Laissez-Faire vs Government Intervention

The theoretical basis of government policy toward American business has been provided for more than 200 years by "laissez-faire." Laissez-faire, or "leave-it-alone," in a translation from the French, is a concept allowing private interests to have a virtual free rein in operating business. The 18th-century Scottish economist Adam Smith strongly influenced the development of ideas about laissez-faire and, indirectly, the growth of capitalism in America. He argued that the actions of private individuals, motivated by self-interest, worked together for the greater good of society if markets were competitive. Although Smith did favor some forms of government intervention -- mainly to establish the ground rules for free enterprise -- it was his criticisms of mercantilism and his advocacy of laissez-faire that earned him popularity in America.

But dedication to laissez-faire has not prevented private interests in the United States from turning to the government for help on numerous occasions. Railroad builders accepted grants of land and public subsidies in the 19th century. Industries facing strong competition from abroad have appealed for a greater degree of protectionism in trade policy. American agriculture, almost totally in private hands, has benefited by government assistance in numerous ways. Manufacturers, labor unions, bankers and others have sought government assistance in many forms, from tax breaks to outright subsidies.

In other words, there has been a constant give-and-take between the theory of laissez-faire and concrete demands for government help for specific economic purposes. Yet many men and women in business believe that there is too much government regulation. They feel that some of the rules they must follow are unnecessary. Besides, they say, filling out forms to satisfy government rules costs money and adds to the prices they must charge. Many other Americans believe, however, that strict regulations are needed to keep businesses from cheating or harming workers or consumers in order to increase business profits. Proponents of either of these views are often labeled in terms of contemporary American politics. That is to say, a conservative is usually defined as one who generally favors private initiative and opposes government intervention; a liberal is usually defined as one who supports private enterprise but is more willing to accept government intervention, and perhaps enthusiastically support it.