Why did a laissez faire approach by the presidents in America’s past result in short economic downturns? If we’re supposed to learn from history, why does the current administration espouse...

Why did a laissez faire approach by the presidents in America’s past result in short economic downturns? If we’re supposed to learn from history, why does the current administration espouse stimulus packages for the economy? Has Obama’s system worked?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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First, it is important to note that this question, as the lawyers say, “assumes a fact not in evidence.”  It seems to imply that laissez faire policies in the past have resulted in short economic downturns and that we should, therefore, engage in laissez faire.  This is, at the very least, a controversial statement.  Many historians and economists would argue that laissez faire economics were responsible for things like the “panics” of the late 1800s and even for the Great Depression.  The Depression, in particular, was not a short downturn.  Furthermore, we have not had a real laissez faire policy since the Depression and the economy has not suffered from prolonged recessions.  Today, we have a relatively slow recovery, but it is not at all clear that this recovery would be faster if we adopted laissez faire policies.

President Obama presumably espouses fiscal stimulus packages because he believes that history tells us such packages are necessary.  He sees them as the sort of policies that helped the US get out of the Depression and therefore he believes that they can help us with our current problems.  As for whether the stimulus packages have worked, that is not clear either.  Conservatives argue that they have not worked because the economy is not growing fast enough.  Liberals would argue that the economy would not have recovered as well as it has from the “great recession” had it not been for the packages.

So, America has not engaged in real laissez faire for a long time.  This is presumably why President Obama does not think he should engage in it now.  It is impossible to prove whether he is right in his beliefs.

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