Below is the detailed discussion on the economic policy of ‘Laissez Faire’. It is the policy of minimal government interference in trade and business activities carried out by French merchants and dealers. Initially, it started as a system in France and slowly went on to be adopted as a policy by many European nations.
What is Laissez Faire?
Laissez Faire literally means ‘allow to do’. It means that it asks the government to allow the flow of trade however it goes and encourages minimum interference of government or their influencers. This philosophy was highly supported and accepted by classical economists. Trade restrictions, trade laws, minimum wage laws, and regulation of a product were considered to be major trade barriers by economists and traders.
Therefore, the Laissez Faire was a long-lasting policy throughout the Victorian Era. It still plays an important role in the economic policies of trade. The Laissez Faire continued to be effective until the beginning of the twentieth century.
Origin of Laissez Faire
The origin of the philosophy of Laissez Faire is unknown. However, it can be traced back to the times when merchants asked the Controller General of Finance – Jean Baptiste Colbert to “leave them alone” when he questioned them about what the government can do to make the trade better. This happened during the reign of King Louis XIV of France.
This doctrine was deeply studied and understood by the ‘Physiocrats’ that lived in France during 1756 – 1778. Later, it came to be highly supported by the British merchants as well and the influencer – Adam Smith.
Adam Smith’s Laissez Faire
Adam Smith was a Scottish Classical economist, philosopher and author. He was known as the Pioneer of Political Economy in the Victorian Era. His works, ‘The Theory of Moral Sentiments’ in 1759 and ‘An Inquiry into the Nature and Causes of the Wealth of Nations‘ also known as the ‘Wealth of Nations’ in 1776 are well known and studied for many references till date.
The system of Capitalism was deeply studied and favoured by Adam Smith. He believed that the landlords of the society were yielding in the economy of a place. They had the ability to acquire revenue solely through ownership. He explained that an increase in population increases the demand for food. This demand gives rise to the demand for land for growing crops which is obtained only by landlords.
Therefore, according to Smith, landlords contribute to the growth of wealth in the society. And hence, their policies must be favoured by the government.
Laissez Faire in Britain
‘The Economist’, a British newspaper highly favoured the influence of Laissez Faire. It was so favoured that during a famine in Ireland, the British refused to help by sending food aid or clothing saying ‘It is no man’s business to help another’. This was written in the Economist, by James William – founder of the Economist.
End of Laissez Faire
Laissez Faire was a philosophy that promoted social inequality and moreover injustice. Therefore, it was discarded soon in the mid 20th century. Economists like John Maynard Keyes, were against Laissez Faire on many occasions. He even published a book called ‘The End of Laissez Faire’ in the year 1926.