, pillaged by the ruling class through endless wars and inflations, and then weakened through neglect of high ideals and dominated by cronies and looters. It happened to Spain, Portugal, Germany, and even the Mayans and Aztecs in the New World, and, of course, Britain and now, apparently, the United States. It's a roughly similar situation in each case. Relative freedom leads to wealth that feeds power and fuels hegemonic ambitions that undermine freedom and wreck national vitality and wealth-a vicious cycle.

I'm not sure what the final answer is to the question of what ruined liberalism, but I suspect something like this dynamic is at work, not just nationally but globally with the rise of a cartel of international interest groups consisting of foundations, intellectuals, social elites, and government institutions that have seized so much power and wealth for themselves at the expense of the people in all nations. But that's just a theory.

There's plenty of time to cogitate on this important subject. Figuring it out could be the most important intellectual task of our times. The lament of The Economist rings true, but is this a short-term setback or are we in for a new and long dark age?