Laissez-faire Capitalism & the US Economy

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  • 0:00 What Does Laissez-Faire Mean?
  • 1:01 Rooted in American History
  • 1:50 Early Limits on…
  • 2:51 The American Economy Today
  • 3:42 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

You might think that the United States has an 'anything goes' economy, and in some respects, this laissez-faire approach is true. However, in other regards, the American economy has an attitude of anything but 'anything goes'.

What Does Laissez-Faire Mean?

Have you ever purchased something? Of course you have! You wait in line; you're tempted by the gum display. Finally you get to the checkout, pay your money, and receive your goods. In short, you had a very quick transaction directly with the store.

However, did you know that there are times when the government can act as a middleman between you and the store? That would have resulted in a longer wait time. If you had to wait much longer, you may just decide to leave the store without any goods. Imagine having to wait on government approval to buy your groceries.

In some systems that is the case; however, in the American laissez-faire system it is not. Laissez-faire is a French term that describes an economic attitude in which people and businesses are allowed to act in whatever way they see most beneficial. It literally means, 'let them go'. The system that it describes goes back to the earliest days of the American Republic, and is still hotly debated today.

Rooted in American History

Not a lot of poor people signed the Declaration of Independence, and if that isn't apparent from an image of the room it was signed in, it is certainly apparent from the language of the document. After all, it complains about unjust taxes and unfair hoops that American businesses had to jump through to take part in commerce.

One of the biggest obstacles that the Founders wanted to avoid was tariffs. A tariff is a fee levied by the government for every good imported into a country. In short, many of the Founding Fathers, some of whom were merchants, thought a tariff was an obstruction to free trade. Clearly, to some degree, the Founding Fathers would have favored a laissez-faire system. But, to what extent?

Scholars make careers from trying to answer that question, but it is clear that there were some standard levels of control that the founders did appreciate.

Early Limits on Laissez-Faire Economics

We can definitely tell that they did support some limits. After all financial freedom, along with political freedom, was the economic goal, and one way to do that was to establish a fair playing ground.

To this end, early government agencies included the Patent Office, to protect people's inventions, as well as the Office of Standard Weights and Measures to make sure people weren't getting ripped off by bad scales on goods. Note, however, that these served as a stamp of quality on the goods in question.

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