Laissez faire

The dictionary defines laissez faire as "An economic doctrine that opposes governmental regulation of or interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws."

Now, who or what decides the "minimum necessary" government regulations or interference in a free-enterprise system, in accordance with its laws? And when do we know when governments have gone far enough with their minimum necessary regulations or have gone overboard with them? My feeling is that such things are determined through experience. It also depends on the nature of the economics society. For instance, the laissez faire of Hong Kong would not be appropriate or acceptable in Britain.

Laissez faire proponents oppose "economic interventionism and taxation by the state beyond that which is perceived to be necessary to maintain peace, security, and property rights." But how about people's safety and protection from unscrupulous operators and harmful products? Shouldn't safety be a responsibility of the state? According to true believers of laissez faire safety concerns should be something the business community and corporations should undertake themselves, through the self-policing of their respective industries, making government legislation unnecessary. The theory is that corporations would realize it is in their own self-interest to keep people safe. For instance, there is an incentive for corporations to keep the work place safe because injuries on the job increase the cost of doing business. Also, as the theory goes, product and consumer safety should also be an incentive for corporations because lawsuits brought about by disgruntled customers and defective products also drives up the cost of doing business. Alas, the business world does not work in such a noble way or with such insight, developing and maintaining its own safety standards. Also, there are always unscrupulous business operators who cheat and cut corners, making it bad for everybody. And since the business community has historically done a poor job of policing itself the state has had to intervene and implement its own safety standards. Therefore, I would think, safety is another minimum requirement in accordance with a society’s laissez faire economic laws.

I started thinking about laissez faire because of what is happening in China and to its economy. If ever there was an opportunity to see laissez faire at work, what it's involved and how it fits into the scheme of things, China is it. The way capitalism is developing and taking hold in China is very much like it developed in the West, where capitalism was born. China has been learning capitalism from the ground up and it’s remarkable. In doing so it to is beginning to grasp the true meaning of laissez faire and what it entails, in accordance with economic laws. Theoretically anything goes with laissez faire. But there are a lot of unscrupulous business people in China who are giving free trade and capitalism a bad name, as we have discovered from the tainted pet food additives the world has been buying from China. Those additives poised and killed many pets. Also, medicines and toothpastes from China have poisoned and killed people. And more recently poisonous lead paint was discovered in toys manufactured China. Now, in order for China to remain in good standing with its trading partners around the world it has had to insure them that it is taking steps to implement strict international safety standards. In these instances China is learning the limits of laissez faire.

Though the notion implies it, pure laissez faire doesn’t exist. Things can’t be totally unregulated. All systems need some kind of framework in how to function. Systems function best when they have a set of rules. Capitalism is no exception. And even though business people protest against government regulations and intervention they feel more comfortable in having them than not. Government sets up the networks in which business is done, creating the environment in which business can be conducted equitably and in relative safety. Business people also rely on the government when things go wrong, to enforce the laws and sometimes even bail them out. If business activity were truly laissez faire capitalism would be replete with Enron situations where companies would behave unscrupulously to the point of destroying the very system of capitalism. Nevertheless, the notion of laissez faire is advocated with great gusto and hubris as a way to see how much the market will bear.

Proponents of laissez faire are not all bad guys, as some would have us believe. They do capitalism and society a big service. They are part of the push-me-pull-me polemics that keeps a society humming and remaining vibrant and flexible so that it survives and continues. Realistically, believers of laissez faire know they will never totally have things their way, just like their opponents will never totally have things their way. Nevertheless, in imposing their beliefs they keep government’s role to a necessary minimum and from becoming too domineering and controlling, like governments would get if given the chance. A laissez faire attitude is needed to keep the chief economic engine of humankind, capitalism, from becoming stale but remaining agile and always innovative so that it will always deliver the sustenance we need and to keep the world working.