Theory that the state should not intervene in economic affairs, except to break up a monopoly. The phrase originated with the Physiocrats, 18th-century French economists whose maxim was laissez faire et laissez passer (literally, “let go and let pass”—that is, leave the individual alone and let commodities circulate freely). The degree to which intervention should take place is still one of the chief problems of economics. The Scottish economist Adam Smith justified the theory in The Wealth of Nations.
Before the 17th century, control by guilds, local authorities, or the state, of wages, prices, employment, and the training of workers, was taken for granted. As capitalist enterprises developed in the 16th and 17th centuries, entrepreneurs shook off the control of the guilds and local authorities. By the 18th century this process was complete. The reaction against laissez faire began in the mid-19th century and found expression in the factory acts and elsewhere. This reaction was inspired partly by humanitarian protests against the social conditions created by the Industrial Revolution and partly by the wish to counter popular unrest of the 1830s and 1840s by removing some of its causes.
In general the 20th century has seen an increasing degree of state intervention to promote social goals. Environment, safety, and antidiscrimination regulations have been imposed on businesses in some countries, in addition to campaigns to foster corporate responsibility.
A far-reaching program of deregulation was instituted from 1980 by President Reagan as part of an effort to return to a more laissez-faire system.
(French) “let be” or “let act”; policy of non-intervention by government in industry or industrial conditions.