Are free trade and small government the answer?

Liberal economists argue consistently for free trade, libertarians argue constantly for smaller government. We can easily see the faults of over-regulation and the centralisation of power.

But what would happen to the poorest if we really did move towards laissez-faire capitalism? I don't mean the poor in India and China, who are currently benefiting from open markets; I mean the poorest in the USA and UK. Would things really sort themselves out to the good of all?

Or would we find that we'd leapt from the frying pan into the fire?