10/01/2013 02:30 pm ET Updated Jan 23, 2014

Why Confucius Rejected 'Laissez-faire'

The expression laissez-faire comes from a French phrase meaning "Let [it] be". Legend has it that Jean-Baptiste Colbert, the French finance minister best known for pioneering mercantilism, met a group of business owners in 1680. When Colbert asked how the government could help their businesses, the leader of the group quipped, "Let us be." We do not know whether that moment marked the birth of laissez-faire, but the episode captures the essence of its non-interventionist philosophy. In modern times the term mainly refers to freedom from state interference in the economic realm.

So it is perhaps surprising to learn that the laissez-faire philosophy of governing (although not the term itself) existed 2,500 years ago. The philosopher who expounded the idea was Lao Tzu, the ancient sage of Taoism. See, for instance, the following verse from Tao Te Ching:

The best government is when people only know that rulers exist.The next best is when people love and praise their rulers.The next is when people fear their rulers.The next is when people feel humiliated by their rulers.

The best government, according to Lao-tzu, is all but invisible to its citizens. People know it exists, but state interference is so minimal that they lead their daily lives without ever worrying about it. The next best is a paternalistic government, which people love and praise for its compassionate efforts-exactly the kind of benevolent government with which Confucianism is closely associated. Next in line is a legalistic government, in which an intimidating authority imposes order by threatening people with legal enforcement. Lastly, the worst form of government is an arbitrary dictatorship, where so-called leaders insult the dignity of their citizens by taking their lives and property at will.

Why did Lao Tzu prefer laissez-faire to paternalism? For much the same reason that neoclassical economists advocate free-market capitalism: good intention distorts. Whenever a government tries to do something good, it necessarily ends up favouring one particular section of the society over all the others. But a government must not play favourites. Better to have a government which acts as a fair referee to everyone- exactly the position of market fundamentalists today. So why did Confucians defy the sagely wisdom and embrace a more activist approach? We find a clue in this passageby Han Yu (AD 768-824):

Nowadays intellectuals, wallowing in Taoism and Buddhism, will say, "Why not learn the ancient wisdom of leaving things alone?" This is like saying to those who desperately seek fur in wintertime, "Why not put on linen?", or telling those who suffer from hunger, "Why not drink a glass of water?"

What drove Han Yu was his concern for people's livelihood. Like other pre-modern societies, China had to endure occasional bouts of widespread famine, which could be caused by any number of reasons: wars, droughts, epidemics, locusts, or the plain idiocy of the bureaucrats. Confronted with an impending calamity, how could one just sit still and let things be? Winter in northern China was brutal, especially for those who could not afford firewood and warm clothing. A poignant poem from the Song era describes a woman so desperate for firewood that she sells her body: "Didn't you see her, last winter, when travellers were stopped by rain and snow... At twilight she knocked on the gate, but no one wanted her trade." In the face of such obvious human tragedy, laissez-faire would be nothing other than irresponsibility. That is why Han Yu advocated a more paternalistic approach to governance based on compassion, aesthetic sensibility, and humaneness (ren), calling for a society where "the widows, the elderly, the orphans, the disabled, and the sick are taken care of."

In his last passage, Han Yu is making a reference to Mencius's famous saying that widows, orphans, and the elderly without children are "the most destitute of people who have no one to lean on," and a benevolent ruler must take care of them. Mencius further asserted that "an intelligent ruler would manage the livelihood of people" so that "grey-haired men will not be seen on the streets carrying heavy burdens on their backs." Concern for social welfare was the hallmark of a Confucian gentleman. In fact, the very notion of Confucian sagehood rested upon it, as the following exchange in the Analects shows:

Zigong asked, "Suppose someone improved the wellbeing of people, and rescued those in need, what would you say of him? Would you say such a person possesses ren?" Confucius replied, "Why only speak of ren? That person must be a saint. Even Yao and Shun [the "sage kings" of ancient China] have struggled with this."

This is an unexpected reply, because we normally associate sainthood with holy men who embody religious virtues. Here Confucius is saying that the true saint is not some ascetic who meditates for years on a mountaintop, but a worldly leader who benefits the society at large. The former only seeks salvation for himself, while the latter seeks salvation for all. After all, what would be the point of compassion, aesthetic sensibility and humaneness (ren) if such qualities did not lead one to care about the hungry and the homeless around him? Therein lay the case for a paternalistic government. It was all about possessing a warm heart.