A Simple Definition of Laissez-Faire Economics
Jean Baptiste Colbert
Jean Baptiste Colbert was a French statesman who has been given credit for creating an economic system in France. He descended from a family of businessmen and became a successful minister under King Louis XIV. Colbert acquired a lot of responsibility involving finances and managed affairs for the royal household. He also managed the merchant marine and the navy.
Colbert's aim was to build France's economy. Although he wasn't successful in his attempt to create royal trading companies that could compete with other countries, he made up for this in his achievement with the merchant marine and navy. He basically laid the foundation for what would be accomplished in the future.
Colbert believed that if he could effect the Dutch in how they dominated trade, that possibly France could take over that role. So when King Louis XIV invaded Holland for no justifiable reason, Colbert would support this cause. The war lasted for seven years and it affected the economy in France in the long run. This would be the last time that a minister would wear as many hats as Colbert.
The term, mercantilism, stems from an economic system utilized by countries involved with trade from the 16th through the 18th centuries. These countries would export goods in exchange for precious metals, especially gold. Because gold was in such high demand, these mercantilist countries understanding wealth knew they could use the gold to acquire other types of merchandise. On products that were imported, a duty was imposed on same which would raise money for the government, which had a lot of control over the economy. Colbert was an advocate of mercantilism, the policies of which would slowly end with the birth of the industrial revolution and laissez-faire.
Essentially, mercantilism was built around the idea that countries participating with this type of commercial policy would gain power and wealth. However, under this type of policy, commerce was very much regulated by the government and as indicated above, the goal was to obtain a lot of gold and create monopolies in the trade market.
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This subject may seem as dry as melba toast, but once familiarized with what it is and some of the history behind this notion, it becomes interesting. Additionally, if you do not know what it is, then you will have learned something new and the next time you hear the phrase in a conversation, you will understand what's being said.
The translation of French word, "laissez," into English means "let." The translation of "faire" from French to English is "do." The concept is that people in their business dealings should be allowed to do as they wish without any interference from others. This philosophy was born as early as the 17th Century.
The philosophy of laissez-faire grew out of France during the 18th century due to unfair economic practices of business. The concept of laissez-faire carries with it a freedom to operate a business that is not interfered with by the government and if so, at a minimum.
Without any operating restraints, the notion is that a well-adjusted operation would grow out of steady production and trade, which would benefit both the merchant and the buyer (or in the 18th century, a type of barter agreement).
By the time of the 19th century, laissez-faire became popular in the Western world; however, this philosophy would become interrupted by the behavior of commerce. When employees were treated poorly and with the lack of consideration for consumers, as just two examples, people began to re-evaluate laissez-faire. As countries became more industrialized, it was desired for the government to become involved to help protect employees as well as the consumers. Laws were created to protect people.
In the 20th century, laissez-faire would return some 40 years ago during the 1970s with the modernized term of "free enterprise." Odds are if you live in a laissez-faire country, then you live in a capitalistic society.
Economists used to be referred to as "Physiocrats." Steering the boat for the Physiocrats was Francois Quesnay. The Physiocrats and others were under the reign of King Louis XV (ruler from 1715-1774). Because the Physiocrats believed that their economy's strength came from agriculture. As such, they wanted the the government to lower taxes on agriculture in order to achieve success and become a richer country as England. Allegedly, at that time was when Quesnay had created the term, laissez-faire. He firmly believed that economic growth in France would be a result of agriculture, and not from anything that was industrial. It would be Quesnay who would help to shape the subject of economics. Quesnay also believed that the reason why conditions were poorly in France was due to the policies of mercantilism and Colbert.
The government in France had so much power over the behavior of its manufacturers that they were not able to easily compete with other countries. As such, farmers had to pay a higher price for any type of machinery and the wealthy were enable to heavily tax the farmers to exhaustion. Quesnay believed the government regulations needed to be reformed and that taxes needed to be lowered. He also believed that traders should be able to freely trade.
Victor Riqueti-Marquis de Mirabeau
Victor Riqueti-Marquis de Mirabeau was a French political economist who was influential and involved with the Physiocratic economic philosophies. After serving in two wars, he studied political economy (doesn't that make you wish you took Economics in college?). Mirabeau wrote papers on his notions and was critical of the government's intervention and control. He also believed that wealth could be derived more so from agriculture than trade. He supported the ideas of the Physiocrats and believed that that tax system in France was archaic. Despite criticism, he was committed to his beliefs in what would benefit France economically.