Laissez-faire began around 1680 when some French businessmen were asked how the government could help their businesses. Their reply: “Leave it be,” meaning, “Do nothing.” Today, 330 years later, “laissez-faire economics,” still has true believers.
The collapse of state controlled communist economies made some think laissez-faire should be absolute. China, testing state capitalism, cedes some controls, while democratic capitalism seeks a balance between no controls and enough to prevent abusive monopolies.
And now the European elections are rattling those who preach austerity, which is a form of laissez-faire. Economies in debt are expected to lay off workers, close factories, and hunker down until the problems go away. Against this are those believe that stimulating growth is the way out.
Christine Lagarde, head of the IMF must figure out how to help, and also deal with the policies and stench left by her predecessor, Dominique Strauss-Kahn, abuser of defenseless women. Can one separate this man’s character from the economic policies he left behind?
Greece, the Eurozone’s economic poster child, stands out in its national aversion to paying taxes. Government collectors too eager to do their jobs find themselves in the hinterlands. But in the wake of an IMF imposed austerity, Greece’s GDP has plunged 20%. Even if a wave of tax-paying were to sweep the citizenry, there’s not enough money moving. It has caused many outside of Greece to wonder if shutting down an economy is the way to fix it.
The U.S. has not, so far, dropped into the Greek abyss, but people are worried. Nobel laureates can have starkly opposing theories about how economies work. Mitt Romney, who hasn’t yet earned his Nobel, claims to know, and wants to return to laissez-faire, letting banks, manufacturers, and other businesses fail, cutting taxes for the rich and services for everyone else. He maintains that extra billions will encourage them to hire people. But they already have idle billions. And with middle classes strapped for basic needs, who will buy any goods they produce? And if a lower GDP is causing Greek wheels to stop turning, why would it work here? Is it time to give stimulous a chance? One thing is sure; there will soon be a lot of new Nobel Prizes for economics.