Glossary
Laissez Faire
The French have a way with words. They can say things in a way that may not be completely understood, but the meaning sits right on the edge of human knowing. Laissez faire is one of those phrases that rings a bell of remembering because it is an innate part of human freedom. When that phrase is applied to economic and political doctrines, especially when it comes to government regulations, no one needs an interpreter. Free enterprise functions best when left alone, which means without government intervention.
Laissez faire promotes self-responsibility as well as self-interest and competition. Frivolous regulations and burdensome taxes inhibit the free enterprise system and erode the democratic principles that expand the global economy. The essence of expansion cannot and should not be restricted by governments according to laissez faire principles.
The 18th century Physiocrats in France was the first group to respond to the agony of French mercantilism. Middle-class French merchants were put out of business by the government. Mercantilism is the process of exporting more goods than a nation imports so more wealth is accumulated in the process. The law advocated exporting finished goods instead of exporting extractive goods from industries like farming. The theory was based on the belief that wealth was finite. France and other countries believed more wealth would come at the expense of other nations. The Physiocrats argued against tariffs, laws, special monopolies and business taxes.
Adam Smith, who is considered the father of classical economics, believed that Britain's goal should have been the welfare of the individual, rather than focusing on prestige and power when dealing with the new colonies. In his 1776 work, Wealth of Nations, he argued free functioning economies bestow benefits on all levels of society.
In 1848, John Stuart Mill wrote Principles of Political Economy, which presented cases for and against government interference in the economy because laissez faire economic principles were not always accepted in the United States. Alexander Hamilton talked about free enterprise without interference but also advocated protectionism so the nation's infant industries could be protected from the big companies in Europe.
Antebellum Southerners fought the government for years when it came to imposing heavy tariffs on exports. Southern farmers knew first-hand that export taxes were met with a retaliatory duty on other imported business goods.
In 1870, the laissez faire approach to business reached its peak in the United States. American factories operated with a free hand, but when companies began to merge, the government saw a reduction in competition. Mergers had an impact on prices and taxes so antitrust legislation began to creep into the American business framework.
By the time Teddy Roosevelt and Woodrow Wilson took power, American sentiment had shifted away from a laissez faire approach in order to curb unrestrained business and its sometimes abusive behavior when it came to the workforce. More antitrust laws were enacted to protect consumers and businesses, and issues pertaining to child labor, unsafe working conditions and long work hours became controlled by government laws.
The laissez faire attitude did return during the Roaring Twenties, but when the Great Depression hit the people begged the government for help. Franklin D. Roosevelt's New Deal was the beginning of serious government intervention in the economy and it hasn't stopped.
Recent economic developments demonstrate how government intervention works. The stimulus packages and other financial incentives that the government produced to 'save' the free enterprise system are still being debated. Laissez faire proponents favored no support for the banks and Wall Street investment houses that helped create the debacle, but fear as well as world economic issues led the government to act. In some people's minds the jury is still out in terms of the success of this support, but one thing is certain: The free enterprise system has turned into a non-laissez faire semi-socialist system that will create more government intervention as the world expands, especially when it comes to foreign currency exchange.
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