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Laissez Faire Capitalism

Laissez Faire Capitalism

Research papers on laissez faire capitalism examine economic systems based upon capitalistic notions. Paper Masters has economics and economic history writers that will explain concepts related to capitalism in any specific way you need.

Capitalism is the predominant economic system in the West. Laissez faire capitalism expresses the notion that governments should refrain from regulating businesses or individuals in all areas of economic activity. The term "laissez faire" is French, directly translated as "leave alone." Essentially, proponents of laissez faire capitalism argue that there should be complete separation of the economy and the state, without any forms of tariffs, regulations, or subsidies. Many members of the Republican Party in the United States are vocal in their desire for greater laissez faire capitalism in America.

In economic theory, laissez faire capitalism is the same as a pure market system. The government plays no role in supporting such notions as a minimum wage, workplace safety, or even child labor laws. According to history, the term arose in 1681 when legendary French finance minister asked what the state could to to promote commerce, and was told "Laissez-nous faire" ("Let us do what we want to do"). The idea spread throughout the Enlightenment, espoused by thinkers such as Adam Smith and Jeremy Bentham.

In the history of the United States, there has been a near constant struggle between advocates of laissez faire capitalism and those who support government regulation. The Gilded Age was a close as America came towards laissez faire capitalism, but the Progressive Era instituted many reforms designed to protect citizens from some of the worst abuses of unregulated capital.


Capitalists are, therefore, not now and never have been uniform in their opinions concerning the proper role of government.There are many and varied shadings of opinion with respect to that role. We can, in a small paper such as this one, deal only in broad generalities. In doing so I think two things about the capitalist position on the government are reasonably clear.

  1. First, the capitalist position on statism is that it is politically objectionable, that the allocation of more than minimal power to governments at all levels results in a loss of freedom for the population as a whole; those who believe this are very fond of Jefferson's words from his first inaugural address, "a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry." This position equates capitalism and laissez-faire with a set of political virtues.
  2. Second, the capitalist position is, and has been since Smith's rejection of mercantilism in the 18th century, that capitalism is a more efficient generator of wealth, that government interference in the free market is a source of wasteful friction in the economic machinery.

Arthur Selden gives a fairly moderate version of the capitalist position on the role of free markets in promoting political freedom in his book Capitalism. His is an empirical argument. He points out that, while not all capitalist systems the world has known have been democracies, some have been. Socialism, on the other hand, "as the world has known it has nowhere been democratic and there is no way to make it so." Political democracy is, he argues, inherently in conflict with central planning. Capitalism is therefore "compatible" with free societies in the sense that they can develop into democracies, a possibility lacking in socialist societies. This is a powerful argument for the minimization of government regulation at all levels. Its power derives from the fact that it takes one of our most cherished political values, democratic government, and links it to an economic ideology.

This argument is capable of extension; it can appear in a more radical form. Hayek, for example, argues that there is something organic to the nature of government itself that gives it an inherently anti-freedom tendency. There is thus an inevitable evolutionary process in which governments that are "strong enough to protect individuals against the violence of their fellows" inevitably come to abuse that power in ways that diminish freedom "in order to enforce their own presumably greater wisdom and 'not to allow social institutions to develop in a haphazard manner'." Both Seldon's moderate and Hayek's more radical notions concerning the relationship between government interference and tyrannical political institutions have found many echoes in places like the op-ed pages of the Wall Street Journal, and the Financial Times, and in the speeches of the more conservative of our local, state, and federal politicians.The notion of the political efficacy of free market systems has become deeply embedded in the public consciousness and represents one of the most successful victories achieved by the proponents of capitalism in their on- going war with those who, since Roosevelt's New Deal, have called for the role of government to be writ large in our national affairs. We now turn to the second great argument used by proponents of capitalism in their defense of free markets against what they perceive to be "unwarranted" government interference. The capitalist argument is that the unfettered market, governed by Smith's "invisible hand," is the only efficient way by which wealth is created, and human needs are met. Some of the more radical supporters of capitalism would argue that any governmental interference in the economy is a manifestation of government's natural tendency to squelch freedom; people of this persuasion believe that government's attempts at social welfare, for example, are the product of ulterior motives. Friedman and Friedman, who would probably not go quite that far, point out that Bismarck's 19th century social-welfare legislation, which adumbrated the modern welfare state, was motivated by a desire to buy off the German working class and squelch the Social Democrats in Wilhelmine Germany. Other believers in capitalism do not go that far. They see governmental interference in the economy as being well meaning but mistaken.Interesting, Friedman himself, in Capitalism and Freedom, often bases his critique of government's economic legislation to promote social welfare on purely practical grounds, the alleged inability to "get it right". For example, speaking of governmental measures to control the distribution of income, something that is anathema to those who believe in capitalism, Friedman states, "The distribution of income is still another area in which government has done more harm by one set of measures than it has been able to undo by others."


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