Liberalism became a distinct movement in the Age of Enlightenment, when it became popular among Western philosophers and economists. Liberalism sought to replace the norms of hereditary privilege, state religion, absolute monarchy, the divine right of kings and traditional conservatism with representative democracy and the rule of law. Liberals also ended mercantilist policies, royal monopolies and other barriers to trade, instead promoting free markets. Philosopher John Locke is often credited with founding liberalism as a distinct tradition, arguing that each man has a natural right to life, liberty and property, adding that governments must not violate these rights based on the social contract. While the British liberal tradition has emphasised expanding democracy, French liberalism has emphasised rejecting authoritarianism and is linked to nation-building.
Leaders in the Glorious Revolution of 1688, the American Revolution of 1776 and the French Revolution of 1789 used liberal philosophy to justify the armed overthrow of royal tyranny. Liberalism started to spread rapidly especially after the French Revolution. The 19th century saw liberal governments established in nations across Europe and South America, whereas it was well-established alongside republicanism in the United States. In Victorian Britain, it was used to critique the political establishment, appealing to science and reason on behalf of the people. During 19th and early 20th century, liberalism in the Ottoman Empire and Middle East influenced periods of reform such as the Tanzimat and Al-Nahda as well as the rise of secularism, constitutionalism and nationalism. These changes, along with other factors, helped to create a sense of crisis within Islam, which continues to this day, leading to Islamic revivalism. Before 1920, the main ideological opponent of classical liberalism was conservatism, but liberalism then faced major ideological challenges from new opponents: fascism and communism. However, during the 20th century liberal ideas also spread even further—especially in Western Europe—as liberal democracies found themselves on the winning side in both world wars.
In Europe and North America, the establishment of social liberalism (often called simply "liberalism" in the United States) became a key component in the expansion of the welfare state. Today, liberal parties continue to wield power and influence throughout the world. However, liberalism still has challenges to overcome in Africa and Asia. The fundamental elements of contemporary society have liberal roots. The early waves of liberalism popularised economic individualism while expanding constitutional government and parliamentary authority. Liberals sought and established a constitutional order that prized important individual freedoms, such as freedom of speech and freedom of association; an independent judiciary and public trial by jury; and the abolition of aristocratic privileges. Later waves of modern liberal thought and struggle were strongly influenced by the need to expand civil rights. Liberals have advocated gender and racial equality in their drive to promote civil rights and a global civil rights movement in the 20th century achieved several objectives towards both goals. Continental European liberalism is divided between moderates and progressives, with the moderates tending to elitism and the progressives supporting the universalisation of fundamental institutions, such as universal suffrage, universal education and the expansion of property rights. Over time, the moderates displaced the progressives as the main guardians of continental European liberalism.
Words such as liberal, liberty, libertarian and libertine all trace their history to the Latin liber, which means "free". One of the first recorded instances of the word "liberal" occurs in 1375, when it was used to describe the liberal arts in the context of an education desirable for a free-born man. The word's early connection with the classical education of a medieval university soon gave way to a proliferation of different denotations and connotations. "Liberal" could refer to "free in bestowing" as early as 1387, "made without stint" in 1433, "freely permitted" in 1530 and "free from restraint"—often as a pejorative remark—in the 16th and the 17th centuries. In 16th century England, "liberal" could have positive or negative attributes in referring to someone's generosity or indiscretion. In Much Ado About Nothing, William Shakespeare wrote of "a liberal villaine" who "hath confest his vile encounters". With the rise of the Enlightenment, the word acquired decisively more positive undertones, being defined as "free from narrow prejudice" in 1781 and "free from bigotry" in 1823. In 1815, the first use of the word "liberalism" appeared in English. In Spain, the liberales, the first group to use the liberal label in a political context, fought for the implementation of the 1812 Constitution for decades. From 1820 to 1823 during the Trienio Liberal, King Ferdinand VII was compelled by the liberales to swear to uphold the Constitution. By the middle of the 19th century, "liberal" was used as a politicised term for parties and movements worldwide.
Over time, the meaning of the word "liberalism" began to diverge in different parts of the world. According to the Encyclopædia Britannica: "In the United States, liberalism is associated with the welfare-state policies of the New Deal programme of the Democratic administration of Pres. Franklin D. Roosevelt, whereas in Europe it is more commonly associated with a commitment to limited government and laissez-faire economic policies". Consequently, in the United States the ideas of individualism and laissez-faire economics previously associated with classical liberalism became the basis for the emerging school of libertarian thought and are key components of American conservatism.