Liberal ideas are normally taken to have played an important role in the development of free markets, and of free labor based on contract in those markets. A closer look at labor regimes in the nineteenth century, however, reveals that liberal commitments to freedom did not straightforwardly produce what we today would think of as free labor. Just as often they produced a form of coerced contractual labor. And this was quite simply because liberal commitments to freedom embraced a basic conflict between freedom of contract and freedom of person.

To the extent that one possessed absolute freedom of contract, one would have been free to contract away one's personal liberty. One would have been free to contract into slavery or bind one's labor irrevocably for long periods of time. To the extent that the state found it desirable to prevent this result, it could only do so by imposing limitations on the freedom of contract in the interest of preserving the freedom of persons.

Modern free labor is the result of just such a choice to restrict freedom of contract. Before this basic issue within liberalism was finally resolved in favor of freedom of person and against freedom of contract, many of the first market regimes based on free contract produced coerced contractual labor rather than free labor. In the first flourishing of free contract in the nineteenth century, lawmakers in many different countries seem to have believed that labor markets based on promises could only function properly if contracts could be rigorously enforced against workers. As a result they often gave employers harsh remedies for contract breach so that they could compel workers to perform their agreements.