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What Is Laissez-Faire Capitalism?

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  • Written By: K.C. Bruning
  • Edited By: John Allen
  • Last Modified Date: 09 November 2016
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Laissez-faire capitalism is a system in which the government has very little involvement with business. In essence, the state is kept separate from the economy. The term laissez-faire is French, and means to “let do” or “leave alone”. Some say that laissez-faire capitalism is a redundant term, as both parts of the phrase mean essentially the same thing.

A pure system of Laissez-faire capitalism would have no restrictions on business. This includes things such as enforced monopolies, taxes, tariffs, or regulations that restrict business operations. While there is no government that is free of all of these elements, there are some that come close.

Citizens in a system of laissez-faire capitalism are free to earn income by any legal means they wish. The prices and levels of production are determined by supply and demand. This is partially driven by competition between various companies. These tend to be the characteristics of highly capitalist nations such as the United States and Great Britain.

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The concept of laissez-faire is believed to have originated in France in 1650, as the result of a meeting between a minister of finance and an assembly of businessmen. In 1751, the term made what is thought to be its first appearance in print. It was in a magazine article that related the story of the term’s origin. The original incarnation of laissez-faire capitalism had so few restrictions, that governments eventually intervened and began instituting taxes, tariffs, and other similar elements in order to ensure economic stability.

Supporters of laissez-faire capitalism tend to be ambitious. They often want the unlimited possibilities of a system in which the government will not interfere. People who like this system are also often determined to hold on to as much of their wealth as they can.

There are several possible reasons detractors of laissez-faire capitalism would want more government intervention in business. Some feel that distributing more wealth to the less privileged elevates the whole society. Others believe that having more regulations on business can help to keep companies in check and thus stabilize the economy.

Socialist governments are the opposite of laissez-faire capitalism. In a socialist system, wealth is more evenly distributed at the behest of the government. In extreme situations, citizens may be forced to conduct business as the leader of the government sees fit. This can include being required to give property, goods, or high taxes to the government.

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