Why did Deakin go left?

I'm reading a biography of Alfred Deakin, who served as Australian Prime Minister in the very early 1900s, written by Judith Brett.

Chapter 5 is especially interesting as it provides some of the details of how a young Deakin became a liberal. In part, he came to identify as a liberal because of the influence of the leading liberal intellectuals of the time. He described himself (in 1878) as being "saturated with the doctrines of Spencer, Mill, Buckle".

But what did it mean to be a liberal in the colony of Victoria in the 1870s? The distinction between right liberals and left liberals had already emerged. The right side of politics championed free trade and laissez-faire liberalism and found support in the professional classes, the squatters (large landholders), the Argus newspaper, and the large merchants. The left side of politics denounced their opponents as "Conservatives and obstructionists, no matter how much the free-traders might protest that they were the true Liberals" (p.55).

The left saw itself as the progressive liberal movement and gained its support from the working-classes and the Age newspaper. It supported popular democracy, land reform, economic protection and "an active state to develop the colony's potential".

The story of the Age newspaper is highly relevant here. It was founded in 1856 and by the 1870s, under David Syme, had become the most widely read Australian newspaper. Syme played a key role in challenging the dominance of classical liberalism:

Syme also rejected classical-liberal economics' methodological assumption of an economic man motivated only by self-interest. Showing the influence of German idealism on his thinking, Syme argued that this was an untenable abstraction which excluded morality and the sense of duty. Nor, he argued, can it be assumed that the operations of self-interest are generally beneficial as postulated in Adam Smith's ideal market. Self-interest and individualism have their place, but need to be balanced by the interests of society as a whole, for which the state is the appropriate agent. Syme was happy to accept the description of his position as "in the direction of State Socialism" (p. 57).

We learn further that:

Deakin was already predisposed to such arguments from Carlyle's rejection of the dismal science of economics, with its mechanical operations of supply and demand leaving no room for the operations of the spirit...For Syme the arguments over trade were about far more than economics, and his arguments for protection connected it to other aspects of Deakin's emerging political outlook: his optimistic faith in the state as an agent of a harmonised and progressive common interest and his confident identification with the colonial point of view.

The political divide was therefore the dreary one that we are familiar with today. The right was made up of classical liberals who believed in the free market but who were called conservatives. The left saw themselves as progressive liberals and thought that the state could represent a "progressive common interest".

It's easy to sympathise with Syme's criticism of classical liberalism. The view that we are economic men motivated by individualistic self-interest is not exactly an elevated or inspiring ideal. It has to be said, too, that liberals like Deakin did try to use the state to promote a "common interest" at the time of Australia becoming a federated nation in the early 1900s. For instance, there was a policy to keep working-class living standards high through economic protection and immigration restrictions, and an arbitration system was devised to avoid the class conflicts of earlier decades.

But it fell apart. Neither the Australian state, nor the Age newspaper has promoted a genuine national interest for many decades. The focus on the state as "an agent of a harmonised and progressive common interest" didn't work in the longer term.

What went wrong with the new liberalism (the left-liberalism) that Deakin was converted to? I can't discuss this in detail but the following points are worth considering:

1. Syme was correct to want the interests of society as a whole to be considered rather than just individual self-interest. But there are problems in seeing the state as the agency responsible for regulating society. Patrick Deneen has a whole chapter in his book Why Liberalism failed outlining the ways in which individualism and statism are mutually reinforcing rather than alternatives.

2. The general liberal understanding of liberty and equality (and progress and reason), held by both sides of politics, has an inner logic that came to disallow the forms of identity, the loyalties and the social commitments which hold together a common life within society. Therefore, over time left-liberalism was just as dissolving of society as was classical liberalism.