ENGLISH NIAGA

Materi Diskusi 6

Setelah mempelajari Topik Sesi pertama yang berjudul ‘Laissez-Faire’ dan juga menonton video
dengan topik yang sama, jawablah pertanyaan-pertanyaan berikut:

1. What does “Laissez-Faire” mean?

Jawab:

Laissez-Faire is French words. Laissez is conjugate from Laisser, a regular verb which mean “to
leave, to lose, something or someone”. And Faire is irregular verb which mean “to do, to make”.

According to Cambridge Dictionary Laissez-Faire means: An economic theory or plan in which a

government does not have many laws or rules to control the buying and selling of goods and
services. The idea that businesses should be free to develop without the involvement or control of
government. The idea that people should be free to choose how to do things, without too much
control from someone in authority.

According to Investopedia Laissez-faire is an economic theory from the 18th century that opposed
any government intervention in business affairs. The driving principle behind laissez-faire, a French
term that translates to "leave alone" (literally, "let you do"), is that the less the government is
involved in the economy, the better off business will be, and by extension, society. Laissez-faire
economics is a key part of free-market capitalism.

History of Laissez-faire
(French: “allow to do”) policy of minimum governmental interference in the economic affairs of
individuals and society. The origin of the term is uncertain, but folklore suggests that it is derived
from the answer Jean-Baptiste Colbert, comptroller general of finance under King Louis XIV of
France, received when he asked industrialists what the government could do to help business:
“Leave us alone.” The doctrine of laissez-faire is usually associated with the economists known as
Physiocrats, who flourished in France from about 1756 to 1778. The policy of laissez-faire received
strong support in classical economics as it developed in Great Britain under the influence of the
philosopher and economist Adam Smith. This economic theory from the 18th century that is
strongly opposed to any government intervention in business affairs. Laissez-Faire economics: the
belief that an economy functions best when there is no interference by government. It can be traced
to the 18th-century French physiocrats, who believed in government according to the natural order
and opposed mercantilism. Adam Smith and others turned it into a central tenet of classical
economics, as it allowed the invisible hand to operate efficiently. (But even they saw a need for
some limited government role in the economy.) In the 19th century, it inspired the British political
movement that secured the repeal of the Corn Laws and promoted free trade and gave birth to The
Economist in 1843. In the 20th century, Laissez-Faire was often seen as synonymous with supporting
monopoly and allowing the business cycle to boom and bust, and it came off second best against
Keynesian policies of interventionist government. However, mounting evidence of the inefficiency of
state intervention inspired the free market policies of Ronald Reagan and Margaret Thatcher in the
1980s, both of whom stressed the importance of laissez-faire.
2. How is “Laissez-Faire” still relevant today? What are the weaknesses of “Laissez-Faire”?
Jawab:

The government intervened in the running of the economy as little as possible, allowing decisions
concerning the production and allocation of goods to be determined by firms operating in a largely
unfettered market economy. To be sure, governments still had an important role to play, albeit an
extremely limited one. They established the legal framework in which companies operated and
protected private property rights. There is still in political support for laissez-faire economic policies
in some countries are relevant today, and firm opposition. The inflation of the 70s, political
conservatives in the U.S. embraced a strong anti-regulation, free-market platform. As President
Ronald Reagan famously said, "Government is not the solution to our problem, government is the
problem." In the US, that same sentiment has been echoed by the conservative Tea Party movement
and in the business-friendly policies of the modern Republican party. While in Europe, the
"neoliberal" political movement has tried to reform Europe's free markets by limiting government
regulation and public ownership.

In a more recent example of laissez-faire run amok, the U.S. financial services industry could operate
largely unregulated in the early 2000s under the belief that the stock market will self-correct if there
was a speculative bubble. Left to their own devices, banks and mortgage lenders created a credit
crisis that sunk the housing industry and triggered the Great Recession. In response, Democratic
President Barack Obama pushed for greater regulation of Wall Street, including the creation of the
Consumer Financial Protection Bureau. The Heritage Foundation runs an "Economic Freedom"
index, where it rates countries based on 12 freedoms including trade freedom, investment freedom,
business freedom, labor freedom, and monetary freedom. By their ranking, Hong Kong was the
"freest" country in 2019 (the country with the most laissez-faire economic policy), followed by
Singapore. The U.S. ranked 12th.

The disadvantage of this policy is that businesses may engage in risky behaviors that could lead to
future economic problems. In the 1920s, there were few rules and regulations on banks and on the
investment industry. Too much money was being loaned to individuals and people could buy stocks
with only a small down payment. Banks were also free to invest in the stock market. When the stock
market crashed, many people and banks were financially ruined. As a result, laissez-faire economic
ideals reject almost all forms of market regulation such as: minimum wages, safety standards,
working hours, environmental restrictions, and taxes. This theory sees workplace regulation as an
interference with the freedom of contract between a worker and a boss. If someone does not pay
staff adequately, the workers can quit.

Sometimes corporations in a laissez-faire system do not have the best interests of the public in
mind. Without regulations, corporations are free to cause environmental and public health
problems in the name of profit. Workers are more likely to be exploited and subjected to unsafe
working conditions. It becomes possible for companies to form monopolies under a laissez-faire
system. This leads to price increases for the consumer and the lack of diversification in the
marketplace. This can result in a large wealth gap in a society with a few extraordinarily rich people
in control of most of the the economy's wealth.
 Critics claim that there are a few weaknesses that it can lead to poverty and economic
imbalances:
 Inequality of income and wealth
 Failure to represent the interest of the entire society.

3. Do you think government’s supervision in economic activities should be significant?

Jawab:

Supervision is very necessary to ensure that the implementation of government activities runs in
accordance with the planning and in accordance with the provisions of the applicable regulations.
Such planning can be interpreted as a management function that determines the best strategy and
tactics to achieve the goals and targets in the organization. In addition, to realize a good governance
good and a government that is free from undesirable actions, supervision is also needed to o
support effective and efficient governance, transparency, filtering, and is clean and free from
corrupt practices, because it is noticeably clear that so many corruptors which is in Indonesia so that
Indonesia has been listed as a country with many corruptors. Supervision of the administration of
this government can be carried out through internal supervision, community supervision, and
functional supervision and then in all modern states, governmental functions have greatly expanded
with the emergence of government as an active force in guiding social and economic development.

Conclusion based on my opinion:

 It literally means " let people do as they please". This implies no outside intervention from any
source to coerce people and society to do or perform something else. This also means allowing the
markets to function freely and determine equilibrium, high or low. Free markets do not always bring
about results which are necessarily good for either individuals or society. If for example, labor
demand and supply conditions are such that under free market conditions many people are paid
extremely low wages, this is not a good outcome for society. It is the duty and responsibility of the
government intervene to correct this situation.
 Laissez faire is very much in evidence today. Financial markets operate according to this principle as
do international markets for resources such as oil. Interest rates are determined freely in the
loanable funds market. The weakness of laissez faire is that it may lead to "market failure" whereby
output and price are not set at socially efficient levels. There is either over- or under-production. In
some cases, the prices of some considerably basic needs may be extremely high such that many
people cannot afford them.
 My opinion is: Government should stay out of the affairs of private individuals and institutions as
long their behavior is in keeping with socially desirable norms. If, however, totally free markets do
not yield satisfactory results, the government must intervene to improve the situation. For example,
if unemployment is extremely high despite labor market equilibrium, the government must find
ways to increase demand for labor by increasing its expenditures. Or, at times if the lending rates
are usurious, the government can set limits. The government can subsidize the costs of production
of firms so that they can hire more workers. The government should ban the sale of dangerous
products and discourage the use of certain socially undesirable products through taxes. The
government can set limits on speed of cars, the volume of imports and set rent controls, all for the
common good.
REFERENCES:
 MY OWN OPINION BASED ON: both French & English bilingual skills
 contrepoints.org/lorigine-du-laissez-faire/
 lesechos.fr/reagan-le-double-et-explosif-laisser-faire/
 ADBI 4201/2SKS/MODUL 5 Page 5.5
 MATERIAL INISIATION 6
 Investopedia.com