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''Laissez-faire'' ( ; from french: laissez faire , ) is an
economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea of a two-way effect is essential in the co ...
in which transactions between private groups of people are free or almost free from any form of
economic interventionism Economic interventionism, sometimes also called state interventionism, is an economic policy position favouring government intervention in the market process with the intention of correcting market failure In neoclassical economics, market f ...
such as
regulation Regulation is the management of complex systems A complex system is a system composed of many components which may interaction, interact with each other. Examples of complex systems are Earth's global climate, organisms, the human brain, infras ...

regulation
and
subsidies A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the term ...

subsidies
. As a system of thought, ''laissez-faire'' rests on the following axioms: "the individual is the basic unit in society, i.e. the standard of measurement in social calculus; the individual has a natural right to freedom; and the physical order of nature is a harmonious and self-regulating system."
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and ...

Adam Smith
also argues that
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
s are creatures of the state and therefore the citizens must watch them closely due to their propensity to disrupt the
spontaneous order Spontaneous order, also named self-organization Self-organization, also called (in the social sciences) spontaneous order, is a process where some form of overall order arises from local interactions between parts of an initially disordered ...
. Another basic principle of ''laissez-faire'' holds that markets should be
competitive Competition is a rivalry A rivalry is the state of two people or groups engaging in a lasting competitive relationship. Rivalry is the "against each other" spirit between two competing sides. The relationship itself may also be called "a riv ...
, a rule that the early advocates of ''laissez-faire'' always emphasized. With the aims of maximizing freedom and of allowing markets to self-regulate, early advocates of ''laissez-faire'' proposed a ''impôt unique'', a tax on land rent (similar to
Georgism Georgism, also called in modern times geoism and known historically as the single tax movement, is an economic ideology An economic ideology distinguishes itself from economic theory in being Normative economics, normative rather than just expl ...
) to replace all taxes that they saw as damaging welfare by penalizing
production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products (goods and services) * Production as a statistic, g ...
. Proponents of ''laissez-faire'' argue for a complete separation of government from the economic sector. The phrase ''laissez-faire'' is part of a larger French phrase and literally translates to "let t/themdo", but in this context the phrase usually means to "let it be" and in expression "laid back." Although never practiced with full consistency, ''laissez-faire''
capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
emerged in the mid-18th century and was further popularized by
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and ...

Adam Smith
's book ''
The Wealth of Nations ''An Inquiry into the Nature and Causes of the Wealth of Nations'', generally referred to by its shortened title ''The Wealth of Nations'', is the ''magnum opus 's ''The Creation of Adam'' (c. 1512), part of the Sistine Chapel ceiling The ...

The Wealth of Nations
''. While associated with
capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
in common usage, there are also non-capitalist forms of ''laissez-faire'', including some forms of
market socialism Market socialism is a type of economic system involving the Public ownership, public, Cooperative ownership, cooperative, or social ownership of the means of production in the framework of a market economy. Market socialism differs from Economi ...
.


Etymology and usage

The term ''laissez-faire'' likely originated in a meeting that took place around 1681 between powerful French
Controller-General of FinancesThe Controller-General or Comptroller-General of Finances (french: Contrôleur général des finances) was the name of the minister in charge of finances in France France (), officially the French Republic (french: link=no, République franç ...
Jean-Baptiste Colbert Jean-Baptiste Colbert (; 29 August 1619 – 6 September 1683) was a French statesman who served as First Minister of State from 1661 until his death in 1683 under the rule of King Louis XIV. His lasting impact on the organisation of the country's ...

Jean-Baptiste Colbert
and a group of French
businessmen A business person (business man, business woman) is a person involved in the business sector In business Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such a ...

businessmen
headed by M. Le Gendre. When the eager
mercantilist Mercantilism is an economic policy The economic policy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, nationalization, national owner ...

mercantilist
minister asked how the French state could be of service to the merchants and help promote their commerce, Le Gendre replied simply: "Laissez-nous faire" ("Leave it to us" or "Let us do , the French verb not requiring an
object Object may refer to: General meanings * Object (philosophy), a thing, being, or concept ** Entity, something that is tangible and within the grasp of the senses ** Object (abstract), an object which does not exist at any particular time or pl ...
). The anecdote on the Colbert–Le Gendre meeting appeared in a 1751 article in the ''Journal économique'', written by French minister and champion of
free trade Free trade is a trade policy A commercial policy (also referred to as a trade policy or international trade policy) is a government's policy governing international trade International trade is the exchange of capital, goods, and service ...
René de Voyer, Marquis d'Argenson—also the first known appearance of the term in print. Argenson himself had used the phrase earlier (1736) in his own diaries in a famous outburst:
Vincent de GournayJacques Claude Marie Vincent de Gournay (; 28 May 1712, Saint-Malo – 27 June 1759, Cádiz), a French economist, became an intendant of commerce. Some historians of economics believe that he coined the phrase '' laissez faire, laissez passer' ...
, a French Physiocrat and intendant of commerce in the 1750s, popularized the term ''laissez-faire'' as he allegedly adopted it from
François Quesnay François Quesnay (; 4 June 1694 – 16 December 1774) was a French economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and conce ...

François Quesnay
's writings on China. Quesnay coined the phrases ''laissez-faire'' and ''laissez-passer'', ''laissez-faire'' being a translation of the Chinese term ''
wu wei ''Wu wei'' () is a concept literally meaning "inexertion", "inaction", or "effortless action". ''Wu wei'' emerged in the Spring and Autumn period, and from Confucianism, to become an important concept in Chinese statecraft and Taoism, and was m ...
'' (無為). Gournay ardently supported the removal of restrictions on trade and the deregulation of industry in France. Delighted with the Colbert–Le Gendre anecdote, he forged it into a larger maxim all his own: "Laissez faire et laissez passer" ("Let do and let pass"). His motto has also been identified as the longer "Laissez faire et laissez passer, le monde va de lui même !" ("Let do and let pass, the world goes on by itself!"). Although Gournay left no written tracts on his economic policy ideas, he had immense personal influence on his contemporaries, notably his fellow Physiocrats, who credit both the ''laissez-faire'' slogan and the doctrine to Gournay. Before d'Argenson or Gournay, P. S. de Boisguilbert had enunciated the phrase "On laisse faire la nature" ("Let nature run its course"). D'Argenson himself during his life was better known for the similar, but less-celebrated motto "Pas trop gouverner" ("Govern not too much"). The Physiocrats proclaimed ''laissez-faire'' in 18th-century France, placing it at the very core of their economic principles and famous economists, beginning with
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and ...

Adam Smith
, developed the idea.Fine, Sidney. ''Laissez Faire and the General-Welfare State''. United States: The University of Michigan Press, 1964. Print It is with the Physiocrats and the classical
political economy Political economy is the study of production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products (g ...
that the term ''laissez-faire'' is ordinarily associated. The book ''Laissez Faire and the General-Welfare State'' states: "The physiocrats, reacting against the excessive mercantilist regulations of the France of their day, expressed a belief in a 'natural order' or liberty under which individuals in following their selfish interests contributed to the general good. Since, in their view, this natural order functioned successfully without the aid of government, they advised the state to restrict itself to upholding the rights of private property and individual liberty, to removing all artificial barriers to trade, and to abolishing all useless laws". The French phrase ''laissez-faire'' gained currency in English-speaking countries with the spread of Physiocratic literature in the late 18th century.
George Whatley George Whatley, Esq, was a contemporary, friend and correspondent of Benjamin Franklin Benjamin Franklin ( April 17, 1790) was one of the Founding Fathers of the United States. A polymath, he was a leading writer, printer (publishing), prin ...
's 1774 ''Principles of Trade'' (co-authored with
Benjamin Franklin Benjamin Franklin ( April 17, 1790) was one of the Founding Fathers of the United States that was negotiated on behalf of the United States by John Adams, Benjamin Franklin and John Jay The Founding Fathers of the United States, or simp ...

Benjamin Franklin
) re-told the Colbert-LeGendre anecdote; this may mark the first appearance of the phrase in an English-language publication.
Herbert Spencer Herbert Spencer (27 April 1820 – 8 December 1903) was an English philosopher, biologist Francesco Redi, the founder of biology, is recognized to be one of the greatest biologists of all time A biologist is a professional who has speciali ...

Herbert Spencer
was opposed to a slightly different application of ''laissez faire''—to "that miserable ''laissez-faire''" that leads to men's ruin, saying: "Along with that miserable ''laissez-faire'' which calmly looks on while men ruin themselves in trying to enforce by law their equitable claims, there goes activity in supplying them, at other men's cost, with gratis novel-reading!" As a product of the
Enlightenment Enlightenment, enlighten or enlightened may refer to: Age of Enlightenment * Age of Enlightenment, period in Western intellectual history from the late 17th to late 18th century, centered in France but also encompassing: ** Midlands Enlightenment ...
, ''laissez-faire'' was "conceived as the way to unleash human potential through the restoration of a natural system, a system unhindered by the restrictions of government".Gaspard, Toufick. ''A Political Economy of Lebanon 1948–2002: The Limits of Laissez-faire''. Boston: Brill, 2004. In a similar vein, Adam Smith viewed the economy as a natural system and the market as an organic part of that system. Smith saw ''laissez-faire'' as a moral program and the market its instrument to ensure men the rights of
natural law Natural law ( la, ius naturale, ''lex naturalis'') is a system of law based on a close observation of human nature Human nature is a concept that denotes the fundamental disposition A disposition is a quality of character, a habit A habit (or ...
. By extension,
free market In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of pl ...
s become a reflection of the natural system of liberty. For Smith, ''laissez-faire'' was "a program for the abolition of laws constraining the market, a program for the restoration of order and for the activation of potential growth". However, Smith and notable classical economists such as
Thomas Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) was an English cleric Clergy are formal leaders within established religion Religion is a social system, social-cultural system of designated religious behaviour, be ...

Thomas Malthus
and
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, one of the most influential of the classical economists along with Thomas Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) w ...

David Ricardo
did not use the phrase.
Jeremy Bentham Jeremy Bentham (; 15 February 1748 Old_Style_and_New_Style_dates">O.S._4_February_1747.html" ;"title="Old_Style_and_New_Style_dates.html" ;"title="nowiki/>Old Style and New Style dates">O.S. 4 February 1747">Old_Style_and_New_Style_dates.htm ...

Jeremy Bentham
used the term, but it was probably
James Mill James Mill (born James Milne; 6 April 1773 – 23 June 1836) was a Scottish historian ( 484– 425 BC) was a Greek historian who lived in the 5th century BC and one of the earliest historians whose work survives. A historian is a person who stu ...

James Mill
's reference to the ''laissez-faire'' maxim (together with the "Pas trop gouverner" motto) in an 1824 entry for the ''Encyclopædia Britannica'' that really brought the term into wider English usage. With the advent of the
Anti-Corn Law League The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners’ interests by levying taxes on imported wheat, thus raising the price of bread at a time wh ...
(founded 1838), the term received much of its English meaning. Smith first used the metaphor of an
invisible hand The invisible hand is an economic concept that describes the unintended greater social benefits and public good brought about by individuals acting in their own self-interests. The concept was first introduced by Adam Smith Adam Smith ( ...

invisible hand
in his book ''
The Theory of Moral Sentiments ''The Theory of Moral Sentiments'' is a 1759 book by Adam Smith. It provided the ethical, philosophical, psychological, and methodological underpinnings to Smith's later works, including '' The Wealth of Nations'' (1776), '' Essays on Philosop ...
'' (1759) to describe the unintentional effects of economic self-organization from economic self-interest. Although not the metaphor itself, the idea lying behind the invisible hand belongs to
Bernard de Mandeville Bernard Mandeville, or Bernard de Mandeville (; 15 November 1670 – 21 January 1733), was an Anglo-Dutch philosopher, political economist and satirist. Born in Rotterdam Rotterdam (, , ) is the second largest city A city is a large human ...

Bernard de Mandeville
and his ''
Fable of the Bees ''The Fable of The Bees: or, Private Vices, Publick Benefits'' (1714) is a book by the Anglo-Dutch social philosopher Bernard Mandeville Bernard Mandeville, or Bernard de Mandeville (; 15 November 1670 – 21 January 1733), was an Anglo-Dutch p ...
'' (1705). In political economy, that idea and the doctrine of ''laissez-faire'' have long been closely related. Some have characterized the invisible-hand metaphor as one for ''laissez-faire'', although Smith never actually used the term himself.Roy C. Smith, Adam Smith and the Origins of American Enterprise: How the Founding Fathers Turned to a Great Economist's Writings and Created the American Economy, Macmillan, 2004, , pp. 13–14. In ''Third Millennium Capitalism'' (2000), Wyatt M. Rogers Jr. notes a trend whereby recently "conservative politicians and economists have chosen the term 'free-market capitalism' in lieu of ''laissez-faire''". American
individualist anarchists Individualist anarchism is the branch of anarchism that emphasizes the individual and their Will (philosophy), will over external determinants such as groups, society, traditions and ideological systems."What do I mean by individualism? I mean b ...
such as
Benjamin Tucker Benjamin Ricketson Tucker (; April 17, 1854 – June 22, 1939) was an American anarchist Anarchism is a political philosophy and Political movement, movement that is sceptical of authority and rejects all involuntary, coercive forms of hie ...

Benjamin Tucker
saw themselves as economic ''laissez-faire'' socialists and political individualists while arguing that their "anarchistic socialism" or "individual anarchism" was "consistent Manchesterism".


History


Europe

In Europe, the ''laissez-faire'' movement was first widely promoted by the
Physiocrats , a physician who is considered the founding father of physiocracy, published the "Tableau économique" (Economic Table) in 1758 Image:Pierre Samuel du Pont de Nemours (1739-1817).png, Pierre Samuel du Pont de Nemours, a prominent physiocrat. In ...
, a movement that included
Vincent de GournayJacques Claude Marie Vincent de Gournay (; 28 May 1712, Saint-Malo – 27 June 1759, Cádiz), a French economist, became an intendant of commerce. Some historians of economics believe that he coined the phrase '' laissez faire, laissez passer' ...
(1712–1759), a successful merchant turned political figure. Gournay is postulated to have adapted the Taoist concept ''
wu wei ''Wu wei'' () is a concept literally meaning "inexertion", "inaction", or "effortless action". ''Wu wei'' emerged in the Spring and Autumn period, and from Confucianism, to become an important concept in Chinese statecraft and Taoism, and was m ...
'', from the writings on China by
François Quesnay François Quesnay (; 4 June 1694 – 16 December 1774) was a French economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and conce ...

François Quesnay
(1694–1774). Gournay held that government should allow the laws of nature to govern economic activity, with the state only intervening to protect life, liberty and property.
François Quesnay François Quesnay (; 4 June 1694 – 16 December 1774) was a French economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and conce ...

François Quesnay
and
Anne Robert Jacques Turgot Anne Robert Jacques Turgot, Baron de l'Aulne ( ; ; 10 May 172718 March 1781), commonly known as Turgot, was a French economist and statesman. Originally considered a physiocrat, he is today best remembered as an early advocate for economic liber ...

Anne Robert Jacques Turgot
, Baron de l'Aulne took up Gournay's ideas. Quesnay had the ear of the King of France,
Louis XV Louis XV (15 February 1710 – 10 May 1774), known as Louis the Beloved (french: le Bien-Aimé), was King of France The monarchs of the Kingdom of France ruled from the establishment of the West Francia, Kingdom of the West Franks in 843 ...

Louis XV
and in 1754 persuaded him to give ''laissez-faire'' a try. On September 17, the King abolished all tolls and restraints on the sale and transport of grain. For more than a decade, the experiment appeared successful, but 1768 saw a poor harvest, and the cost of bread rose so high that there was widespread starvation while merchants exported grain in order to obtain the best profit. In 1770, the Comptroller-General of Finances
Joseph Marie Terray Abbot Joseph Marie Terray (1715 – 18 February 1778) was a Controller-General of Finances during the reign of Louis XV of France, an agent of fiscal reform. Biography Terray, tonsured but not a priest, was appointed in 1736 an ecclesiastical cou ...

Joseph Marie Terray
revoked the edict allowing free trade in grain. The doctrine of ''laissez-faire'' became an integral part of 19th-century European liberalism. Just as liberals supported
freedom of thought Freedom of thought (also called freedom of conscience or ideas) is the freedom Freedom, generally, is having the ability to act or change without constraint. Something is "free" if it can change easily and is not constrained in its present s ...
in the intellectual sphere, so were they equally prepared to champion the principles of
free trade Free trade is a trade policy A commercial policy (also referred to as a trade policy or international trade policy) is a government's policy governing international trade International trade is the exchange of capital, goods, and service ...
and free competition in the sphere of economics, seeing the state as merely a passive policeman, protecting
private property Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property Public property is property Property (''latin: Res Privata'') in the Abstract ...
and administering justice, but not interfering with the affairs of its citizens. Businessmen, British industrialists in particular, were quick to associate these principles with their own economic interests. Many of the ideas of the physiocrats spread throughout Europe and were adopted to a greater or lesser extent in
Sweden Sweden ( sv, Sverige ), officially the Kingdom of Sweden ( sv, links=no, Konungariket Sverige ), is a Nordic countries, Nordic country in Northern Europe.The United Nations Group of Experts on Geographical Names states that the country's fo ...

Sweden
,
Tuscany it, Toscano (man) it, Toscana (woman) , population_note = , population_blank1_title = , population_blank1 = , demographics_type1 = Citizenship , demographics1_footnotes = , demographics1_title1 = Italian , demogra ...
,
Spain , image_flag = Bandera de España.svg , image_coat = Escudo de España (mazonado).svg , national_motto = , national_anthem = , image_map = , map_caption = , image_map2 ...

Spain
and in the newly created
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
.
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and ...

Adam Smith
, author of ''
The Wealth of Nations ''An Inquiry into the Nature and Causes of the Wealth of Nations'', generally referred to by its shortened title ''The Wealth of Nations'', is the ''magnum opus 's ''The Creation of Adam'' (c. 1512), part of the Sistine Chapel ceiling The ...

The Wealth of Nations
'' (1776), met Quesnay and acknowledged his influence. In Britain, the newspaper ''
The Economist ''The Economist'' is an international weekly newspaper A weekly newspaper is a general-news or current affairsCurrent affairs may refer to: Media * Current Affairs (magazine), ''Current Affairs'' (magazine), a bimonthly magazine of cult ...
'' (founded in 1843) became an influential voice for ''laissez-faire''
capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
. ''Laissez-faire'' advocates opposed food aid for famines occurring within the
British Empire The British Empire was composed of the dominions, Crown colony, colonies, protectorates, League of Nations mandate, mandates, and other Dependent territory, territories ruled or administered by the United Kingdom and its predecessor states. ...

British Empire
. In 1847, referring to the famine then underway in
Ireland Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic. It is separated from Great Britain to its east by the North Channel (Great Britain and Ireland), North Channel, the Irish Sea ...

Ireland
, founder of ''The Economist''
James WilsonJames Wilson may refer to: Politicians and government officials Canada *James Wilson (Upper Canada politician) (1770–1847), English-born farmer and political figure in Upper Canada *James Crocket Wilson (1841–1899), Canadian MP from Quebec ...
wrote: "It is no man's business to provide for another". More specifically, in
An Essay on the Principle of Population The book ''An Essay on the Principle of Population'' was first published anonymously in 1798, but the author was soon identified as Thomas Robert Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) was an English cleri ...

An Essay on the Principle of Population
,
Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) was an English cleric Clergy are formal leaders within established religion Religion is a social system, social-cultural system of designated religious behaviour, beh ...

Malthus
argued that there was nothing that could be done to avoid famines because he felt he had mathematically proven that population growth tends to exceed growth in food production. However, ''The Economist'' campaigned against the
Corn Laws The Corn Laws were tariff A tariff is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law, a legal person is any person A person (plural people or per ...
that protected landlords in the
United Kingdom of Great Britain and Ireland The United Kingdom of Great Britain and Ireland was a sovereign state that existed between 1801 and 1922. It was established by the Acts of Union 1800, which merged the Kingdom of Great Britain and the Kingdom of Ireland into a unified state ...

United Kingdom of Great Britain and Ireland
against competition from less expensive foreign imports of cereal products. The Great Famine in Ireland in 1845 led to the repeal of the Corn Laws in 1846. The tariffs on grain which kept the price of bread artificially high were repealed. However, repeal of the Corn Laws came too late to stop the Irish famine, partly because it was done in stages over three years. A group that became known as the Manchester Liberals, to which
Richard Cobden Richard Cobden (3 June 1804 – 2 April 1865) was an English Radicals (UK), Radical and Liberal Party (UK), Liberal politician, manufacturing, manufacturer, and a campaigner for free trade and peace. He was associated with the Anti-Corn Law League ...

Richard Cobden
(1804–1865) and
John Bright John Bright (16 November 1811 – 27 March 1889) was a British Radicals (UK), Radical and Liberal Party (UK), Liberal statesman, one of the greatest orators of his generation and a promoter of free trade policies. A Quaker, Bright is most f ...

John Bright
(1811–1889) belonged, were staunch defenders of free trade. After the death of Cobden, the
Cobden Club The Cobden Club was a society and publishing imprint, based in London London is the capital city, capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom. The city stands on the River Thames in th ...
(founded in 1866) continued their work. In 1860, Britain and France concluded a trade treaty, after which other European countries signed several similar treaties. The breakdown of ''laissez-faire'' as practised by the British Empire was partly led by British companies eager for state support of their positions abroad, in particular British oil companies.


United States

Frank Bourgin's study of the Constitutional Convention and subsequent decades argues that direct government involvement in the economy was intended by the
Founding Fathers The following list of national founding figures is a record, by country, of people who were credited with establishing their nation. National founders are typically those who played an influential role in setting up the systems of governance, ...
. The reason for this was the economic and financial chaos the nation suffered under the
Articles of Confederation The Articles of Confederation and Perpetual Union was an agreement among the 13 original states of the United States of America The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, ...
. The goal was to ensure that dearly-won political independence was not lost by being economically and financially dependent on the powers and princes of Europe. The creation of a strong central government able to promote science, invention, industry and commerce was seen as an essential means of promoting the general welfare and making the
economy of the United States The economy of the United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous United States, primarily located in North America. It consists of 50 U.S. state, s ...
strong enough for them to determine their own destiny. Others view Bourgin's study, written in the 1940s and not published until 1989, as an over-interpretation of the evidence, intended originally to defend the New Deal and later to counter
Ronald Reagan Ronald Wilson Reagan ( ; February 6, 1911June 5, 2004) was an American politician who served as the 40th president of the United States The president of the United States (POTUS) is the and of the . The president directs the of ...

Ronald Reagan
's economic policies. Historian Kathleen G. Donohue argues that in the 19th century
liberalism in the United States Liberalism in the United States is a Political philosophy, political and moral philosophy based on concepts of unalienable rights of the individual. The fundamental Liberalism, liberal ideals of freedom of speech, freedom of the press, freedom of ...
had distinctive characteristics and that "at the center of classical liberal theory
n Europe N, or n, is the fourteenth letter Letter, letters, or literature may refer to: Characters typeface * Letter (alphabet) A letter is a segmental symbol A symbol is a mark, sign, or word that indicates, signifies, or is understood as ...
was the idea of ''laissez-faire''. To the vast majority of American classical liberals, however, ''laissez-faire'' did not mean "no government intervention" at all. On the contrary, they were more than willing to see government provide tariffs, railroad subsidies, and internal improvements, all of which benefited producers". Notable examples of government intervention in the period prior to the
American Civil War The American Civil War (also known by Names of the American Civil War, other names) was a civil war in the United States from 1861 to 1865, fought between northern U.S. state, states loyal to the Union (American Civil War), Union and sout ...
include the establishment of the
Patent Office A patent office is a government A government is the system or group of people governing an organized community, generally a State (polity), state. In the case of its broad associative definition, government normally consists of legi ...
in 1802; the establishment of the Office of Standard Weights and Measures in 1830; the creation of the
Coast and Geodetic Survey The National Geodetic Survey (NGS), formerly the United States Survey of the Coast (1807–1836), United States Coast Survey (1836–1878), and United States Coast and Geodetic Survey (USC&GS) (1878–1970), is a Federal government of the United ...
in 1807 and other measures to improve river and harbor navigation; the various
Army An army (from Latin ''arma'' "arms, weapons" via Old French ''armée'', "armed" eminine, ground force or land force is a fighting force that fights primarily on land. In the broadest sense, it is the land-based military branch, service branc ...
expeditions to the west, beginning with
Lewis and Clark Lewis may refer to: Names * Lewis (given name) Lewis () is a masculine English-language given name. It was coined as an anglicisation Linguistic anglicisation (or anglicization, occasionally anglification, anglifying, or Englishing) is the pra ...
's
Corps of Discovery The Corps of Discovery was a specially-established unit of the United States Army The United States Army (USA) is the land military branch, service branch of the United States Armed Forces. It is one of the eight Uniformed services of the Uni ...
in 1804 and continuing into the 1870s, almost always under the direction of an officer from the Army
Corps of Topographical Engineers The U.S. Army Corps of Topographical Engineers was a branch of the United States Army The United States Army (USA) is the land military branch, service branch of the United States Armed Forces. It is one of the eight Uniformed services of the ...
and which provided crucial information for the overland pioneers that followed; the assignment of Army Engineer officers to assist or direct the surveying and construction of the early railroads and canals; and the establishment of the
First Bank of the United States The President, Directors and Company of the Bank of the United States, commonly known as the First Bank of the United States, was a national bank In banking A bank is a financial institution that accepts deposits from the public and ...

First Bank of the United States
and
Second Bank of the United States The Second Bank of the United States was the second federally authorized Hamiltonian National bank#United States, national bank in the United States. Located in Philadelphia, Pennsylvania, it was chartered from February 1816 to January 1836.. T ...
as well as various protectionist measures (e.g. the
tariff of 1828 The Tariff of 1828 was a very high protective tariff A tariff is a tax imposed by a government A government is the system or group of people governing an organized community, generally a State (polity), state. In the case of i ...
). Several of these proposals met with serious opposition and required a great deal of horse-trading to be enacted into law. For instance, the First National Bank would not have reached the desk of President
George Washington George Washington (February 22, 1732, 1799) was an American soldier, statesman, and Founding Fathers of the United States, Founding Father who served as the first President of the United States from 1789 to 1797. Appointed by the Continenta ...

George Washington
in the absence of an agreement that was reached between
Alexander Hamilton Alexander Hamilton (January 11, 1755 or 1757July 12, 1804) was an American statesman, politician, legal scholar, military commander, lawyer, banker, and economist. He was one of the Founding Fathers of the United States The Founding Fa ...

Alexander Hamilton
and several Southern members of Congress to locate the capitol in the
District of Columbia ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument The Washington Monument is an obelisk within the National Mall The National Mall is a Landscape architecture, landscape ...

District of Columbia
. In contrast to Hamilton and the
Federalists The term ''federalist'' describes several political beliefs around the world. It may also refer to the concept of parties, whose members or supporters called themselves ''Federalists''.http://m-w.com/dictionary/federalist. History Europe In E ...
was
Thomas Jefferson Thomas Jefferson (April 13, 1743 – July 4, 1826) was an American statesman, diplomat, lawyer, architect, philosopher, and Founding Father The following list of national founding figures is a record, by country, of people who were cr ...

Thomas Jefferson
and
James Madison James Madison Jr. (March 16, 1751June 28, 1836) was an American statesman, diplomat, expansionist, philosopher, and Founding Father The following list of national founding figures is a record, by country, of people who were credited wi ...

James Madison
's opposing political party, the
Democratic-Republicans The Democratic-Republican Party, also referred to as the Jeffersonian Republican Party and known at the time under various other names, was an American political party founded by Thomas Jefferson Thomas Jefferson (April 13, 1743 – J ...
. Most of the early opponents of ''laissez-faire'' capitalism in the United States subscribed to the American School. This school of thought was inspired by the ideas of Hamilton, who proposed the creation of a First Bank of the United States, government-sponsored bank and increased tariffs to favor Northern industrial interests. Following Hamilton's death, the more abiding Protectionism, protectionist influence in the antebellum period came from Henry Clay and his American System (economic plan), American System. In the early 19th century, "it is quite clear that the ''laissez-faire'' label is an inappropriate one" to apply to the relationship between the United States government and industry. In the mid-19th century, the United States followed the Whig Party (United States), Whig tradition of economic nationalism, which included increased state control, regulation and Macroeconomics, macroeconomic development of infrastructure. Public works such as the provision and regulation transportation such as railroads took effect. The Pacific Railway Acts provided the development of the First Transcontinental Railroad. In order to help pay for its war effort in the Civil War, the Federal government of the United States, United States government imposed its first personal income tax on 5 August 1861 as part of the Revenue Act of 1861 (3% of all incomes over US$800; rescinded in 1872). Following the Civil War, the movement towards a mixed economy accelerated. Protectionism increased with the McKinley Tariff of 1890 and the Dingley Tariff of 1897. Government regulation of the economy expanded with the enactment of the Interstate Commerce Act of 1887 and the Sherman Anti-trust Act. The Progressive Era saw the enactment of more controls on the economy as evidenced by the Woodrow Wilson administration's The New Freedom, New Freedom program. Following World War I and the Great Depression, the United States turned to a mixed economy which combined free enterprise with a Progressive tax, progressive income tax and in which from time to time the government stepped in to support and protect American industry from competition from overseas. For example, in the 1980s the government sought to protect the automobile industry by "voluntary" export restrictions from Japan. In 1986, Pietro S. Nivola wrote: "By and large, the comparative strength of the dollar against major foreign currencies has reflected high U.S. interest rates driven by huge federal budget deficits. Hence, the source of much of the current deterioration of trade is not the general state of the economy, but rather the government's mix of fiscal and monetary policies – that is, the problematic juxtaposition of bold tax reductions, relatively tight monetary targets, generous military outlays, and only modest cuts in major entitlement programs. Put simply, the roots of the trade problem and of the resurgent protectionism it has fomented are fundamentally political as well as economic". A more recent advocate of total ''laissez-faire'' has been Objectivism, Objectivist Ayn Rand, who described it as "the abolition of any and all forms of government intervention in production and trade, the separation of State and Economics, in the same way and for the same reasons as the separation of Church and State". This viewpoint is summed up in what is known as the iron law of regulation, which is a theory stating that all government economic regulation eventually leads to a net loss in social welfare. Rand's political philosophy emphasized individual rights (including Private property, property rights) and she considered ''laissez-faire'' capitalism the only moral social system because in her view it was the only system based on the protection of those rights.; . She opposed statism, which she understood to include theocracy, absolute monarchy, Nazism, fascism, communism, socialism and dictatorship. Rand believed that natural rights should be enforced by a constitutionally limited government. Although her political views are often classified as Conservatism in the United States, conservative or Libertarianism in the United States, libertarian, she preferred the term "radical for capitalism". She worked with conservatives on political projects, but disagreed with them over issues such as religion and ethics. She denounced libertarianism, which she associated with anarchism. She rejected anarchism as a naïve theory based in subjectivism that could only lead to collectivism in practice.


Models


Capitalism

A closely related conception is that of raw or pure capitalism, or unrestrained capitalism, that refers to capitalism free of social
regulation Regulation is the management of complex systems A complex system is a system composed of many components which may interaction, interact with each other. Examples of complex systems are Earth's global climate, organisms, the human brain, infras ...

regulation
s, with low, minimal or no government and operating almost entirely on the profit motive. Other than ''laissez-faire'' economics and anarcho-capitalism, it is not associated with a school of thought. It typically has a bad connotation, which hints towards a perceived need for restraint due to social needs and securities that can not be adequately responded to by companies with just a motive for making profit. Robert Kuttner states that "for over a century, popular struggles in democracies have used the nation-state to temper raw capitalism. The power of voters has offset the power of capital. But as national barriers have come down in the name of freer commerce, so has the capacity of governments to manage capitalism in a broad public interest. So the real issue is not 'trade' but democratic governance". The main issues of raw capitalism are said to lie in its disregard for quality, durability, sustainability, respect for the Environmental protection, environment and human beings as well as a lack of morality. From this more critical angle, companies might naturally aim to maximise profits at the expense of workers' and broader social interests. Advocates of laissez-faire capitalism argue that it relies on a constitutionally limited government that unconditionally bans the initiation of force and coercion, including fraud. Therefore, free market economists such as Milton Friedman and Thomas Sowell argue that, under such a system, relationships between companies and workers are purely voluntary and mistreated workers will seek better treatment elsewhere. Thus, most companies will compete for workers on the basis of pay, benefits, and work-life balance just as they compete with one another in the marketplace on the basis of the relative cost and quality of their goods. So-called "raw" or "hyper-capitalism" is a prime motive of cyberpunk in dystopian works such as ''Syndicate (series), Syndicate''.


Socialism

Although ''laissez-faire'' has been commonly associated with
capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
, there is a similar ''laissez-faire'' economic theory and system associated with socialism called left-wing ''laissez-faire'', or free-market anarchism, also known as Left-wing market anarchism, free-market anti-capitalism and Market socialism, free-market socialism to distinguish it from ''laissez-faire'' capitalism. One first example of this is Mutualism (economic theory), mutualism as developed by Pierre-Joseph Proudhon in the 18th century, from which emerged individualist anarchism.
Benjamin Tucker Benjamin Ricketson Tucker (; April 17, 1854 – June 22, 1939) was an American anarchist Anarchism is a political philosophy and Political movement, movement that is sceptical of authority and rejects all involuntary, coercive forms of hie ...

Benjamin Tucker
is one eminent American individualist anarchist who adopted a ''laissez-faire'' system he termed anarchistic socialism in contraposition to state socialism. This tradition has been recently associated with contemporary scholars such as Kevin Carson, Roderick T. Long, Charles W. Johnson, Brad Spangler, Sheldon Richman,Sheldon Richman (3 February 2011).
Libertarian Left: Free-market anti-capitalism, the unknown ideal
." ''The American Conservative''. Retrieved 5 March 2012.
Chris Matthew Sciabarra and Gary Chartier, who stress the value of radically free markets, termed freed markets to distinguish them from the common conception which these left-libertarians believe to be riddled with capitalist and statist privileges.Gillis, William (2011). "The Freed Market." In Chartier, Gary and Johnson, Charles. ''Markets Not Capitalism''. Brooklyn, NY: Minor Compositions/Autonomedia. pp. 19–20. Referred to as left-wing market anarchists or market-oriented left-libertarians, proponents of this approach strongly affirm the classical liberal ideas of self-ownership and
free market In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of pl ...
s while maintaining that taken to their logical conclusions these ideas support anti-capitalist, anti-corporatist, Social hierarchies, anti-hierarchical and pro-labor positions in economics; anti-imperialism in foreign policy; and thoroughly radical views regarding such cultural issues as gender, sexuality and race. Critics of ''laissez-faire'' as commonly understood argues that a truly ''laissez-faire'' system would be anti-capitalist and socialist. Kevin Carson describes his politics as on "the outer fringes of both free market libertarianism and socialism" and has also been highly critical of intellectual property. Carson has identified the work of Benjamin Tucker, Thomas Hodgskin, Ralph Borsodi, Paul Goodman (writer), Paul Goodman, Lewis Mumford, Elinor Ostrom, Peter Kropotkin and Ivan Illich as sources of inspiration for his approach to politics and economics. In addition to individualist anarchist Benjamin Tucker's big four monopolies (land, money, tariffs and patents), he argues that the Sovereign state, state has also transferred wealth to the wealthy by subsidizing organizational centralization in the form of transportation and communication subsidies. Carson believes that Tucker overlooked this issue due to Tucker's focus on individual market transactions whereas he also focuses on organizational issues. As such, the primary focus of his most recent work has been decentralized manufacturing and the informal and household economies. The theoretical sections of Carson's ''Studies in Mutualist Political Economy'' are also presented as an attempt to integrate marginalist critiques into the labor theory of value. In response to claims that he uses the term capitalism incorrectly, Carson says he is deliberately choosing to resurrect what he claims to be an old definition of the term in order to "make a point". He claims that "the term 'capitalism,' as it was originally used, did not refer to a free market, but to a type of statist class system in which capitalists controlled the state and the state intervened in the market on their behalf". Carson holds that "capitalism, arising as a new class society directly from the old class society of the Middle Ages, was founded on an act of robbery as massive as the earlier Feudalism, feudal conquest of the land. It has been sustained to the present by continual state intervention to protect its system of privilege without which its survival is unimaginable".Richman, Sheldon
Libertarian Left
, ''The American Conservative'' (March 2011).
Carson argues that in a truly ''laissez-faire'' system the ability to extract a profit from labor and capital would be negligible. Carson coined the pejorative term vulgar libertarianism, a phrase that describes the use of a free market rhetoric in defense of corporate capitalism and economic inequality. According to Carson, the term is derived from the phrase vulgar political economy which Karl Marx described as an economic order that "deliberately becomes increasingly apologetic and makes strenuous attempts to talk out of existence the ideas which contain the contradictions [existing in economic life]". Gary Chartier offers an understanding of property rights as contingent yet tightly constrained social strategies, reflective of the importance of multiple, overlapping rationales for separate ownership and of
natural law Natural law ( la, ius naturale, ''lex naturalis'') is a system of law based on a close observation of human nature Human nature is a concept that denotes the fundamental disposition A disposition is a quality of character, a habit A habit (or ...
principles of practical reasonableness, defending robust yet non-absolute protections for these rights in a manner similar to that employed by David Hume. This account is distinguished both from Lockean and neo-Lockean views which deduce property rights from the idea of self-ownership and from consequentialist accounts that might license widespread ad hoc interference with the possessions of groups and individuals. Chartier uses this account to ground a clear statement of the natural law basis for the view that solidaristic wealth redistribution (economics), redistribution by individual persons is often morally required, but as a response by individuals and grass-roots networks to particular circumstances rather than as a state-driven attempt to achieve a particular distributive pattern. He advances detailed arguments for workplace democracy rooted in such natural law principles as subsidiarity, defending it as morally desirable and as a likely outcome of the elimination of injustice rather than as something to be mandated by the state. Chartier has discussed natural law approaches to land reform and to the occupation of factories by workers. He objects on natural law grounds to intellectual property protections, drawing on his theory of property rights more generally and develops a general natural law account of boycotts. He has argued that proponents of genuinely freed markets should explicitly reject capitalism and identify with the global anti-capitalist movement while emphasizing that the abuses the anti-capitalist movement highlights result from state-tolerated violence and state-secured privilege rather than from voluntary cooperation and exchange. According to Chartier, "it makes sense for [freed-market advocates] to name what they oppose 'capitalism.' Doing so calls attention to the freedom movement's radical roots, emphasizes the value of understanding society as an alternative to the state, underscores the fact that proponents of freedom object to non-aggressive as well as aggressive restraints on liberty, ensures that advocates of freedom aren't confused with people who use market rhetoric to prop up an unjust status quo, and expresses solidarity between defenders of freed markets and workers — as well as ordinary people around the world who use "capitalism" as a short-hand label for the world-system that constrains their freedom and stunts their lives".


Criticism

Over the years, a number of economists have offered critiques of ''laissez-faire'' economics.
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and ...

Adam Smith
acknowledges some moral ambiguities towards the system of capitalism.Spencer J. Pack. Capitalism as a Moral System: Adam Smith's Critique of the Free Market Economy. Great Britain: Edward Elgar, 2010. Print Smith had misgivings concerning some aspects of each of the major character-types produced by modern capitalist society, namely the landlords, the workers and the capitalists. Smith claimed that "[t]he landlords' role in the economic process is passive. Their ability to reap a revenue solely from ownership of land tends to make them indolent and inept, and so they tend to be unable to even look after their own economic interests" and that "[t]he increase in population should increase the demand for food, which should increase rents, which should be economically beneficial to the landlords". According to Smith, the landlords should be in favour of policies which contribute to the growth in the wealth of nations, but they often are not in favour of these pro-growth policies because of their own indolent-induced ignorance and intellectual flabbiness. Many philosophers have written on the systems society has created to manage their civilizations. Thomas Hobbes utilized the concept of a "state of nature," which is a time before any government or laws, as a starting point to consider the question. In this time, life would be "war of all against all." Further, "In such condition, there is no place for industry; because the fruit thereof is uncertain . . . continual fear and danger of violent death, and the life of man solitary, poor, nasty, brutish, and short." Smith was quite clear that he believed that without morality and laws, society would fail. From that perspective, it would be strange for Smith to support a pure Laissez-Faire style of capitalism, and what he does support in Wealth of Nations is heavily dependent on the moral philosophy from his previous work, Theory of Moral Sentiments. Regardless of preferred political preference, all societies require shared moral values as a prerequisite on which to build laws to protect individuals from each other. Adam Smith wrote Wealth of Nations during the Enlightenment, a period of time when the prevailing attitude was, "All things can be Known." In effect, European thinkers, inspired by the likes of Isaac Newton and others, set about to "find the laws" of all things, that there existed a "natural law" underlying all aspects of life. They believed that these could be discovered and that everything in the universe could be rationally demystified and cataloged, including human interactions. Critics and Market abolitionism, market abolitionists such as David McNally (professor), David McNally argue in the Marxist tradition that the logic of the market inherently produces inequitable outcomes and leads to unequal exchanges, arguing that Smith's moral intent and moral philosophy espousing equal exchange was undermined by the practice of the free market he championed. According to McNally, the development of the market economy involved coercion, exploitation and violence that Smith's moral philosophy could not countenance. The British economist John Maynard Keynes condemned ''laissez-faire'' economic policy on several occasions. In ''The End of Laissez-faire'' (1926), one of the most famous of his critiques, Keynes argues that the doctrines of ''laissez-faire'' are dependent to some extent on improper deductive reasoning and says the question of whether a market solution or state intervention is better must be determined on a case-by-case basis. The Austrian School economist Friedrich Hayek stated that a freely competitive, ''laissez-faire'' banking industry tends to be endogenously destabilizing and pro-cyclical, arguing that the need for central banking control was inescapable. Karl Polanyi's ''Great Transformation'' criticizes self-regulating markets as aberrational, unnatural phenomena which tend towards social disruption.


See also

* Anarcho-capitalism * Corporatocracy * Deregulation * Economic liberalism * Free market * Free-market anarchism * Free trade * History of economic thought * Liberism * Libertarianism * Market fundamentalism * Market socialism * Neoliberalism * Objectivism * Physiocracy * Privatization * Wu wei


References


Further reading

* * * * Gerlach, Cristian (2005) Wu-Wei in Europe
A Study of Eurasian Economic Thought
London School of Economics. * * Bourgin, Frank ''The Great Challenge: The Myth of Laissez-Faire in the Early Republic'' (George Braziller Inc., 1989; Harper & Row, 1990). * by Christian Gerlach, London School of Economics – March 2005.

* Carter Goodrich,
Government Promotion of American Canals and Railroads, 1800–1890
' (Greenwood Press, 1960). ** Goodrich, Carter. "American Development Policy: the Case of Internal Improvements," ''Journal of Economic History'', 16 (1956), 449–60. in JSTOR. ** Goodrich, Carter. "National Planning of Internal Improvements," ''Political Science Quarterly'', 63 (1948), 16–44. in JSTOR. * Johnson, E.A.J., ''The Foundations of American Economic Freedom: Government and Enterprise in the Age of Washington'' (University of Minnesota Press, 1973). *


External links


Laissez-faire
at ''Encyclopædia Britannica'' Online. {{DEFAULTSORT:Laissez-Faire Anarchism, Free-market anarchism Capitalism Classical liberalism Economic history of France Economic liberalism Ideologies of capitalism Individualism Market socialism Minarchism Political movements Political theories Right-wing politics Right-libertarianism Socialism, Market socialism