N5 – Module 1
Laissez-Faire (from French: to allow to do)
Here the government does not intervene in the private economy/social activities of individual citizens or groups – instead it allows a system of free association with what is today called free market principles (pure capitalism). The government is there to do two things only: to protect life and private property and to maintain law and order.
This ideology is characterised by the following: • There is less government intervention in the lives and activities of private citizens – particularly in their economic activities – how and what they buy and sell;
• The government provides basic conditions for free competition – it maintains law and order; enforces contracts; protects private property; defends the nation against enemies; • Competition is allowed to function freely and without regulation.
Origin During the reign of Louis XIV of France, political rulers realised their financial wealth depended on the economic prosperity of their taxpayers. The king sent his Minister of Finance, Jean Baptiste Colbert, to a meeting of French private entrepreneurs to ask them what the government should do to enhance (increase) their wealth – he was told “Laissez-faire!” – let us alone! The person who answered, therefore, gave a name to what later became an ideology.
In 18th Century France the champions of liberty used two common sayings: laissez-faire (let people do or make what they choose) and also laissez passer (let us pass or go). And so a feeling, a sentiment, or an idea, became an ideology. John Locke (see picture) – the 18th Century English philosopher, and a group of French economists (The Physiocrats) – championed this ideology in Europe.
Adam Smith – in his famous treatise, The Wealth of Nations, argued that private competition free from regulation produces and distributes wealth better than government-regulated markets. Since 1776, when Smith produced his work, his argument has been used to justify capitalism and discourage government intervention in trade and exchange. In Smith’s words, private businessmen seeking their own interest organise the economy most efficiently “as if by an invisible hand”.
This philosophy was best expressed by Adam Smith, 1776, who said: “society, like the physical universe, is a rationally designed, sensible, orderly mechanism governed with natural laws.” By this he meant that there was no need for a government to intervene or to interfere – the people would find their own path in life. People needed to be left alone and they would work out their own salvation ... This, then, is the cornerstone of this ideology.
This type of government leaves people alone to trade and make a living – a free economy. All the government does is provide essential services and protection, such as courts of law, an army and other protection services such as a police force. They will also ensure that a free market system is in place and that free trade is able to take place. For the rest, they leave alone.
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