Laissez Faire concept

7/29/2019 Laissez Faire concept

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LAISSEZ-FAIRE

Major component of middle-class politicalthought during the 19th century

It was the idea that government should stayout of business affairs, that it should allowthe marketplace free play to determine thedirection and intensity of economic

development

It was developed first in England and thenspread, along with industrial capitalism, to

the rest of Europe and the United States


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QUESTIONS FOR TODAY

How did the idea of laissez-faire develop inEngland?

Why did it take such a strong hold there?

Was it ever really practiced there?

If laissez-faire was never really implementedin the country where the idea was invented,

then it must be relegated to the status of anutopian dream that looks good in theory butis impossible to apply successfully in reality


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UNIQUENESS

Because Englandwas a pioneer inindustrialization, itstake off phasepossessed severaluniquecharacteristics thatlater industrializing

countries did not,and perhaps couldnot, possess


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CAPITAL ACCUMULATION

In order to catch up withalready industrializedEngland, other countrieshad to rapidly accumulateand mobilize large

amounts of capital The best way to

facilitate this processwas to have the stateplay an active role

This meant laissez-fairehad no foundation in theeconomic reality ofthese countries

England had not been underany pressure to catch upduring its industrial revolution State was therefore not

required to play a directand active role in economicdevelopment

Capital accumulation was agradual process

Undertaken initially bywealthy landlords andmerchants

Capital requirements wererelatively small

British industrializationdepended on individualenterprise, not active state

intervention


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POSSESSIVE INDIVIDUALISM

Thomas Hobbes, John Locke andJames Harrington had developedtheory of possessiveindividualism

Strongly defended the sanctityof private property andindividual liberty

Argued that it was best for

society to allow men thefreedom to dispose of theirprivate property as they say fit

Idea was already formulatedbefore the Industrial Revolution


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SUMMARY THUS FAR

Two phenomena combined to

make British unique in theircommitment to laissez-faire

Metaphysical

Structural

Laissez-faire therefore did havea certain degree of reality in19th century England

Forged from a combinationof the objective conditionssurrounding the worlds first

industrial revolution andfrom the subjective influenceof the old liberal tradition,many people viewed anyform of state control of its

citizens as a constraint oneconomic progress


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THE CORN LAWS

Corn Laws passed in1815 to protectagricultural intereststhat were hurt by the

drop in prices foragricultural productsthat followed the end ofthe Napoleonic Wars

Set up price

supports and highimport tariffs to keepprices foragricultural productsartificially high


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ANTI-CORN LAW LEAGUE Middle class reformers criticized

Corn Laws as an impediment to

the free activity of themarketplace

Anti-Corn Law League formed in1840s

Argued that Corn Laws had

caused depression becausehigh tariff on imported grainhad made agriculturalcountries less able and willingto buy British manufactured

products Classic laissez-faire argument

State interference in theeconomy had disrupted thefree flow of commerce and

caused unnecessaryhardship

Anti-Corn Law League Meeting


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THE OTHER SIDE OF LAISSEZ-

FAIRE Laissez-faire had another dimension which

seemed to contradict the unrestricted play offree trade, individualism, and privateproperty

The indirect role played by the Britishgovernment in the economy

For laissez-faire did not simply mean staying

out of economic affairs It also meant that the government had a

responsibility to create the properenvironment for free economic exchange


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INDIRECT INTERVENTION IN

THE 18TH CENTURY Establishing Englands

commercial power throughoutthe world

Through war against rivals,conquest, and navalprotection

Creation of stable institutionalframework through whichindividual entrepreneurs couldprosper

Uniform body of laws,

guarantees of individualrights, destruction of barriersto social mobility

Government orders forindustrial products prepared

England for economic growth inthe 19th century

French and Indian War

SOC O C


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SOCIAL POLICY Need to create the correct environment

for economic activity collided with thenegative effects generated by that

activity Industrialization had broken down old

forms of social control and new formshad yet to mature

Hence turbulent nature of early 19thcentury

Some forms of preindustrial behaviorpersisted

Popular sports, regional dialects,ignorance, various superstitions

Seen as dangerous because theyleft workers open to radical

agitation and reducedproductivity

Could not adopt a hands off policy tothese social problems

Threat to civilized society andeconomic growth was too real

State had to intervene


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ENVIRONMENTAL REFORM

Saw social, political, andcultural environment of theworking class as the source ofmost social problems

Primary goal of stateintervention was theimprovement of thisenvironment

Included municipal

improvements, modelworking class housing,sanitation reforms, ect.

Examples were Factory

Acts of 1831 and TenHour Act of 1833

Model Housing


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MORAL REFORM

Considered values and

behavior of workers to

be the big problem

If worker morals

could be uplifted,

then their

productivity would

increase and threat

of disruption woulddiminish

Sunday school

Movement


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BEGINNING OF THE WELFARE

STATE?

On the surface, environmental and moral reform

seemed to contradict the principle of laissez-faire

The main purpose of this sort of state interferencewas to create and protect a climate favorable to

free enterprise

They were not welfare policies based on theprinciple that the state had a duty to guarantee a

certain level of existence for all its citizens

Intended to make the world safe for laissez-faire


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LIMITS OF LAISSEZ-FAIRE

Reality of laissez-faire was powerful in early 19th century

England Influenced the structure of industry

Conditioned men to mistrust state intervention in theirindividual and business affairs

It determined the type, extent, and purpose of state

intervention But the fact that the principle of non-intervention had to be

suspended on occasion to protect free enterpriseillustrates the limit of the reality of laissez-faire

Workers were not always willing to let themselves be

bounced around by the free play of the marketplace In response, they organized, embraced socialist

ideologies, and sometimes resorted to violence

This forced state to intervene to protectindividualism and private property


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IRELAND

Was a conquered country in the18th century

Mass of population wereRoman Catholic peasantswho rented land from aminority of ProtestantEnglish landlords

Many of whom wereabsentee owners wholived in England

They lacked improvingzeal of English landlordsand squeezed their Irishtenants as hard aspossible for their income


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HORRIBLE CONDITIONS

Condition of Irish peasants washorrible

Lived in wretched huts madeof mud

Did not even have shoes Many reports describe

hopeless poverty

But Irish population skyrocketedfrom 3 million in 1725 to 4 millionin 1780 to 8 million in 1840

Despite the fact that nearly 2million had left between 1780

to 1840

REASON 1 THE POTATO


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REASON 1: THE POTATO Principle food of Irish peasants by

late 18th century

Rise of the potato was causedby population growth whichforced peasants to find ways towring as many calories aspossible from a given piece ofland

Potatoes allowed for larger familiesthan previously

Single acre planted in potatoescould feed a family of six for ayear

It would take 4 acres of grainand pasture to do the samething

Potatoes could also be grown inareas where grain could not

Boggy wastelands


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REASON 2: EARLY MARRIAGE

Since they only needed

an acre or two to

support a family, Irish

youths married early

Had more children

than they would have

had if they had

married later

Condemned to a lifeof extreme poverty

Lived on potatoes

for their entire life

SO O O


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REASON 3: EXPLOITATION

Landlords, not peasants,

owned land Peasants could only lease

land for short periods

No guarantee leasewould be renewed and

therefore no incentivefor peasants to makeimprovements

Poverty was thereforeinescapable in Ireland and at

least having a family made ita little more bearable

Children, although aliability when they wereyoung, were a personsonly chance of survival intheir golden years


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THE GREAT FAMINE

Potato crop was susceptibleto disease

Potatoes could not bestored for more than ayear so there was nothingto fall back on when acrop failed

Problems with crop beganin the 1820s

Great Famine

1845, 1846, 1848, and1851crop totally fails

Widespread starvation,mass epidemics, andcannibalism

DEVASTATION


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DEVASTATION Losses were staggering

Population should have grown

from 8 to 9 million between 1845and 1851

It instead dropped from 8 to 6 million during this period

Net loss of 2 million

1 million left for U.S. 1 million died

British efforts at famine reliefwere too little and too late

Government continued tocollect taxes and landlordscontinued to demand their fullrents

Peasants who could notpay were evicted withoutmercy

A NEW EQUILIBRIUM


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A NEW EQUILIBRIUM Ireland was only country in

Europe to experience

population decline duringthe 19th century

Only had 4 millionpeople in 1911

Became source ofcontinual out-migration

Nobody moved therebut lots of people left

Became country of late

marriage and celibacy As landlords

discouraged potatofarming andconverted much ofthe land to pasture

SUMMARY


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SUMMARY

Ireland is excellent example of what happened

when a country experiences rapid populationgrowth without industrialization

Result is terrible poverty, starvation, epidemics

Total demographic catastrophe Probably would have happened in England too

if its population explosion had not been

accompanied by industrialization

The alternative to industrialization was

catastrophe

Laissez Faire concept

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