Laissez-faire capitalism (fr. “let It be”) is a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual's rights against the initiation of physical force. In other words, laissez-faire economy is when the trading between private companies is not regulated by the state (via taxes, tariffs or enforced monopolies). There is no possibility for the economy to be absolutely non-inferenced because there is always government’s protectionism and interventionism.
Is the ‘invisible hand’ enough for the economy to work?
According to Adam Smith, in a free market, no regulation would be necessary, because the ‘invisible hand’ would make people to trade in the most efficient way.
There is a popular opinion that the financial crisis is a result of laissez-faire capitalism, for example, the French president Nicolas Sarkozy said "laissez-faire" economics, "self-regulation" and the view that "the all-powerful market" always knows best are finished. Is it possible that after the current financial crisis the era of laissez-fair capitalism will end?
In my opinion, even if the economy never is totally free, there is no better way to develop as capitalism (a good example here can be China’s growth after transferring from centrally planned economy). I agree with the statement made by Dr Linda Yueh that laissez-faire means that market forces lead economic decisions, but within a framework of regulation. Improving regulation is what is required; not handing the economy over to the government.
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“What this brief account has shown is that the politico-economic system of the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.”
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That’s what I think.
MANU
In l-faire capitalism who looks after the poor, the disabled etc? Who deals with those who live on the fringes of society?
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