Download intellectual devotional reading on laissez-faire

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Freshman Global Studies Special Topic Reading: Laissez-Faire. Please use this reading on the economic
concept of laissez-faire to answer the questions on the structured reading comprehension worksheet that
accompanies it.
Laissez-faire, an economic doctrine that calls for minimal government interference with the marketplace, was
dominant in the United States during the nineteenth century and remains a strong intellectual tradition in
American political thought. In general, supporters of laissez-faire believe that allowing the market to function
unfettered by regulation will result in economic prosperity for all. However, critics of laissez-faire have argued
successfully since the Gilded Age that some government regulation is needed to prevent corporate abuses.
French for leave alone, laissez-faire had its roots in the backlash against mercantilism that started in the late
eighteenth century. Beginning in 1776, Adam Smith (1723-1790) and a growing number of his fellow
economists rejected mercantilism and began to argue against government interference with trade. If the
government stepped aside and left private industry to its own devices, they believed, the laws of supply and
demand would ultimately create a more efficient economy for everyone.
Across Europe and the United States, the mid-nineteenth century represented the zenith of laissez-faire. Labor
laws were generally nonexistent, and corporate tycoons wielded unchecked power over their employees.
Railroads could set prices as high as they wanted. Several large companies, such as John D. Rockefeller’s
Standard Oil, began to develop monopolies that squeezed out their competition. In historical usage, the term
laissez-faire is sometimes used to refer specifically to the lax economic policies of this period in American
history.
The reaction against the excesses of laissez-faire began to gain force in the 1880s. One of the first regulatory
bills, the Interstate Commerce Act, was passed in 1887 to limit the clout of railroad corporations. In the
beginning of the twentieth century, President Theodore Roosevelt (1858-1919) campaigned strongly against
corporate power. Finally, the Great Depression of the 1930s was a major catalyst for the passage of stringent
new government regulations on industry, banks, and utilities.
More recently, supporters of laissez-faire have made a minor comeback. Since the 1970s, Congress has wholly
or partially deregulated several major industries, including airlines, banks, and railroads. In general, however,
the modern regulatory state would be unrecognizable to the robber barons whose abuses led to its creation.
Additional Facts
1. The term laissez-faire was coined by a group of eighteenth-century French economists known as the
physiocrats.
2. To the widespread confusion of both Europeans and Americans, the word liberal has very different
definitions on the two continents. In Europe, a liberal generally supports free market economics and and
minimal government regulation; in the United States, people who identify themselves as liberals
generally believe just the opposite.
3. The leading journal for laissez-faire supporters, the Economist, was founded in 1843 in Britain and is
still published today.
Adapted from: Kidder, David S., and Noah Oppenheim. The Intellectual Devotional: American History:
Revive Your Mind, Complete Your Education, and Converse Confidently about Our Nation's Past. New York:
Modern Times, 2007.