In 1966 the Russian-American novelist-philosopher Ayn Rand (1905-1982) published an important book. It consisted of her and her friends' essays about what Rand considered the ideal social and political system. It was called Capitalism: The Unknown Ideal.

In the essay "Let Us Alone!" (pp. 140-141 of the 1967 paperback edition) Rand tells the charming story of a French capitalist named Legendre who is supposed to have said, when Louis XIV's finance minister Jean-Baptiste Colbert (1619-1683) asked what he could do to help French industry, "Laissez-nous faire!" ("Let us alone!") No date is given for this event, and no source. (Colbert was Louis XIV's finance minister from 1665-1683.) I have no idea whether the incident Rand relates ever really happened.

In contrast to Rand's story, Encylopedia Britannica (2000 edition) says the origin of the term laissez-faire is obscure, and that is associated with the Physiocrats. They were French economists who believed that agriculture was the source of all wealth. They flourished about 100 years after Legendre, from about 1756 to 1778.

But, according to Rand, it is from this incident with Messrs. Colbert and Legendre that the social and economic idea of laissez-faire, usually found in the phrase laissez-faire capitalism, originated.

What is laissez-faire?

Laissez-faire literally means, "allow to do." As a social policy it means: letting people alone to do what they want. That is, I adopt a policy of laissez-faire toward you if I let you do what you want to do, no matter what I think of what you're doing. Tolerance, in other words.

What is laissez-faire as an economic doctrine?

To understand laissez-faire as an economic doctrine it is necessary, first, to define capitalism. I define capitalism as the Random House Dictionary of the English Language (1966; first edition) defines it -- as an economic system "in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations." (pg. 200 of the (shorter) College Edition) (Private here includes corporate ownership. Though corporate enterprises seem to me voluntary collectives, they are usually considered to be privately owned.)

What then is laissez-faire capitalism?

In economic policy, laissez-faire capitalism amounts to capitalism in which all property is privately owned (remember what I said above about corporations) and owners are free to do with their property, including industrial property, absolutely whatever they wish.

So, under non---laissez-faire capitalism (as I understand it) there may be some regulations by a central government for environmental reasons. There may be some redistribution of wealth, and some welfare measures (though not many). There may be some government-owned companies or public utilities, and some government regulation (but not much).

If there were too much government regulation, most of us would not think such a system capitalist. It would begin to seem a social democracy or a welfare state. If it had even more controls and redistribution of wealth . . . we would at some point consider it effectively a socialist state.

What a laissez-faire capitalist state would be like

In a pure laissez-faire capitalist state, by contrast, there would be no labour laws, no minimum-wage laws, no welfare measures, no environmental laws, no state enterprises, no state monopolies, no zoning laws, few or no taxes, no tariffs (except for revenue), no health laws, and no traffic laws. Why? Because if these state features existed, then people wouldn't be free to do absolutely what they wanted with their property. We wouldn't have a state where all property was privately owned and controlled. (Remember that corporations are considered by capitalist thinkers to be privately owned.)

Laissez-faire capitalist states advocated by Rand and her followers would consist only of

  1. a police power and courts to protect citizens from enemies within the state,
  2. armed forces (and perhaps border guards) to protect them from without,
  3. a small efficient government to debate and pass laws, and
  4. nothing else.

The single policy the laissez-faire capitalist state would exist to protect is: There must be no initiation of force or fraud. Property rights must be absolutely defended. Everyone must be absolutely free to do whatsoever they wish with their own property -- including their own bodies -- provided they refrain from initiating force or fraud.


Rand based her belief in this type of social and economic order on a belief in what she called man's rights (which I call, cumbrously, natural human individual rights).

Now as I have pointed out elsewhere, about 1970 a number of Ayn Rand's followers and fellow travellers suggested that there was a contradiction in Rand's system.

In Rand's system, there would be some compulsory taxes and a government with a monopoly on the use of physical force. (Rand suggested in Capitalism: The Unknown Ideal that the tiny laissez-faire government might be financed by sales taxes or taxes on contracts.) The critics suggested that compulsory taxes and a government monopoly on physical force was inconsistent with Rand's advocacy of freedom from force and fraud. They suggested that Rand's government, in creating its monopoly on physical force, would have to initiate force. And collecting compulsory taxes would involve the government's initiating the use of force.

Surely, the critics said, one should abolish government altogether. Logically, one should abolish the state, not merely reduce its size and powers. Instead of allowing governments to monopolize physical force, private persons could contract with private companies for their self-defence. These companies would be more efficient and fair than government courts and police, simply because they were private and in competition. They were named defence agencies by the critics, who gradually began to call themselves Libertarians.

Rand replied indignantly. In an essay called "The Nature of Government" in the appendix to Capitalism: The Unknown Ideal she blasted the Libertarians. According to Rand, no one would be able to make the Libertarians' plan of defence agencies work. What if the defence agencies quarreled? How would they settle their disputes?

Well, I have gone into this elsewhere.

[To Be Continued and Revised]

Books Relating to Laissez-Faire
and Corporations

Mickelthwait et al. The Firm.

Perkins, Richard and Ernestine. Precondition for Peace and Prosperity: Rational Anarchy. St. Thomas, Ontario, Canada (privately published), 1971.

A fascinating reasonable defence of capitalist anarchism. Depends on the argument from natural rights.

Rand, Ayn. The Virtue of Selfishness. New York: New American Library, 1963.

-------. Capitalism: the Unknown Ideal. New York: New American Library, 1966.

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