For more than a century, the free market has been the engine
of the economic prosperity we are enjoying in the developed
countries.  In turn, the free market is the child of laissez
faire.

Laissez faire

Laissez faire is a French expression which means let them do
it.  Put another way, it means give them the freedom to do as
they wish without interfering.

Laissez faire is both a political and economic doctrine
which advocates a minimum of government meddling in industry and
trade.  It was born in the 18th century in France, and its
principles were enunciated by the French physiocrats (pioneer
economists).  Britain adopted these rules, and further expanded
them.

Adam Smith, father of classical economics, believed that
individual welfare was more important than national power.  When
individuals were free to pursue self-interest, competition among
them would become more effective than the British state imposing
its own regulations.  Smith did not believe in laissez faire in
an absolute sense; the state still had many important roles to
play.  Jeremy Bentham made it into a philosophy of individualism
and utilitarian ethics; and John Stuart Mill brought it to what
was probably its highest point.

By the 19th century, more and more businesses find it in
their interest to join forces in order to control prices and
production.  Thus monopolies were born, and the underpinning of
laissez faire, competition, was being thwarted.  As well, there
were abuses such as long hours and woman and child labor in the
factories.  The British government (as well as other governments)
found itself forced to put water in the (free enterprise) wine.
The original ethical principles were trampled underfoot.  And the
need to regulate this new capitalistic society was born.

The need for regulations

Imagine watching a tag of war.  Both sides are neither
winning nor losing; there is a movement in one direction, a
movement in the other direction, and on it goes with no end in
sight.  This is what takes place between the business world and
modern governments.  States are caught in an endless dilemma:
Regulate too much and you risk killing the goose that’s laying
the golden eggs.  Avoid overregulating, and greed followed by
grief will result.

I said at the beginning that nobody is winning the tug of
war.  That’s not quite true; our governments in North America
and Europe have in the last few decades given the free
enterprise world far too much freedom; regulations has become a
dirty world not to be mentioned in polite company!  This despite
bitter past lessons.  We never seem to learn.

Enter 2008.  The naked face of greed has turned our
unregulated world into a living nightmare.  The naive assumption
of “letting the managers manage” has exploded in our face.  The
sharp executives have proved to be very human; human in their
inability to properly manage their businesses; human in being
greedy and paying themselves obscene salaries and bonuses; human
in protecting their interest first and foremost.

Will our governments get wiser in 2009?  Will they realize
that the corporate leaders are not choirboys, but rather
individuals with only their own welfare in mind?  Will they
finally understand the need for regulations?

Regulating by itself isn’t enough.  Monitoring what goes on
in the business world is just as important.  And this is the role
of the auditors.  A different breed of auditors.

Source

The Illustrated Columbia Encyclopedia
Columbia University Press
New York
1969

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