The End For Laissez-Faire?

Nouriel Roubini, a business professor at NYU, in his column this week for Forbes, pronounced the death of Laissez-Faire capitalism as a result of the current economic turmoil.

I must object. We haven’t been in a Laissez-Faire system for many decades, at the least. The U.S. government has done all they can to impede market forces in energy, healthcare, education, transportation, housing, and manufacturing. No thinking person can pronounce the current economic situation as a failure of Laissez-Faire Capitalism. It’s a failure of “Central Planning Lite.”

Laissez-Faire is not a part of our everyday vocabulary, so before I continue, let’s look at the definition of the term. Merriam-Webster defines it this way:

1 : a doctrine opposing governmental interference in economic affairs beyond the minimum necessary for the maintenance of peace and property rights

2 : a philosophy or practice characterized by a usually deliberate abstention from direction or interference especially with individual freedom of choice and action

When government mandates more lax lending rules for home mortgage underwriting in order to increase ownership of homes among the poor, as happened beginning in the 90s, or guarantees mortgage repayment to lenders, that is not Laissez-Faire. When government establishes fixed price schedules for all manner of medical care, as has been done with Medicare for decades, that is not Laissez-Faire.

You can essentially say that if we have a cabinet level Secretary of X in the executive branch, then X has not been controlled by market forces. Unfortunately, the current U.S. administration is not seeking to reduce the level of regulation and centralized economic decision making. Rather, it is running headlong toward ever greater government control of healthcare, the financial market, housing, energy, manufacturing – it’s a never-ending list.

I don’t know what you want to call the principles which have guided government in recent decades, but defending it as Laissez-Faire will be a tough sell.