Libertarianism and Laissez Faire Economy

Libertarianism means freedom. A set of principles which insist on liberty as a core of living. Libertarians seek to maximize political freedom and autonomy, emphasizing freedom of choice, voluntary association, and individual judgment. Hence, a more or less laissez faire approach is adopted in political, social and economic life of a country.

This approach guarantees absolutely the freedom of press as clearly elucidated by the thoughts of Thomas Jefferson:

“The basis of our government being the opinion of the people, the very first object should be to keep that right; and were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate a moment to prefer the latter.” –Thomas Jefferson, the third president of United States (1787). media is supposed to be privately owned.

This asserts faith in freedom of thought and individualism. There is no control of authority and everybody has the right to voice their opinion. There is also no censorship and government must not hold any power to control and suppress media. There is a flow of all kinds of information. All of the people are subjected to interpret and decide which information they need and the authenticity of the information. In such a system, the government is itself constrained to make information and reports freely available to citizens. It was a big win in terms of legislation when the legislature passed the Freedom of Information Act. Unfortunately, the current government has not shown much commitment to upholding the letter and the spirit of the Act. This also has implications.

That said, economic principles too will seek to elevate liberty to the core. The only impediment to business and business models would be imagination as there are very few legislative constraints, individuals and corporate organizations are free to engage in all sorts of economic activities, imports and exports, as here, there would be limited restraint to free trade, other than needful tariffs and duties, minimum internal controls by government and generally leading to an increase in the ease of doing business within the country guided by market determinants. And therefore, this will to reduce government regulations to very basic levels such as base standards definition, and arbitration for equity sake and a level playing field among competitors.

The ultimate implication is that the government must necessarily approximate a laissez faire approach to economic activities. As it stands today, governments are moving more and more from the laissez faire approach to more and more control of macroeconomic elements in the very influential Keynesian model. The key advantage of the laissez faire approach allows private businesses to have the much bigger role in the provision of services and goods, build utilities like power stations, water plants, gas plants, and even provide railway services and other transport services. This itself should allow governments maintain a very agile bureaucracy and smaller workforce, lesser costs, lower fiscal burdens and a far more sustainable fiscal regime. What the Keynesian model has done over the decades is that it has increased tremendously, the public debt in view of suggested heavy expenditure interventions to aid a crawling out of recession, to accelerate growth rates, or increase domestic consumption. However, the new trend is that governments are struggling to return to balanced budgets from the long culture of budget deficits in order to steadily over time, reduce the public debt.

But have we ever had a truly laissez faire approach to economic structure in the world before? The answer is a resounding yes! The American economy that accelerated into becoming the biggest economy on earth since the 1870s was laissez faire economy.
The US economy accelerated into an industrial economy from a largely agrarian economy in the 1800s, especially the second half of the century. This was on the back of the steam engine, railways, mills and new factories, and migration that was largely unfettered brought innovation to bear upon economic activities as they were not regulated. Thomas Jefferson had argued at the turn of the century that the country did not even need to regulate the economy nor have as much as a central bank and so it stood until 1913. So, banks were also left to untamed competition. The US economy profited greatly from rapid cycles of creative destruction, and thus expanded rapidly but had a little too frequent cycle of boom and bust to be honest. That necessitated the establishment of the Federal Treasury to afford the economy some stability.

So for a country seeking to grow rapidly, it must let the energies and imagination of its people become unfettered in libertarian economic principles, break down heavy bureaucracies, decentralize approvals if necessary, make approvals a matter of course and only needed for just documentation purposes. Set very base standards, but just only for protection of consumers, so that variety is well encouraged. Free flow of information ought to be encouraged and government too should let its own information, reports and statistics be available in public space to aid planning in business. And most importantly, reduce impediment to access to credit and increase transparency in credit processes. This is the right policy direction for all countries that may wish to grow the economy rapidly – the freedom way!

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