Laissez-Fair economy

Introduction

Laissez-Faire describes an economic doctrine that allows for a free-enterprise system to operate according to its own economic laws and opposes governmental regulation of commerce beyond the minimum necessary. The term translates from the French as “to let alone.” In the 18th century, laissez-faire enjoyed influence in many different areas of everyday life as early European economic thought overlapped with political, philosophical, and religious ideology. More frequently, laissez-faire has been associated with the general prescriptions of the classical economists and, in particular, a belief in the efficiency of a free-market economy (Bruchey, 19).

In economics and politics, the laissez-faire policy functions best as an economic system in which there is no interference by government. Laissez-faire is based on the belief that a natural economic order, in the absence of deliberate influences or adjustments, secures the maximum welfare for individual citizens and the entire community. While laissez-faire occasionally functioned in the 17th and 18th centuries in formulating social policy, the influence of the ideology was most powerful in the economic sphere.

Formation of Laissez-Faire Economy

Historically, laissez-faire was a theoretical reaction against mercantilism. The aim of mercantilism was to maximize foreign trade as well as internal reserves of bullion, the gold and silver necessary for making war. Such commercial controls sought to strengthen the state. Navigation laws, trade monopolies, taxes, and strict economic regulations oppressed the growing class of merchants during the period of European colonial expansion in the 17th and 18th centuries. As a result, a group of pioneer economists banded together in the 1700s to oppose such harsh economic measures. Known as the French physiocrats, this group first devised the principles of laissez-faire (Coats, 71). The physiocrats challenged state interference in economic affairs and opposed the taxation of commercial activities.

Many European intellectuals and scholars wrote about economic progress and the role of individuals in a successful marketplace. The most important economic work of the 18th century was Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith. Published in 1776, the book claimed that economic autonomy was the basis of a natural economic system. Accordingly, he advised that the mercantile system of England—including the navigation acts, bounties, many tariffs, special trading monopolies, and domestic regulation of labor and manufacturing—be terminated. The government intended these regulations to preserve the wealth of the nation, to acquire wealth from other nations, and to increase available labor for its working citizens. Smith argued that such policies actually stalled the expansion of wealth, development of industry, and increases in trade. He maintained that the best way to promote economic growth was to allow individuals to pursue their own economic benefit. As individuals sought to improve their own prosperity by meeting the needs of others through a free market, Smith insisted, the economy naturally would expand (Fine, 56). Consumers would find their needs met as producers and merchants engaged in free competition for business.

During the 18th century, mercantilism assumed that the Earth's resources were limited; hence, one nation could only acquire resources ...