What is Laissez-faire?Laissez-faire is a French phrase that translates to “allow to do.” It refers to a political ideology that rejects the practice of government intervention in an economy. Further, the state is seen as an obstacle to economic growth and development.The term originated in the 18th century during the Industrial Revolution. French industrialists used the term in response to the French government’s voluntary aid to promote business. The phrase is traditionally attributed to French businessman M. Le Gendre when he responded to a Mercantilist minister, Jean-Baptiste Colbert.The laissez-faire theory mainly advocates government non-intervention. Economic theorist Adam Smith believed that the optimal functioning of markets needed minimal government intervention. However, Smith did raise concerns about the drawbacks of the theory, particularly about the possibility of creating an indolent, lazy, but financially robust feudal class.Basic Principles of a Laissez-faire EconomyThe individual is the basic unit in society, i.e., the standard of measurement in social calculus.The individual enjoys a natural right to freedom.The physical order of nature is a harmonious and self-regulating system. The primary purpose of the laissez-faire economy is to promote a free and competitive market that demands the restoration of the order and natural state of liberty that humans emerged from. A laissez-faire economy is thus characterised by the free movement of forces of supply and demand, free from any intervention by a government, a price-setting monopoly, or any other authority.Forms of Government InterventionGovernment intervention can occur through the following:
- Protectionism
- Antitrust laws
- Autonomy
- Innovation
- Absence of taxes
- Income inequality
- Failure to represent the interests of the entire society
Evita Veigas
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