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Since the 60s, in the circles where I hang out, "liberal" has never been a term of respect. Of course it's not nasty like "reactionary" and "conservative." Here's how we have always distinguished between the two:
Liberals believe in democratic capitalism and progressives have a class analysis. Liberals think change comes from electing liberal politicians, while progressives work both within and outside the system building social movements. Liberals seek solutions to crisis situations as they arise; progressives operate out of an ideology based on the idea that all aspects of social reality are inter-connected, so real progress requires fundamental change.
An example? Liberals might work to ensure that health insurance companies cannot exclude people because of pre-existing conditions. Progressives organize to replace the present (absurd) system with state provision of health care for all.
Sue, author
Thanks But No Thanks: The Voter's Guide to Sarah Palin
