“When I say ‘capitalism,’ I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.”
– Ayn Rand
Laissez-faire is French for “leave alone,” “allow to pass,” or “let do.”
The term is said to originate when, in 1681, when the comptroller of finance for King Louis XIV of France, Jean-Baptiste Colbert, asked a group of French businessmen, headed by M. Le Gendre, what should the government do to help their businesses.
Le Gendre’s response “Laissez-nous faire” (which means: to leave us alone, and let us do it.)
Laissez-faire does not mean banning all laws that protect consumer rights, that one can kill one’s competitors; or that companies are not responsible for unsafe working conditions. Unsafe and unsanitary working conditions preceded capitalism. Laissez-faire does not mean the “laws of the jungle,” i.e., that business owners can enslave workers. Laissez-faire means operating under an objective rule of law (freedom) as opposed to an arbitrary, rule of man (regulation). Laissez-faire ends where the violation of the rights of others begins. What laissez-faire does mean is that if a business action does not violate individual rights, then the states’ policy is “hands-off” or laissez-faire.
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Under laissez-faire capitalism, there is a separation of economics and state; just like under freedom of religion, there is a separation of religion and state.
Under laissez-faire capitalism, the role of government is to protect the rights of all individuals equally. In cases of the initiation of physical force or fraud, the government is required to protect the rights of injured parties. Under laissez-faire, there are no bail-outs, no subsidies, no price controls, no licensing to create coercive monopolies, no regulations to restrict competition, no “protection” from imports, nor any laws to interfere with the freedom of production, work, and contract, so long as one is not violating the rights of others.
As philosopher Ayn Rand has observed, “laissez-faire capitalism” (or pure capitalism) is redundancy in today’s philosophical chaos necessary to distinguish real capitalism from all the different so-called “hyphenated-capitalism” which is a mixture of capitalism with anti-capitalist, statist elements.
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A common smear by opponents of “laissez-faire” is that it means anarchism.
Under this false alternative one either has a government that can regulate non-rights violating business (statism), or companies are given free rein to do what they want (anarchism).
The third alternative not mentioned is “laissez-faire” capitalism. The “laissez-faire” in capitalism does not mean anarchism but means that if an individual respects the rights of others, the government’s policy will be “hand’s off”: to leave one free to pursue one’s affairs. (Contrast this to collectivist-statist societies where the rights of individuals are violated to regulate their behavior in service to the collective).
Laissez-faire capitalism is simply the economic form of the libertarian ethic. Laissez-faire capitalism encompasses the notion that men should exchange goods and services, without regulation, solely on the basis of value for value. It recognizes charity and communal enterprises as voluntary versions of this same ethic.
Laissez-faire capitalism is rejected automatically as a socioeconomic philosophy by both the Old Left and New Left as well as by the Old Right. Nevertheless, laissez-faire capitalism — as it really is, rather than as it is generally and mistakenly understood to be — is demonstrably superior to accepted statist economics.
Socialism, communism, fascism and Keynesian mixed economics all boil down to the intervention of the state in the economy through regulation, direct management or confiscation. The efficacy of state intervention can be ascertained by answering a single question: Has any economy ever benefited in the long run from it? Invariably, the answer is no.
In fact, the whole problem of pollution is in itself an indictment of statism. Communal ownership of air and water resources has fostered a denigration of individual rights and responsibilities by placing in artificial limbo the media of pollution. The result has been an indifference on the part of polluters to the consequences of pollution and an inability on the part of the victims to redress damage to health and property caused by pollution. The statist concept of "national goals" has also been responsible for pollution by private concerns. In the late 19th century, for instance, when the effects of air pollution were just becoming apparent, courts invariably held for polluters and denied the suits of victims of pollution on the grounds that the need of society for factories overrode the individual's right to the property being damaged by pollution. Water pollution was similarly ignored, since no one owned rivers, but the community — whose interest the state took to be factories, not the protection of the individual rights of those who owned riverfront property or who drank the water.
In addition to protecting private polluters from the claims of their victims, the state has secured for itself the power to pollute with impunity. Whereas corporations can be and sometimes are held responsible for damage to life and property caused by their pollution, the state has been pumping garbage into the sky and dumping sewage into rivers and lakes without the faintest possibility of legal constraint.
Laissez-faire capitalism is the only answer to the chaos statist economics has brought to the world. Through the free market — the only real determinant of consumer need and desire — laissez-faire capitalism produces sustained, natural economic growth. Those who prosper are those who can satisfy consumer demands. Exchanges are made only on the basis of mutual benefit.
As the economic derivative of libertarianism, laissez-faire capitalism is an economics of life, of rationality. Like libertarianism in general, it is founded on a belief in the ultimate ability of the individual to engage in enterprises and exchanges of mutual benefit. Like libertarianism, it represents man's aspiration for freedom. And, like libertarianism, it is the only viable solution to the catastrophe of statism in the modern age.
