Laissez-faire is aneconomic andpoliticalphilosophy.[1] It is from aFrench phrase that means to "allow to do".[2] It means thatgovernment does not interfere (to take part in something) withbusiness andeconomy.[2] Decisions ofFinance andtrade are made by each person. In laissez faire, each person does things for their own good[3] - for example, a person might sell for gaining money. A person may buy for their gain of aproduct. It is an idea thatunregulatedcompetition inbusiness is the best path toprogress - that the government should not interfere with the economy. People who support laissez-faire believe that afree and unregulated market creates a natural balance betweensupply and demand. The phrase may have come from the18th century.[4]
InAncient China, there were three schools of political thought.Taoism was the idea that the government should not interfere with theeconomy.[5]Legalism included the belief that thestate should be in control.[5] They created the traditional Chinese bureaucratic empire.Confucianism was similar to bothideologies, however was closer to Legalism than Taoism.[5]
In the 1600s, themercantilist Thomas Mun spread the idea that for a country to be rich, it needs toexport more, andimport less.[6]This led to people favouringprotectionism. InBritain, theCorn Laws of 1815 placed hightariffs onimported corn. This made it harder for people to buy corn from other countries, and want to buy corn from their own country. This protected Britishfarmers and landowners.[5] However, Adam Smith and other economists began to spread the idea of laissez faire. The Corn Laws were later ended, and laissez faire was favoured instead.[6]
During the19th century, laissez faire developed as a social and economicphilosophy. Thephysiocrats, includingFrancois Quesnay, helped end mercantilism.[3] Books, for example 'The Wealth of Nations' byScottishphilosopherAdam Smith, and 'Principals of Political Economy' byJohn Stuart Mill made laissez faire popular[3]. It was believed that when the government interferes with business, it was harmful at worst and ineffective at best.[7] Socially, it was believed that the government interfering to help the poor was harmful because it made them lazy and dependent on the government.[7] Economically, there was a argument at this time inEurope and theUnited States over whetherfree trade ortariffs was better for economic growth.[5]
In the late 1800s, laissez faire lost popularity.Industries were growing quickly, so laissez faire was not useful. In the early 1900s, theGreat Depression happened. The economistJohn Maynard Keynes said that the government had to interfere with the economy for the economy to recover - this opposed laissez faire. However, in the late 1900s, the American economistMilton Friedman made laissez faire popular again.[3]
