, French: [lɛsefɛʁ] ( )
) is an economic environment in which transactions between private parties are free from government
, and subsidies
, with only enough regulations
to protect property rights
The phrase laissez-faire
and literally means “let [them] do,” but it broadly implies “let it be,” “let them do as they will,” or “leave it alone.”
According to historical legend, the phrase stems from a meeting in about 1681 between the powerful French finance minister Jean-Baptiste Colbert
and a group of French businessmen led by a certain M. Le Gendre. When the eager 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
” (“Let us be,” literally “Let us do”).
The anecdote on the Colbert-Le Gendre meeting was related in a 1751 article in the Journal Oeconomique
by the French minister and champion of free trade
, René de Voyer, Marquis d’Argenson
– which happens to also be the phrase’s first known appearance in print.
Argenson himself had used the phrase earlier (1736) in his own diaries, in a famous outburst:
Laissez faire, telle devrait être la devise de toute puissance publique, depuis que le monde est civilisé … Détestable principe que celui de ne vouloir grandir que par l’abaissement de nos voisins! Il n’y a que la méchanceté et la malignité du coeur de satisfaites dans ce principe, et l’intérêt y est opposé. Laissez faire, morbleu! Laissez faire!!
(Trans: “Let it be, that should be the motto of all public powers, since the world was civilized … That we cannot grow except by lowering our neighbors is a detestable notion! Only malice and malignity of heart is satisfied with such a principle and our (national) interest is opposed to it. Let it be, for heaven’s sake! Let it be!)
The laissez faire
slogan was popularized by Vincent de Gournay
, a French Physiocrat
and intendant of commerce in the 1750s, who is said to have adopted the term from François Quesnay
‘s writings on China.
It was Quesnay who coined the term laissez-faire, laissez-passer,
laissez-faire being a translation of the Chinese term 無為 wu wei
Gournay was an ardent proponent of the removal of restrictions on trade and the deregulation of industry in France. Gournay was delighted by the Colbert-LeGendre anecdote,
and 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 fellowPhysiocrats
, 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”).
But it was Gournay’s use of the ‘laissez-faire’ phrase (as popularized by the Physiocrats
) that gave it its cachet.
was proclaimed by the Physiocrats in the eighteenth-century France
, thus being the very core of the economic principles, and was more developed by famous economists, beginning with Adam Smith
“It is with the physiocrats and the classical political economy that the term “laissez faire” is ordinarily associated.”
The book Laissez Faire and the General-Welfare State
mentions that, “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.”
, a number of “free trade” and “non-interference” slogans had been coined already during the 17th century.
But the French phrase laissez faire
gained currency in English-speaking countries with the spread of Physiocratic literature in the late 18th century. The Colbert-LeGendre anecdote was relayed in George Whatley
‘s 1774 Principles of Trade
(co-authored with Benjamin Franklin
) – which may be the first appearance of the phrase in an English language publication.
, a product of the Enlightenment
, was “conceived as the way to unleash human potential through the restoration of a natural system, a system unhindered by the restrictions of government.”
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
By extension, free markets
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.”
first used the metaphor of an “invisible hand
” in his book The Theory of Moral Sentiments
to describe the unintentional effects of economic self-organization from economic self-interest.
The idea lying behind the “invisible hand
“, though not the metaphor itself, belongs to Bernard de Mandeville
and hisFable of the Bees
. In political economy, that idea and the doctrine of laissez-faire
have always been closely related.
True, Smith was familiar with the term, but he chose not to use them in his political economy and moral philosophy because they did not benefit the consumers who, as a result of them, paid higher prices and because they restricted competition, and people risked serious injuries.
Some have characterized this metaphor as one for laissez-faire
but Smith never actually used the term himself.
Fundamentals of laissez-faire
As a system of thought, laissez-faire
rests on the following axioms:
- 1. The individual is the basic unit in society.
- 2. The individual has a natural right to freedom.
- 3. The physical order of nature is a harmonious and self-regulating system.
- 4. Corporations are creatures of the State and therefore must be watched closely by the citizenry due to their propensity to disrupt the Smithian spontaneous order.
These axioms constitute the basic elements of laissez-faire
thought, although another basic and often-disregarded element is that markets should be competitive
, a rule that the early advocates of laissez-faire
have always emphasized.
History of laissez-faire debate
During the Han
, and Ming
dynasties, Chinese scholar-officials
would often debate about the interference the government should have in the economy, such as setting monopolies
in lucrative industries and instating price controls
. Such debates were often heated with Confucian
factions tending to oppose extensive government controls and “Reform” factions favoring such moves. During the Han and Tang, emperors sometimes instated government monopolies
in times of war, and abolished them later when the fiscal crisis had passed. Eventually, in the later Song and Ming dynasties, state monopolies were abolished in every industry and were never reinstated during the length of that dynasty, with the government following laissez-faire
policies. During the Manchu Qing Dynasty
, state monopolies
were reinstated, and the government interfered heavily in the economy; many scholars believe this prevented China
, the laissez-faire
movement was first widely promoted by the physiocrats
, a movement that originated with Vincent de Gournay
, a successful merchant. Gournay held that the government should allow the laws of nature
to govern economic activity, with the state only intervening to protect life, liberty, and property. His ideas were taken up by François Quesnay
, Baron de l’Aulne. Quesnay had the ear of the King of France, 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, and for more than a decade the experiment was a success. But then, in 1768, there was 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 edict allowing free trade
The doctrine of laissez-faire
became an integral part of nineteenth-century European liberalism
“Just as liberals supported freedom of thought
in the intellectual sphere, so were they equally prepared to champion the principles of free trade
and free competition
in the sphere of economics. The state was to be merely a passive policeman
, protecting private property
and administering justice, but not interfering with the affairs of its citizens. Businessmen, and particularly British industrialists, 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
, and after 1776 in the newly created United States
. Adam Smith
, author of The Wealth of Nations
, met Quesnay and acknowledged his influence.
, in 1843, the newspaper The Economist
was founded and became an influential voice for laissez-faire capitalism
advocates opposed food aid for famines occurring within the British Empire
; in 1847, referring to the famine then underway in Ireland
, founder of The Economist James Wilson
wrote, “It is no man’s business to provide for another.”
However, The Economist
campaigned against the Corn Laws
that protected landlords in the 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 Irish famine, partly because it was done in stages over three years.
A group calling itself the Manchester Liberals
, to which Richard Cobden
and Richard Wright belonged, were staunch defenders of free trade
, and their work was carried on, after the death of Richard Cobden in 1866, by The Cobden Club
In 1867, a trade treaty was signed between Britain and France, after which several of these treaties were signed among other European countries.
The breakdown of the laissez-faire
practised by the British Empire was partly led by British companies eager for state support of their positions abroad, in particular British oil companies.
Frank Bourgin’s dissertation on the Constitutional Convention
and subsequent decades argues that direct government involvement in the economy was intended by the Founders
The reason for this was the economic and financial chaos the nation suffered under the Articles of Confederation
. 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 strong enough for them to determine their own destiny. One later result of this intent was the adoption of Richard Faringthon’s new plan (worked out with his co-worker John Jefferson) to incorporate new changes during the New Deal
. Others, including Jefferson, 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 Reagan
‘s economic policies.
Most of the early opponents of laissez-faire
capitalism in the US subscribed to the American School
. This school of thought was inspired by the ideas of Alexander Hamilton, who proposed the creation of a government-sponsored bank
and increased tariffs to favor northern industrial interests. Following Hamilton’s death, the more abiding protectionist
influence in the antebellum period came from Henry Clay
and his American System
Following World War I
and the Great Depression
, the United States turned to a mixed economy
, which combined free enterprise
with a 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
Pietro S. Nivola wrote in 1986:
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.
Over the years, a number of economists have offered critiques of laissez-faire economics.
acknowledged deep moral ambiguities towards the system of capitalism.
Smith had severe misgivings concerning some aspects of each of the major character-types produced by modern capitalist society: the landlords, the workers, and the capitalists.
“The 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.”
“The increase in population should increase the demand for food, which should increase rents, which should be economically beneficial to the landlords. Thus, according to Smith, the landlords should be in favour of policies which contribute to the growth of in the wealth of nations. Unfortunately, they often are not in favour of these pro-growth policies, because of their own indolent-induced ignorance and intellectual flabbiness.”
The British economist John Maynard Keynes
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, Keynes says, the question of whether a market solution or state intervention is better must be determined on a case-by-case basis.
a b c d e f g Gaspard, Toufick. A Political Economy of Lebanon 1948–2002: The Limits of Laissez-faire. Boston: Brill, 2004. Print
^ M. d’Argenson, “Lettre au sujet de la dissertation sur le commerce du marquis de Belloni’, Avril 1751, Journal Oeconomique p.111. See A. Oncken, Die Maxime Laissez faire et laissez passer, ihr Ursprung, ihr Werden, 1866
^ as quoted in J.M. Keynes, 1926, “The End of Laissez Faire”. Argenson’sMémoirs were published only in 1858, ed. Jannet, Tome V, p.362. See A. Oncken (Die Maxime Laissez faire et laissez passer, ihr Ursprung, ihr Werden, 1866)
^ Baghdiantz McCabe, Ina (2008). Orientalism in Early Modern France: Eurasian Trade Exoticism and the Ancien Regime. Berg Publishers. pp. 271–272. ISBN 978-1-84520-374-0.
^ Clarke, J.J. (1997). Oriental Enlightenment: The Encounter Between Asian and Western Thought. Routledge. p. 50. ISBN 978-0415133760.
^ According to J. Turgot‘s “Eloge de Vincent de Gournay,” Mercure, August, 1759 (repr. in Oeuvres of Turgot, vol. 1 p.288.
^ Gournay was credited with the phrase by Jacques Turgot (“Eloge a Gournay”, Mercure 1759), the Marquis de Mirabeau (Philosophie rurale1763 and Ephémérides du Citoyen, 1767.), the Comte d’Albon (,”Éloge Historique de M. Quesnay”, Nouvelles Ephémérides Économiques, May, 1775, p.136-7. ) and DuPont de Nemours (Introduction to Oeuvres de Jacques Turgot, 1808–11, Vol. I, p.257 and p.259 (Daire ed.)) among others
^ “Tant, encore une fois, qu’on laisse faire la nature, on ne doit rien craindre de pareil”, P.S. de Boisguilbert, 1707, Dissertation de la nature des richesses, de l’argent et des tributs.
^ DuPont de Nemours, op cit, p.258. Oncken (op.cit) and Keynes (op.cit.) also credit the Marquis d’Argenson with the phrase “Pour gouverner mieux, il faudrait gouverner moins” (“To govern best, one needs to govern less”), possibly the source of the famous “That government is best which governs least” motto popular in American circles, attributed variously toThomas Paine, Thomas Jefferson and Henry Thoreau.
a b c d Fine, Sidney. Laissez Faire and the General-Welfare State. United States: The University of Michigan Press, 1964. Print
^ Macgregor, Economic Thought and Policy (London, 1949), pp. 54–67
^ Whatley’s Principles of Trade are reprinted in Works of Benjamin Franklin, Vol.2, p.401
a b 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, ISBN 0-312-32576-2, pp. 13–14.
^ Abbott P. Usher et al. (1931). “Economic History – The Decline of Laissez Faire”. American Economic Review 22 (1, Supplement): 3–10.
^ Andres Marroquin, Invisible Hand: The Wealth of Adam Smith, The Minerva Group, Inc., 2002, ISBN 1-4102-0288-7, page 123.
^ John Eatwell, The Invisible Hand, W.W. Norton&Company, 1989, pp. Preface x1.
^ Li Bo and Zheng Yin, 5000 years of Chinese History, Inner Mongolian People’s publishing corp , ISBN 7-204-04420-7, 1017
^ Will & Ariel Durant, Rousseau and the Revolution, pp. 71–77, Simon and Schuster, 1967, ISBN 067163058X.
^ Will & Ariel Durant, Rousseau and the Revolution, p. 76, Simon and Schuster, 1967, ISBN 067163058X.
^ Scott Gordon (1955). “The London Economist and the High Tide of Laissez Faire”. Journal of Political Economy 63 (6): 461–488.doi:10.1086/257722.
^ Christine Kinealy. A Death-Dealing Famine:The Great Hunger in Ireland. Pluto Press, 1997. ISBN 978-0-7453-1074-9. p. 59
^ Bourgin, Frank (1989). The Great Challenge: The Myth of Laissez-Faire in the Early Republic. New York, NY: George Braziller Inc. ISBN 0-06-097296-3.
^ Prince, Carl E.; Taylor, Seth (1982). “Daniel Webster, the Boston Associates, and the U.S. Government’s Role in the Industrializing Process, 1815–1830”. Journal of the Early Republic 2 (3): 283–299.JSTOR 3122975.
^ Robert W. Crandall (1987). “The Effects of U.S. Trade Protection for Autos and Steel”. Brookings Papers on Economic Activity (Brookings Papers on Economic Activity, Vol. 1987, No. 1) 1987 (1): 271–288.doi:10.2307/2534518.JSTOR 2534518.
a b c d Spencer J. Pack. Capitalism as a Moral System: Adam Smith’s Critique of the Free Market Economy. Great Britain: Edward Elgar, 2010. Print
^ Dostaler, Gilles, Keynes and His Battles (Edward Elgar Publishing, 2007), p. 91.
^ Dostaler 2007, p. 91; Barnett, Vincent, John Maynard Keynes(Routledge, 2013), p. 143.
- Block, Fred; Somers, Margaret R. (2014). The Power of Market Fundamentalism: Karl Polyani’s Critique. Cambridge, MA: Harvard University Press. ISBN 978-0-674-05071-6.
- Bourgin, Frank The Great Challenge: The Myth of Laissez-Faire in the Early Republic (George Braziller Inc., 1989; Harper & Row, 1990)
- Wu-Wei in Europe. A Study of Eurasian Economic Thought PDF (773 KB) by Christian Gerlach, London School of Economics – March 2005
- John Maynard Keynes, The end of laissez-faire (1926)
- 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)
- Sidney Webb (1889). “Fabian Essays in Socialism – The Basis of Socialism – The Period of Anarchy”. Library of Economics and Liberty. “Women working half naked in the coal mines; young children dragging trucks all day in the foul atmosphere of the underground galleries; infants bound to the loom for fifteen hours in the heated air of the cotton mill, and kept awake only by the overlooker’s lash; hours of labor for all, young and old, limited only by the utmost capabilities of physical endurance; complete absence of the sanitary provisions necessary to a rapidly growing population: these and other nameless iniquities will be found recorded as the results of freedom of contract and complete laissez faire in the impartial pages of successive blue-book reports.”