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Encyclopedia > Laissez faire

Laissez-faire is short for "laissez faire, laissez passer," a French phrase meaning to "let things alone, let them pass". First used by the eighteenth century Physiocrats as an injunction against government interference with trade, it is now used as a synonym for strict free market economics. Laissez-faire economic policy is in direct contrast to statist economic policy. Adam Smith played a large role in popularizing laissez-faire economic theories in English-speaking countries, though he was critical of a number of aspects of what is currently thought of as laissez-faire.

Laissez-faire (imperative) is distinct from laisser faire (infinitive), which refers to a careless attitude in the application of a policy, implying a lack of consideration, or thought.



The laissez-faire school of thought holds a pure capitalist or free market view, that capitalism is best left to its own devices; that it will dispense with inefficiencies in a more deliberate and quick manner than any legislating body could. The basic idea is that less government interference makes for a better system.


Laissez-faire philosophy was dominant in the late 19th and early 20th century in the wealthier countries of Europe and North America. Many historians also see that period as the height of laissez-faire's implementation in those countries. However, there are critics who suggest that what was described as "laissez-faire" policy was simply pro-business policy, as with large subsidies for businesses to produce the railroads in the United States or the common use of tariffs by Republican presidents there. In this context, laissez-faire rhetoric was used to justify denial of similar subsidies to the poor and working classes.

For many, laissez-faire theories fell into disrepute because of their failure to allow governments to deal with managing the economy during and after World War I, and their alleged failure to prevent The Great Depression. However, some libertarians, such as Milton Friedman argue that by the time of the Great Depression, significant government economic regulation had already taken place in most major economies, as workers and employees in all industries organized themselves into trade unions to demand better living standards, as well as various checks and balances to the perceived "tyranny of laissez-faire". Workers succeeded in obtaining minimum wage laws and a progressive income tax in some countries. International trade barriers were also in the policy pipeline (e.g. Smoot-Hawley Tariff in the USA). So, according to the above-mentioned libertarians, the economies that suffered from the Depression, although possibly closer to laissez-faire than any other economic models that were ever used, still did not embrace pure capitalism. Some critics of laissez-faire argue that the attainment of pure capitalism is impossible, for example since it is difficult to deal with market failures without an active role for government.

Modern industrialised nations today are not typically representative of laissez-faire principles, as they usually involve significant amounts of government intervention in the economy. This intervention includes minimum wages, significant redistribution through tax and welfare programs, government ownership of businesses and regulation of market competition. The major exception to this is Hong Kong, which officially has a laissez-faire economic policy since the 1960s and perhaps earlier. Moreover, many suggest that President Ronald Reagan of the United States and Prime Minister Margaret Thatcher of the United Kingdom followed a generally laissez-faire perspective.

In the wake of the rise of the USSR, laissez-faire economics assumed a stronger ideological edge, see e.g. Hayek. In the post-war era, where state regulation and involvement in the economy reached a peak, to no small extent as part of the Cold War, anti-statist schools of economic thinking enjoyed a surge of interest and support.

See also

Contrast with




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