I was also bothered by the question of how seemingly intelligent people could come to be persuaded by liberal ideas. I spent a few months researching it and decided to write a paper about it. It is posted at http://cedarstrip.wordpress.com/
"Intellectual" arguments by people like Woodrow Wilson, John Dewey, etc. building on Marxist economic theory concluded that people could only be free if government managed everything. A lot of people bought into it.