Within liberalism one can discern the same tendency as in Marxism, i.e., periods when the ideology has been revised and periods when some thinkers have strived to “return” to a more “classical” liberalism. By classical liberalism I mean the tradition which emphasizes laissez-faire capitalism and which to a large degree invokes Adam Smith, but which also has some democratic ingredients, mainly because of the idea that the individual himself is best capable of discerning his own interests. The main contender of classical liberalism is social liberalism, which was developed gradually during the 19th century and the beginning of the 20th. A period which one might call a period of revision within liberalism occurs mainly from the middle of the 1800s.
John Stuart Mill is a person who by his intellectual development summarizes the ambiguity harbored within some of the liberals of the 19th century. With his book On Liberty he has forever placed himself as one of the foremost thinkers in the tradition that emphasizes liberty above other values. And he started his intellectual trajectory (being the son of James Mill and personally acquainted with Jeremy Bentham) as an adherent to the classical liberalism of the early utilitarians, which generally was very wary of regulations of the freedom to control private property. But many who have studied the development of Mill have noted that his later writings gravitates somewhat to different forms of socialism and ideas about government interventions in order to foster values like knowledge, civilization, and culture. All this means that there have for a long time been quite fruitless discussions about whether Mill really became of socialist, or if he basically remained a libertarian, et cetera.
Anyway, one must accept that the thought of Mill shifts a lot through the years, and one must always keep in mind that he always has his utilitarian basic stance in the back of his head (although the utilitarianism of Mill differs on crucial points from that of Bentham). A fact that may have confused some interpreters is that he sometimes brings forward certain secondary principles, which may be proper as instruments to maximize happiness, but which should mainly be viewed as self-standing principles. One of those is the so-called “harm principle” put forward in On Liberty. For a long time he also put forward private property as an important secondary principle that was relatively disconnected from the utilitarian framework. Later in life he emphasized more and more the utilitarian element in the reasoning about laissez-faire economics and the like. He maintained that at the moment of writing it was not in line with utilitarianism to abolish private ownership of the means of production, but just to connect the design of private property institutions to the utility of the social community (in a meaning different from aggregated preferences) was a large step for many liberals.
However, Dale Miller (“Mill’s ‘Socialism'”, 2003) has claimed that “[i]nsofar as Mill can be accurately described as a socialist, his is a socialism that a classical liberal ought to be able to live with, if not to love.” Miller describes Mill’s stance as being that “capitalist economies should at some point undergo a ‘spontaneous’ and incremental process of socialization, a process involving the formation worker-controlled ‘socialistic’ enterprises through either the transformation of ‘capitalistic’ enterprises or creation de novo.” And Mill believes that this process would not entail any large (or any at all) infringements of the foundational principles of liberty; everything would happen through voluntary processes and without central direction (and the state would not own any means of production). Mill’s “socialist” society can be viewed as a society where worker-controlled companies (and other experimental forms) exist side by side with “ordinary” capitalist enterprises.