What Are The Concepts Upon Which Laissez Faire Is Based - Essay Example

24 September Assignment “Laissez-faire” is a French word-combination that literally means ‘let them do’ and may be interpreted in the economic sense as ‘let them do as they will’ or ‘leave them to do as they please.’ The phrase was brought into question when M. Le Gendre, who led a group of French businessmen, was asked about the welfare of merchants in France and how they could contribute to the commercial structure of the country. Established in the 18th century, the concept of laissez-faire was used in order to oppose any government intervention in business affairs. Vincent De Gournay further popularized the phrase as he was completely in favor of the removal of restrictions on trade and industry in the country as well as deregulation of industry; he gave rise to the phrase “laissez faire et laissez passer” referring to the commercial workers; it can be translated as “let do and let pass”. The French phrase even found place in England later in the 18th century with respect to protests for bringing about free trade and non-interference or non-intervention by the government. Later, James Mill and Jeremy Bentham were users of the term, bringing about a wider range of understandings among economists and students alike. It must be understood that the concept of laissez-faire applies not only to economics but also to lifestyle. People desired to lead their lives without governmental intervention or social regulations, which led to restrictions in many situations. The policy thus applies to individual and governmental or industrial affairs and proposes capitalism, entrepreneurship, and competition among producers to satisfy consumer preferences in order to achieve maximum possible freedom. In Western Europe during the 18th century it was believed that the natural economic order brought maximum wellbeing for the majority of citizens when it was untouched by regulations or adjustments. At the time, there were pioneer economists in France who were known as the Physiocrats, and they led to the primary development of the theory of laissez-faire, which emphasized on non-interference with commercial ventures in order to protect the interests of those yearning to set up their own empires. “The most important and influential proponent of laissez-faire capitalism, however, was the 18th-century Scottish economist Adam Smith, who believed that individual welfare was more important than national power. In his book The Wealth of Nations (1776), he advocated a policy of free trade so that the “invisible hand” of competition could act as an economic regulator. Smith's advocacy of private enterprise as the best stimulus to equitable distribution of wealth gained increasing support in the early 19th century, partly because of the wave of libertarian revolution sweeping Europe and the U.S. His theories were further developed by the British economists David Ricardo and John Stuart Mill.” (“Laissez-faire versus Government Intervention”) Laissez-faire could be understood as being equivalent of a free market concept, where the government has little or no say in the matters of private owners. Such a market allows private ownership to flourish and leaves room for creativity. In countries where the concept is not followed, the government tends to regulate market affairs by either subsidizing local industries or imposing certain tariffs and restrictions on carrying out free trade. This is done mainly for the demand and the supply level to reach a particular point at which they are equivalent so as to meet the needs of individuals. The concept of laissez-faire thus may not be carried out in countries where the government is required in order to keep in check the needs of the consumers, for example in underdeveloped or certain developing nations around the world (Cunningham 213-214). In countries like China, for example, monopoly has been held by the government in terms of trade and commerce since the Song and Ming dynasties even though some control has been given to private owners. In India, on the other hand, the government has made it a point to share the economy with private owners and entrepreneurs; certain aspects of life have been given to private parties to control, whereas things like defense, nuclear power, etc. remain in control of the government. This is done in order to ensure that all citizens of the country and not just a particular group are benefited. For example, only the richer part of society will be able to afford products and commodities by private entrepreneurs, because these commodities will obviously be more expensive. Thus, the government lets them carry on laissez-faire or free trade without intervening while keeping in mind certain products that it takes upon itself to manufacture in order to benefit those that are not able to afford much. In other countries like America and Canada, which are more developed than their counterparts, private owners have a bigger say in matters relating to trade and commerce. E.A.J Johnson wrote the following in his 1973 study on the economic principles established at the foundation of the United States: The general view, discernible in contemporaneous literature, was that the responsibility of government should involve enough surveillance over the enterprise system to ensure the social usefulness of all economic activity. It is quite proper, said Bordley, for individuals to “choose for themselves” how they will apply their labor and their intelligence in production. But it does not follow from this that “legislators and men of influence” are freed from all responsibility for giving direction to the course of national economic development. They must, for instance, discountenance the production of unnecessary commodities of luxury when common sense indicates the need for food and other essentials. Lawmakers can fulfill their functions properly only when they “become benefactors to the public”; in new countries they must safeguard agriculture and commerce, encourage immigration, and promote manufactures. Admittedly, liberty “is one of the most important blessings which men possess,” but the idea that liberty is synonymous with complete freedom from restraint “is a most unwise, mistaken apprehension.” True liberty demands a system of legislation that will lead all members of society “to unite their exertions” for the public welfare. It should therefore be the policy of government to aid and foster certain activities or kinds of business that strengthen a nation, even as it should be the duty of government to repress “those fashions, habits, and practices, which tend to weaken, impoverish, and corrupt the people.” (194–195) To conclude, the concept of laissez-faire involves minimal governmental interference in the lives of individuals, no matter what activities they might be conducting; however, the other side of the coin states that private owned bodies and individuals may resort to unfair means and exploit the poor due to the lack of any governmental intervention, which is, therefore, required to stop them from doing so. Nonetheless, the concept of laissez-faire, or free market trade, is also required to help countries tap their potential by allowing entrepreneurs to excel and carry out their personal tasks. Free trade and commerce allows private parties to give back to society, and no government interference would permit private owners to carry out tasks that, though they may harm a section of society in the short run, will prove beneficial for the entire economy in the long run. Works Cited “Laissez-faire versus Government Intervention.” About.com. n.d. Web. 26 Sept. 2012. . Johnson, E.A.J. The Foundations of American Economic Freedom: Government and Enterprise in the Age of Washington. New York, NY: University of Minnesota Press, 1973. Print. Cunningham, William. Laissez-Faire. Cambridge: Cambridge Univ., 1907. Print. Read More