This paper attempts to show how two points of view concerning the relationship between the state and the individual-laissez-fairism and etatism-interact with each other and with the forces unleashed by the Industrial Revolution in the 19th century England to produce modern liberal democratic philosophy. This attempt is carried out by examining the problems faced by, and the philosophical synthesis forged by a succession of English social philosophers-John Locke, Jeremy Bentham, Edmund Burke, J.S. Mill and finally T.H. Green. Locke sets the stage for the dialectics between the state and the individual by tracing the origin of political authority not to the divine rights but to the social compact amongst free and equal individuals endowed with natural rights to life, liberty and property. In order to circumvent the tendency toward a free for all due to inherent greed and partiality in men, individuals enter into a social compact to create a government with legislative and executive powers subject to the principle of majority rule. Here the tension between individualism and rejection of anarchism inherent in individualism which characterized English liberalism comes to surface. As a 18-century social philosophers concerned with abolition of absolutism, however, Locke gave clear philosophical priority to individual rights. He sought the philosophical fonndation for these rights in natural law. Such a view however was clearly in conflict with Locke``s epistemology, according to which experience was the sole source of knowledge and truth. As the 18th century advanced, it was clear that Locke``s individualism needed to be provided with a better philosophical foundation. The principle of utility based on hedonistic psychology was able to provide just such a philosophical justification to individnalism in the late 18th century and early 19th century England characterized by anti-metaphysical and empiricist spirit. While repudiating the natural law of medieval metaphysics, it was able to retain the respect for the rights of individual and the advocacy of radical reforms characteristic of Locke``s liberalism. It served in fact as the philosophical basis for the radicalist movement of the early 19th century in England. The principle of utility-the greatest happiness for the greatest number-together with hedonistic psychology on which the principle was based, provided just such a philosophical justification. By postulating the aim of government to be attainment of happiness of greatest number of individuals, Bentham``s utilitarianism gave English liberalism a decisive push toward greater democracy. It served in fact as the philosophical basis for a large number of legislative and penal reforms in England in the early phase of the Industrial Revolution. The conflict however between the altruistic tendency inherent in the utility principle and the egoistic tendency inherent in hedonistic psychology should not go unnoticed. The hedonistie calculus requires that my pleasure and pleasure of others should have equal value. Yet it is far from clear that the pleasure of others can play the motivational role that my pleasure and plays, at least to the same degree. It is the role of government and legislation to mediate whenever conflicts among pleasures arise. It became increasingly evident that the psychology of quantitative hedonism was inadequate to explain the relation between individual and community, particularly in view of the emergence of such social problems as urbanization and pauperization that concern not just individuals but the community as a whole. The need for a communal point of view found early expression in the conservative political views of E. Burke. Basing himself on Hume``s destructive criticism of natural rights, Burke advocates primacy of sentiment over against reason. Just as the liberals did, Burke advocated laissez-faire in economic policy, but for entirely different reasons. His position was based not on the primacy of individual rights and freedoms, but on the primacy of community and state as concrete expression of tradition. Rights and freedoms are prescribed by the tradition as embodied in the long development of state, and members of that state are duty-bound to preserve them. Burke``s vehement opposition to the French Revolution is rooted in his suspicion of abstract ideas in politics. French Revolution was an artificial attempt to put abstract ideas into practice. Such an attempt, according to Burke, is doomed to failure, because a community cannot survive without love and loyalty of its members, which can only grow in tradition. Burke``s etatistic view point has a greater kinship with the idealistic tradition of continental Europe, particularly with romanticism, medievalism and ethnography of the late 18th century German thought. Burke``s emphasis on tradition and stability, however, was an expression of a need for a new synthesis in social philosophy that could adequately account for the changing relation between the state and the individual. It finds its fruition in the more humanely based liberalism of J.S. Mill. Mill``s philosophical task was one of revising the principle of utility in such a way as to meet the needs of a society entering a more mature phase of industrialization. The revision was in essence two-fold. One was to recognize a qualitative differentiation among pleasures. Another was to accept the idea of self-realization as the standard with which to measure qualitative differences among pleasures. One pleasure is qualitatively superior to another, in so far as it contributes more toward realization of capabilities inherent in individuals. Since, however, the development of the community as a whole is not necessarily based on a simple addition of individualities, the common good of the society as a whole must place certain constraints on unlimited development of individuality. Mill``s interest in the common good of the society became increasingly greater, and his advocacy of social legislation in late years was described even by himself as being socialist. The tension in Mill between the individualism inherited from the earlier liberal tradition and the communalistic tendency was an element in Mill``s liberalism which, while making a theoretic integration difficult, gave a richer and more humane base to the liberalism based merely on hedonistic utilitarianism. The ideal of self-realization plays an important role in the idealist revision of liberalism in late 19th century by the Oxford idealists, particularly T.H. Green. For him the end of life was a complete realization of capabilities and potentialities of individuals. Such an ideal was based, unlike the earlier utilitarians of the empiricist tradition, on a collectivistic view of human nature, according to which individual fulfillment is possible only within a social framework. Such a framework is provided by the state. Unlike the absolute etatism of the Hegelian provenance, Green saw the state and- the individual in a mutual interactive process. The function of the state is to create and promote those conditions necessary for the self-realization of the individual members. Green thus opposed the classical liberalist conception of freedon as a mere absence of constraints. Positive freedom must be one that is consonant with the ideal of self-realization of individuals. The idealist revision of liberalism thus explicitly recognizes the role of the state in full realization of the individual self. The dynamic relationship between the state and the individual in the social thought of the 19th century England coincides with the founding process of democratic liberalism One of the essential reasons for the preeminence of Great Britain in 19th century was perhaps this successful balancing and integration of two essentially opposed ideas of the individual and the state in a gradual interactive process.