Laissez-faire 165451 226139309 2008-07-17T00:12:46Z 72.94.48.81 /* Europe */ {{Cleanup|date=June 2008}} {{Economic systems (sidebar)}} {{Libertarianism}} {{Dablink|The use of the term ''laissez-faire'' can refer to "let alone, let pass" attitude for matters outside of economics.<ref>As well as being used in economic management, the term has also been applied more broadly to a style of [[management]] and [[leadership]], where it typically describes any form of control where the controlled are given most or all of the decision-making power. In this limited usage, ''laissez-faire'' (imperative) has come to be distinct from ''laisser faire'' (infinitive), which refers to a careless attitude in the application of a policy, implying a lack of consideration or thought.</ref>}} {{for|the bookseller|Laissez Faire Books}} '''Laissez-faire''' ([[help:IPA|pronunciation]]: [[French language|French]], {{Audio-IPA|laissez-faire.ogg|[lɛsefɛʁ]}}; [[English language|English]], {{Audio-IPA|En-us-laissez-faire.ogg|ˌleɪseɪˈfɛər}}) is a [[French language|French]] phrase literally meaning "Let do." From the French diction first used by the eighteenth century [[physiocrats]] as an injunction against government interference with trade, it became used as a synonym for 19th-century [[capitalism]]. Laissez-faire capitalism was the economic system before the [[Progressive Era]]<ref>{{cite journal|author=Charlene Gannage|title=E.S. Varga and the Theory of State Monopoly Capitalism|year=1980|journal=Review of Radical Political Economics|volume=12|issue=3|pages=36–49|doi=10.1177/048661348001200304}}</ref> and the [[Keynesian economics|Keynesian revolution]].<ref>{{cite journal |title=Keynes and Laissez-Faire |author=Trevithick, J. |journal=The Economic Journal |volume=9 |number=354 |pages=476--478 |year=1979 |publisher=JSTOR }}</ref> It is generally understood to be a doctrine that maintains that private initiative and production are best allowed a minimal of [[economic interventionism]] and [[taxation]] by the state beyond what is necessary to maintain [[individualism|individual liberty]], peace, security, and [[property]] rights.<ref name="Hanlin">{{cite journal|author=Oscar Handlin|title=Laissez-Faire thought in Massachusetts, 1790-1880|year=1943|journal=Journal of Economic History|volume=3|pages=55–65}}</ref> Laissez-faire capitalism is supported by proponents of [[libertarianism]], [[classical liberalism]], [[neoliberalism]], [[minarchism]], [[conservativism]] and [[Objectivism (Ayn Rand)|Objectivism]]. Libertarians argue that laissez-faire produces greater prosperity and [[personal freedom]] than other economic systems. The [[Austrian School]] of economics and the [[Chicago school (economics)|Chicago School]] of economics are important figures supporting of laissez-faire economics. [[Market anarchist]]s take the idea of laissez-faire to its extreme by opposing all compulsory state intervention including taxation, preferring that law and order be privately funded. ==Origins of the term== The exact origins of the term "laissez-faire" as a slogan of [[economic liberalism]] are uncertain. According to historical folklore, the phrase stems from a meeting c. [[1680]] between the powerful French finance minister [[Jean-Baptiste Colbert]] and a group of French businessmen led by a certain M. Le Gendre. When the eager [[mercantilist]] minister asked how the French state could be of service to the merchants, Le Gendre replied simply "Laissez-nous faire" ('Leave us be', lit. 'Let us do').<ref> The anecdote on Le Gendre is briefly referenced in J. Turgot's "Eloge de Vincent de Gournay", '' Mercure'', August, 1759).</ref> The ''laissez faire'' slogan became closely associated with [[Vincent de Gournay]], a French intendant of commerce in the [[1750s]] and ardent proponent of the removal of restrictions on trade and the deregulation of industry in France, and a mentor of the later [[Physiocrats]]. Gournay was delighted by the LeGendre anecdote, and forged it into a larger maxim all his own: "Laissez faire et laissez passer, le monde va de lui même!" ('Let do and let pass, the world goes on by itself!'). Although Gournay left no written tracts on his economic policy ideas, his immense personal influence on the thinking of his contemporaries, notably the [[Physiocrats]], is generously acknowledged in their testimonies. Among others, [[Jacques Turgot]],[[Tyler Caron]], the [[Victor de Riqueti, marquis de Mirabeau|Marquis de Mirabeau]], the [[Comte d'Albon]] and, most insistently, [[Pierre Samuel du Pont de Nemours| DuPont de Nemours]] credit both the 'laissez-faire' slogan and doctrine to Gournay. <ref> J. Turgot, ''op cit''. V.R. Marquis Mirabeau, in ''Philosophie rurale'' 1763 and ''Ephémérides du Citoyen'', 1767. C.C. Comte d'Albon,"Éloge Historique de M. Quesnay", ''Nouvelles Ephémérides Économiques'', May, 1775, p.136-7. P.S.DuPont de Nemours, in ''Ouevres de Jacques Turgot'', 1808-11, Vol. I, p.257 and p.259 (Daire ed.)</ref> The honour of the first recorded use of the 'laissez faire' maxim goes to the contemporary French minister [[René-Louis de Voyer de Paulmy, marquis d' Argenson|Rene de Voyer, Marquis d'Argenson]], another champion of free trade. <ref> A. Oncken (''Die Maxime Laissez faire et laissez passer, ihr Ursprung, ihr Werden'', 1866) indicates d'Argenson used the 'laissez-faire' term firstly in his 1736 ''Memoires'' and then in an article in the 1751 ''Journal Oeconomique'' (the term's first known appearance in print).</ref> However, there is little dispute that it was Gournay who gave the maxim its vogue - or at least it was persistently ascribed to him by the [[Physiocrats]], particularly DuPont de Nemours. D'Argenson, during this time, was better known for the similar but less-celebrated motto "Pas trop gouverner" ("Govern not too much").<ref>DuPont de Nemours, ''op cit'', p.258.</ref> In English, a variety of "free trade" and "non-interference" slogans had been coined already in the seventeenth century. The first known appearance of the French motto ''laissez faire'' in an English text is in the writings of the London merchant [[Charles Bosanquet]] in 1808.<ref>"if trade could be left free and unfettered, it would in most cases take very good of itself; but alas! ''laissez nous faire'', though an excellent maxim, is grown quite obsolete." From C. Bosanquet, 1808, ''Thoughts on the Values to Great Britain of Commerce in General and the Value and Importance of the Colonial Trade in Particular'', London, p.48-49. The identification of this as its first use in English is due to E.R. Kittrell (1966) "Laissez Faire in English Classical Economics", ''Journal of the History of Ideas'', Vol. 27 (4), p.610-620.</ref>. It was originally introduced in the English-language world in 1774, by [[George Whatley]], in the book ''Principles of Trade'', which was co-authored with [[Benjamin Franklin]]. [[Classical economist]]s, such as [[Thomas Malthus]], [[Adam Smith]] and [[David Ricardo]] did not use the term. [[Jeremy Bentham|Bentham]] employed it, but only with the advent of the [[Anti-Corn Law League]] did the term receive much of its (English) meaning.<ref>{{cite journal|author=Abbott P. Usher et al.|title=Economic History--The Decline of Laissez Faire|year=1931|journal=American Economic Review|volume=22|issue=1, Supplement|pages=3–10}}</ref> Nonetheless, it was probably [[James Mill]]'s reference to the 'laissez-faire' maxim (together with 'pas trop gouverner') in an 1824 entry for ''Encyclopedia Britannica'' that really brought the term into wider English usage. ==History of laissez-faire debate== ===Europe=== In nineteenth century Britain, laissez-faire capitalism found a small but strong following by such [[Manchester Liberalism|Manchester Liberals]] as [[Richard Cobden]] and Richard Wright. In 1867, this resulted in a free trade treaty being signed between Britain and France, after which several of these treaties were signed among other European countries. The newspaper ''[[The Economist]]'' was founded, partly in opposition to the [[Corn Laws]], in 1843, and [[free trade]] was discussed in such places as ''The Cobden Club'', founded a year after the death of Richard Cobden, in 1866. <ref>{{cite journal|author=Scott Gordon|title=The London Economist and the High Tide of Laissez Faire|year=1955|journal=Journal of Political Economy|volume=63|issue=6|pages=461–488|doi=10.1086/257722}}</ref> <ref>{{cite web|title=London Clubs in the Late Nineteenth Century|url=http://www.nuff.ox.ac.uk/economics/history/paper28/28taddeiweb1.pdf|author=Antonia Taddei|year=1999}}</ref> British laissez-faire was not exclusively unregulated due to [[United Kingdom company law|companies legislation]].<ref name="walker">{{cite journal|title=Laissez-faire, Collectivism And Companies Legislation In Nineteenth-century Britain|last=Walker|first=S.P.|journal=The British Accounting Review|volume=28|number=4|pages=305--324|year=1996|publisher=Elsevier}}</ref> The [[Limited Liability Act 1855]] and the [[Joint Stock Companies Act 1856]] were examples. However, [[Austrian school|Austrian scholars]] consider that laissez-faire was never the main doctrine of any nation, and at the end of the eighteen-hundreds, European countries would find themselves taking up economic protectionism and interventionism again. France for example, started cancelling its free trade agreements with other European countries in 1890. Germany's [[protectionism]] started (again) with a December 1878 letter from [[Bismarck]], resulting in the iron and rye [[tariff]] of 1879. ===United States=== [[Image:Federal Reserve.jpg|thumb|200px|The [[Federal reserve]], headquarters in [[Eccles Building]] was criticized by laissez-faireists as the cause of [[business cycles]].]] Although the period before the [[American Civil War]] was notable for the limited extent of the federal government, the [[Austrian School]] suggest that there was a considerable degree of government intervention in the economy--particularly after the 1820s. Notable examples of government intervention in the period prior to the Civil War include the establishment of the [[First Bank of the United States]] and [[Second Bank of the United States]] as well as various protectionist measures (e.g., the [[tariff of 1828]]). Several of these proposals met with serious opposition, and required a great deal of horse trading to be enacted into law. For instance, the First National Bank would not have reached the desk of President [[George Washington]] in the absence of an agreement that was reached between [[Alexander Hamilton]] and several southern members of Congress to locate the capital in the [[District of Columbia]]. In contrast to Hamilton and the Federalists was the opposing political party the (Democratic)-Republicans. The early Republican party led by Jefferson was very pro-laissez-faire. In fact Jefferson wished to only have the government do three things: collect a census (every ten years), collect duties which were the government's only tax {{Fact| originally written "(i think)" in the article which is not appropriate|date=July 2008}}, and run the postal service. Jefferson also had very few federal employees especially compared to today's American government. Most of the early proponents of laissez-faire capitalism in the United States subscribed to the [[American School (economics)]]. This school of thought was inspired by the ideas of Alexander Hamilton, who proposed the creation of a [[First National Bank|government sponsored bank]] and increased tariffs to favor northern industrial interests. Following Hamilton's death, the more abiding protectionist influence in the antebellum period came from [[Henry Clay]] and his ''[[American System (economic plan)|American System]]''. In the mid-19th century, the [[Abraham Lincoln]] followed the [[Whig Party|Whig]] tradition of economic liberalism, which included increased state control such as the provision and regulation of railroads. The [[Pacific Railway Acts]] provided the development of the [[First Transcontinental Railroad]].<ref>{{citation|first=Allen C.|last=Guelzo|title=Abraham Lincoln: Redeemer President|isbn=0-8028-3872-3|year=1999|url=http://www.questia.com/PM.qst?a=o&d=99466893}}</ref> Following the Civil War, the movement towards a mixed economy accelerated with even more [[protectionism]] and [[government regulation]]. In the 1880s and 1890s, significant tariff increases were enacted (see the [[McKinley Tariff]] and [[Dingley Tariff]]). Moreover, with the enactment of the [[Interstate Commerce Act of 1887]], the [[Sherman Anti-trust Act]], the federal government began to assume an increasing role in regulating and directing the country's economy. The [[Progressive Era]] saw the enactment of even more controls on the economy, as evidenced by the Wilson Administration's [[New Freedom]] program. Following [[World War I]] and the [[Great Depression]], [[Keynesian economics|Keynesian policies]] turned the state into a [[mixed economy]]. The United States, in the 1980s, for example, sought to protect its automobile industry by "voluntary" export restrictions from Japan.<ref>{{cite journal|author=Robert W. Crandall|year=1987|title=The Effects of U.S. Trade Protection for Autos and Steel|journal=Brookings Papers on Economic Activity|volume=1987|issue=1|pages=271–288|doi=10.2307/2534518}}</ref> One scholar wrote about the early 1980s that:{{cquote|By and large, the comparative strength of the dollar against major foreign currencies has reflected high U.S. interest rates driven by huge federal budget deficits. Hence, the source of much of the current deterioration of trade is not the general state of the economy, but rather the government's mix of fiscal and monetary policies — that is, the problematic juxtaposition of bold tax reductions, relatively tight monetary targets, generous military outlays, and only modest cuts in major entitlement programs. Put simply, the roots of the trade problem and of the resurgent protectionism it has fomented are fundamentally political as well as economic.<ref>{{cite journal|author=Pietro S. Nivola|year=1986|title=The New Protectionism: U.S. Trade Policy in Historical Perspective|journal=[[Political Science Quarterly]]|volume=101|issue=4|pages=577–600|doi=10.2307/2150795}}</ref>}} ===The Great Depression=== {{main|Causes of the Great Depression}} [[Image:Lange-MigrantMother02.jpg|thumb|150px|right|Scholarly debate over the [[Causes of the Great Depression|cause of the Great Depression]] questions the involvement of laissez-faire economics in the incident, some blaming it and others exonerating it.]] There is much debate over the relationship between laissez-faire capitalism and the onset of the Great Depression. Some economists and historians (such as [[John Maynard Keynes]]) argue that laissez-faire capitalism fostered the conditions under which the Great Depression arose. Other scholars, such as [[Milton Friedman]] and [[Murray Rothbard]], say that the Depression was not a result of laissez-faire economic policy but of government intervention on the monetary and credit system. Most scholars accept the Great Depression to be a monetary phenomenon. In Keynes's 1936 work, ''The General Theory of Employment Interest and Money'', Keynes introduced concepts and terms that were intended to help explain the Great Depression. One argument for a laissez-faire economic policy during a recession was that if consumption fell, then the rate of interest would fall. Lower interest rates would lead to increased investment spending and demand would remain constant. However, Keynes believed that there are reasons why investment does not necessarily automatically increase as a response to a fall in consumption. Businesses make investments based on expectations of profit. According to Keynes, if a fall in consumption appears to be long-term, businesses analyzing trends will lower expectations of futures sales and will not invest in increasing future production even if lower interest rates make capital inexpensive. In that case, according to Keynes and contrary to [[Say's law]], the economy can be thrown into a general slump. (Keen 2000:198) [[Keynesian]] economists and historians argue that this self-reinforcing dynamic is what happened to an extreme degree during the Depression, where bankruptcies were common and investment, which requires a degree of optimism, was very unlikely to occur. As a solution to this Keynes proposed to alleviate market instability through government intervention. In his view, since private actors cannot be counted on to create aggregate demand during a recession, the government has the responsibility to create demand.<ref> Yergin, Daniel., and Joseph Stanislaw. 1998. The Commanding Heights. Touchstone Book. p 21-22</ref> Keynes saw his macroeconomic theory much better suited for [[totalitarian]] systems than those governed by the principles of laissez-faire. He highlighted this in the foreword to the German edition of 'The General Theory of Employment Interest and Money'': "The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire."<ref>John V. Denson (ed). (2001). ''Reassessing the Presidency: The Rise of the Executive State and the Decline of Freedom''. [[Ludwig von Mises Institute]]. ISBN 0945466293 p.597</ref> [[Friedrich August von Hayek]] and [[Milton Friedman]] argued that the [[Great Depression]] was not a result of laissez-faire capitalism but a result of too much government intervention and regulation upon the market. They note that the Great Depression was the longest depression in U.S. history and the only depression in which the government heavily intervened. In Friedman's work, ''[[Capitalism and Freedom]]'' he argues: "A governmentally established agency--The Federal Reserve System--had been assigned responsibility for monetary policy. In 1930 and 1931, it exercised this responsibility so ineptly as to convert what otherwise would have been a moderate contraction into a major catastrophe."<ref>Friedman, Milton. 1962. ''Capitalism and Freedom.'' University of Chicago Press. p 38.</ref> Furthermore, the U.S. Federal government had created a fixed currency pegged to the value of gold. At one point the pegged value was considerably higher than the world price, which created a massive surplus of gold. World wide demand for gold surged, but the pegged value was too low in the U.S. This created a massive migration of gold from the U.S. [[Milton Friedman]] and [[Friedrich Hayek|Hayek]] both argued that this inability to react to currency demand created a run on the banks that they were not able to handle. The banks inability to handle such a run, and the fixed exchange rates between the dollar and gold; both worked to cause the Great Depression by creating, and then not fixing, deflationary pressures.<ref>Milton, ''Capitalism and Freedom'', p 45-50.</ref> He further argued in this thesis, that the government inflicted more pain upon the American public by first raising taxes, then by printing money to pay debts (thus causing inflation), the combination of which helped to wipe out the savings of the middle class. Friedman concludes that the effects of the Great Depression were not mitigated until after World War II when the economy saw a return to normalcy with the elimination of many price controls. This opinion specifically blames a combination of [[Federal Reserve]] policies and economic regulation by the U.S. government as causes of the Great Depression, and that the depression was exacerbated by raising income taxes on the highest incomes from 25% to 63%, a "check tax", and the [[Smoot-Hawley tariff]]. Friedman believed that [[Herbert Hoover]]'s interventionist policies and [[Franklin D. Roosevelt|Franklin Roosevelt's]] [[New Deal]] further lengthened and worsened the depression. Friedman concludes, "The Great Depression in the United States, far from being a sign of the inherent instability of the private enterprise system, is a testament to how much harm can be done by mistakes on the part of a few men when they wield vast power over the monetary system of a country."<ref>Milton, ''Capitalism and Freedom'', p 50.</ref> Despite criticism of government intervention by those of the Chicago school, they still prefer [[central bank]]s to control the [[money supply]]. Rothbard criticizes Milton Friedman's assertion that the central bank failed to inflate the supply of money. Rothbard asserts that the Federal Reserve purchased $1.1 billion of government securities from February to July 1932 which raised its total holding to $1.8 billion. Total bank reserves only rose by $212 million, but Rothbard argues that this was because the American populace lost faith in the banking system and began hoarding more cash, a factor very much beyond the control of the Central Bank. The potential for a run on the banks caused local bankers to be more conservative in lending out their reserves, and, Rothbard argues, was the cause of the Federal Reserve's inability to inflate.<ref>{{harvnb|Rothbard|2002|pp=293–294}}</ref> [[Image:Currency component of the US money supply 1959-2007.gif|thumb|right|270px|Expansion of the U.S. money supply 1959-2007]] The Austrian school, however, has a different point of view than the Chicago scholars. They are opposed to [[central bank]]s and fiat money--things thay are supported by Chicago scholars. In their view, the key cause of the Depression was the expansion of the money supply in the 1920s that lead to an unsustainable credit driven boom. In their view, the Federal Reserve, which was created in 1913, shoulders much of the blame. In fact, Hayek, writing for the Austrian Institute of Economic Research Report in February 1929<ref>{{cite journal|title=Austrian Institute of Economic Research Report|date=February 1929}}</ref> predicted the economic downturn, stating that "the boom will collapse within the next few months." [[Ludwig von Mises]] also expected this financial catastrophe, and is quoted as stating "A great crash is coming, and I don't want my name in any way connected with it,"<ref>{{cite book|author= Mises, Margit von|title=My Years with Ludwig von Mises|publisher=Arlington House|date=1976|page=31}}</ref> when he turned down an important job at the Kreditanstalt Bank in early 1929. One reason for the monetary inflation was to help [[Great Britain]], which, in the 1920s, was struggling with its plans to return to the gold standard at pre-war ([[World War I]]) parity. Returning to the gold standard at this rate meant that the British economy was facing deflationary pressure.<ref name="rothbard 2002 141">{{harvnb|Rothbard|2002|p=141}}</ref> According to Rothbard, the lack of price flexibility in Britain meant that unemployment shot up, and the American government was asked to help. The United States was receiving a net inflow of gold and inflated further in order to help Britain return to the gold standard. Montagu Norman, head of the Bank of England, had an especially good relationship with [[Benjamin Strong Jr.|Benjamin Strong]], the ''de facto'' head of the Federal Reserve. Norman pressured the heads of the central banks of France and Germany to inflate as well, but unlike Strong, they refused.<ref name="rothbard 2002 141" /> Rothbard says American inflation was meant to allow Britain to inflate as well, because under the gold standard, Britain could not inflate on its own. In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and in capital goods. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable. [[Image:Dollar value chart.gif|thumb|left|270px|The value of $1 over time, in 1776 dollars.<ref>http://www.measuringworth.com/ppowerus/ Purchasing Power of Money in the United States from 1774 to 2007 from measuringworth.com</ref>]] The artificial interference in the economy was a disaster prior to the Depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. According to Rothbard, government intervention delayed the market’s adjustment and made the road to complete recovery more difficult.<ref>{{harvnb|Rothbard|2002|p=25}}</ref> It was President [[Herbert Hoover]]'s interventionist policies during the Depression that prolonged it. He criticized Hoover's policies such as tarrifs, [[wage control]]s and government spending that worsened the Depression. Wage controls and labor union regulations at that time, he argued, kept the unemployment rate high. Artificially high wage controls during a time of monetary contraction kept the [[real income]]s of the workers much higher than the real value, which forced business owners to fire workers. Finally, he refuted the common misconception that [[World War II]] spending ended the war--the Great Depression ended a few years after the war, and argued that military spending kept down the artificially high unemployment rate because the unemployed volunteered in the war. A Depression that should have lasted only a few months is worsened by Hoover's interventionist policies, and Rothbard refuted the popular misconception that Hoover was non-interventionist: Hoover was only a bit less interventionist than President [[Franklin D. Roosevelt]], and stated that the [[New Deal]] was started by Hoover. ==Objectivism and laissez-faire capitalism== [[Objectivism (Ayn Rand)|Objectivism]] is often associated with 19th-century capitalism. [[Ayn Rand]], the founder of Objectivism, was a proponent to revert back to the 19th-century capitalist system. She defended [[patent]] and [[copyright]] laws as legitimate interventions. Also, she argued for a agressive foreign policy to spread freedom and the Empire.<ref>{{cite web|url=http://www.aynrand.org/site/News2?page=NewsArticle&id=19681&news_iv_ctrl=1063|title=With or Without Nukes, Iran Is a Mortal Threat|author=Elan Journo|publisher=Ayn Rand Center for Individual Rights}}</ref> Objectivist politics begins with ''ethics:'' the question of if, and if so why, a rational agent needs a set of principles for living his life. The proper answer to ''ethics'' tells a rational individual how to preserve his individual rights while interacting with, benefiting from cooperation with, and trading with, other individuals in society.<ref name="rand">{{cite book |last=Rand |first=Ayn |year=1996 |title=[[Atlas Shrugged]] (35th Anniv edition) |publisher=Signet Book | isbn 0-451-19114-5}}</ref> That is, it determines the principles that constitute a moral social system.<ref>Ayn Rand, “Philosophy: Who Needs It,” ''Philosophy: Who Needs It''</ref> The only social system that fully recognizes individual rights is Capitalism<ref>Rand, Ayn, "What Is Capitalism?" in ''Capitalism: The Unknown Ideal''</ref> - as Rand understood it:<blockquote>When I say “capitalism,” I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.<ref>Rand, Ayn, with additional articles by Nathaniel Branden. (1964) ''The Virtue of Selfishness.'' Signet Book.</ref></blockquote> Although Objectivist literature does not use the term "natural rights," the rights it recognizes are based directly on the nature of human beings as described in [[Objectivist epistemology]] and [[Objectivist ethics]]. Since human beings must make choices in order to survive as human beings, the basic requirement of a human life is the freedom to make, and act on, one's own independent rational judgment, according to one's self-interest. ==Laissez-faire today== ===The Austrian School=== The [[Austrian School]] consider that many modern nations today are not representative of laissez-faire capitalism, as they usually involve significant amounts of government intervention in the economy. This intervention includes [[minimum wages]], [[corporate welfare]], [[antitrust|anti-trust regulation]], [[nationalization|nationalized industries]], [[intellectual property]], [[licenses]] and [[social welfare|welfare programs]] among other forms of government intervention. Subsidy programs for businesses and agricultural products; [[government ownership]] of some industry (usually in natural resources); regulation of market competition; economic [[trade]] barriers in the form of protective tariffs - quotas on imports -, "[[fair trade]]" or internal regulation favoring domestic industry; and other forms of government favoritism. The now-ubiquitous worldwide money regulating agencies such as the U.S. [[Federal Reserve System]] (although it is technically privately owned) and other government owned-and-operated [[central banking]] systems as criticised by mainly Austrian School scholars, are [[Fractional-reserve banking#Libertarian viewpoint|seen as artificial at best and damaging at worst]]. The [[Austrian School]] consider the now-ubiquitous agencies such as the [[Food and Drug Administration]]s, [[environmental regulation]]s, and the [[War in Iraq]], illegitimate interventions of the state.<ref>{{cite web|url=http://mises.org/story/2894|title=Challenge to America: A Current Assessment of Our Republic|author=[[Ron Paul]]}}</ref> The Austrian School is against our current [[neoliberal]] version of [[globalization]]. They argue that the [[free-trade agreement]]s and intellectual property laws are only protecting the [[multi-national corporation]]s in expense of the people. For example, the intellectual property laws represent [[corporate welfare]] policies, as they may restrict some technology in undeveloped countries, such as the patented [[AIDS]]s medication prevented in Africa. Many of them are also against global organizations such as the [[United Nations]], associating them as a [[world government]] which undermines the independence of the state. They may also oppose international organization such as the [[International Monetary Fund]], which uses a [[Keynesian]] [[inflationary]] approach that contradicts their support of private currencies by Austrians. <ref>{{cite web|url=mises.org/fullstory.asp?control=1334|title=Does World Trade Need World Government?|author=Llewellyn H. Rockwell|publisher=Mises Institute}}</ref> {{seealso|anti-globalization}} ===The Chicago School=== [[Image:GM - Countries by Economic Freedom Index.png|thumb|335px|left|Map of countries by 2006 Economic Freedom of the World, published by the [[Fraser Institute]].]] Those who attend to the [[Chicago School]] prefer some form of [[competition law]], [[school vouchers]], a [[central bank]], [[intellectual property]] and prefer [[Milton Friedman]]'s [[negative income tax]] as a replacement to the existing welfare system, arguing that it is simpler and has fewer of the "[[perverse incentive]]s" of "[[Entitlement|government handouts]]". According to the [http://www.heritage.org/research/features/index/countries.cfm 2008 Index of Economic Freedom] and [http://www.freetheworld.com/ The Economic Freedom of the World], issued by the [[Heritage Foundation]] and the [[Fraser Institute]] respectively, seven countries with the most free economies in the former index are currently the following: [[Hong Kong]], [[Singapore]], [[Ireland]], [[Australia]], [[United States]], [[New Zealand]] and [[Canada]] (all of them former constituents of the [[British Empire]]). Hong Kong is ranked number one for 14 consecutive years in the Index which attempts to measure "the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself." Because of this, [[Milton Friedman]] described [[Hong Kong]] as laissez-faire state and he credits that policy for the rapid move from poverty to prosperity in 50 years.<ref>[http://www.hoover.org/publications/digest/3532186.html The Hong Kong Experiment by Milton Friedman] on [[Hoover Digest]] accessed at [[March 29]] [[2007]]</ref> Much of this growth came under British colonial control prior to the 1997 resumption of sovereignty by [[the People's Republic of China]]. Note that the economic freedom scales are relative, and Hong Kong may not be considered "laissez-faire", especially those who identify with the Austrian school. Central banks, school regulations, environmental regulations and government ownership of housing are some examples of economic intervention in Hong Kong. However at a press conference on [[11 September]] [[2006]], [[Donald Tsang]], the Chief Executive of Hong Kong said that "[[Positive non-interventionism]] was a policy suggested by a previous Financial Secretary many years ago, but we have never said that we would still use it as our current policy.... We prefer the so-called 'big market, small government' policy." Responses in Hong Kong were widely divided, some see it as an announcement to abandon the positive non-interventionism, others see it as a more realistic response to the government policies in the past few years, such as the intervention of the stock market to prevent brokering.<ref>(Ref: 2006-Sept-12: Mingpao Daily)</ref>. ==Controversy== {{seealso|Minarchism|Market anarchism|Anarcho-capitalism}} [[Private defense agency|Private defense agencies]]<ref> {{cite |title=The Myth of National Defense: Essays on the Theory and History of Security Protection |date=2003 |author=Hans-Hermann Hoppe }}</ref> and [[intellectual property]]<ref> {{cite |title=Against Intellectual Property |author=N. Stephan Kinsella |journal=Journal of Libertarian Studies |volume=15, no. 2 |date=Spring 2001 |pages=1–53 }}</ref> are a source of controversy amongst laissez-faire advocates. This is what usually divides the [[minarchists]] who advocate government police and military, and [[anarcho-capitalists]] who want full privatization of goods. For many of the latter, the principle of liberty must overcome the goal of wealth. The public good of police, for instance, could be seen as immoral coercion no matter how efficient over private security. [[Image:Murray Rothbard.jpg|thumb|right|[[Murray Rothbard]] was one of the most popular anarcho-capitalists.]] [[Murray Rothbard]] was a prominent critic of laissez-faire [[minarchism]]. As an [[anarcho-capitalist]], he argued that government defence is inefficient. He criticized laissez-faire activists for supporting geographically large, minarchist states. In his book ''[[Power and Market]]'', he argued that geographically large minarchist states are indifferent from a unified minarchist world monopoly government.<ref>{{cite |title=Power and Market: Government and the Economy |author=[[Murray Rothbard]] }}</ref> Some [[libertarians]] argue that [[anarcho-capitalism]] is the only [[logically consistent]] form of libertarian belief. It is also contradictory to state that [[violence]] is immoral, yet still maintain violence in the form of a government. Such views are often voiced by "[[rights libertarian]]s", though [[consequentialist]] libertarians may argue that laissez-faire is more compatible with utilitarian values (in the manner of [[von Mises]] or [[Milton Friedman]]) But laissez-faireists counter that a government could survive on private donations and the creation of [[trust fund]]s without any form of [[taxation]] whatsoever. Even if a [[government]] could be voluntarily funded, then it still amounts to an authority with a [[monopoly of force]] over a given area, and as such would dictate and control. Additionally, some argue that voluntary donations are not enough to support a government to prevent a foreign invasion. The mere existence of government, irrespective of how it is funded, undermines one's [[self-ownership]], since to govern ''is'' to control. Laissez-faireists, however, depart here from anarcho-capitalists in philosophical beliefs, believing that the government should indeed be the sole arbiter of force in law and military matters, on the premise that competing law systems would inevitably lead to chaos, where no libertarian principles could possibly reign. However, market anarchists had argued that the sole arbitrator can just be the society itself, instead of a government that is separate from the society.<ref>http://www.veritasnoctis.net/docs/persistentanarchyapsa2006.pdf</ref> Also, some libertarians believe that the concept of "constitutionally limited government" is a [[fallacy]]. They argue that the [[United States|American]] [[Founding Fathers]]' approach of limiting the inherent [[force]] linked with government (in respect to the [[United States Constitution]]) has not worked. They claimed that states would inevitably become corrupt. A number of laissez-faireists state that human beings naturally gravitate towards leaders, hence making anarchism untenable and not viable.{{Fact|date=November 2007}} As such, they believe that the existence of government is inevitable, and people should only be concerned with limiting the size and scope of the state, rather than opposing its existence. Murray Rothbard denouced this claim by citing that it often took hundreds years for aristocrats to set up a state out of anarchy.<ref name=powerandmarket/> More to the point, even if anarchy were in some way commensurate with individual liberties, laissez-faireists often argue that anarchy would be highly inefficient at providing for a stable means of repelling organized aggression from foreign armies. As such anarchies would quickly be replaced by whatever government happened to assert its will via military means. However, Murray Rothbard argued that in anarchy, it would be much harder for foreign invasion to set up a government because there would not be an existing central entity to take control over.<ref name=powerandmarket>{{cite book |title=Power and Market: Government and the Economy |author=Murray Rothbard }}</ref> Some laissez-faireists believe their approach to be more [[pragmatic]]. However, [[Hans Hermann Hoppe]] has argued that the only form of state that can pragmatically be restrained from expanding is a monarchical (privately owned) state.<ref>Hoppe, Hans-Hermann. [http://mises.org/hoppeintro.asp Democracy: The God that Failed: Studies in the Economics and Politics of Monarchy, Democracy, and Natural Order] ''New Brunswick, NJ: Transaction Publishers'', 2001 </ref> ==References== <!--See http://en.wikipedia.org/wiki/Wikipedia:Footnotes for an explanation of how to generate footnotes using the <ref(erences/)> tags--> {{reflist|2}} ==Bibliography== * {{cite journal|author=Brebner, John Bartlet|year=1948|title=Laissez Faire and State Intervention in Nineteenth-Century Britain|journal=Journal of Economic History|volume=8|pages=59–73}} * {{cite journal|author=[[Irving Fisher|Fisher, Irving]]|year=1907|month=January|title=Why has the Doctrine of Laissez Faire been Abandoned?|journal=[[Science (journal)|Science]]|volume=25|issue=627| pages=18–27|doi=10.1126/science.25.627.18|pmid=17739703}} * {{cite journal|author=[[Frank William Taussig|Taussig, Frank W.]]|year=1904|title=The Present Position of the Doctrine of Free Trade|journal=[[American Economic Association|Publications of the American Economic Association]]|volume=6|issue=1|pages=29–65}} </div> ==Further reading== {{Spoken Wikipedia|En-us-laissez-faire.ogg|2008-06-27}} *{{cite book | author = [[August Oncken]]| year = 1886 | title = Die Maxime Laissez faire et laissez passer : ihr Ursprung, ihr Werden. Ein Beitrag zur Geschichte der Freihandelslehre | publisher = K.J. Wyss | location = Bern }} * {{PDFlink|[http://hsozkult.geschichte.hu-berlin.de/daten/2005/gerlach_christian_wu-wei.pdf Wu-Wei in Europe. A Study of Eurasian Economic Thought]|773&nbsp;[[Kibibyte|KiB]]<!-- application/pdf, 792303 bytes -->}} by Christian Gerlach, London School of Economics – March 2005 *[http://www.panarchy.org/keynes/laissezfaire.1926.html John Maynard Keynes, The end of laissez-faire (1926)] ==See also== {{wiktionarypar|laissez faire}} * [[Free market]] * [[Market anarchism]] * [[Anarcho-capitalism]] * [[Minarchism]] * [[Libertarianism]] * [[Objectivism (Ayn Rand)|Objectivism]] * [[Classical liberalism]] * [[Economic liberalism]] * [[Capitalism]] * [[Criticisms of capitalism]] [[Category:Classical liberalism]] [[Category:Political theories]] [[Category:Economic liberalism]] [[Category:Political movements]] [[Category:Political economy]] [[Category:Libertarianism]] [[Category:French words and phrases]] [[Category:Capitalism]] [[bs:Ekonomski liberalizam]] [[ca:Laissez faire]] [[cs:Laissez faire]] [[cy:Laissez-faire]] [[da:Laissez faire]] [[de:Laissez-faire]] [[et:Laissez faire]] [[es:Laissez faire]] [[eu:Laissez faire]] [[fr:Laissez-faire]] [[hr:Laissez faire]] [[id:Laissez-faire]] [[it:Laissez-faire]] [[he:לסה פר]] [[hu:Laissez-faire]] [[ms:Laissez-faire]] [[nl:Laissez-faire]] [[ja:レッセフェール]] [[no:Laissez-faire]] [[pl:Leseferyzm]] [[pt:Laissez-faire]] [[ru:Laissez-faire]] [[sco:Laissez-faire]] [[simple:Laissez faire]] [[sk:Laissez-faire]] [[sr:Лесе фер]] [[fi:Laissez-faire]] [[sv:Laissez faire]] [[tl:Laissez-faire]] [[tr:Laissez faire]] [[uk:Laissez-faire]] [[zh:自由放任]]