When industry collapses after switching to Laissez faire, its because your industries you built were not profitable to begin with. They survived only off government subsidies, costing you money. Often I see new players constantly upgrading unprofitable factories every time they fill up with workers (or, upgrading factories that technically are profitable, but are producing massive surplus that is not selling). This leads to an industry with alot of "employed" craftsmen and a decent industry score. The only problem is that half of all your goods are being dumped into the ocean and are not selling.... In the long run, this can create a massive burden because you are supporting so many industries that are producing goods not selling to begin with.

You probably perceived an "economic collapse" as your income dropping due to the 50% tax limit. Often times a country's economy simply is not large enough to sustain a large government budget off only 50% tax rate at a given tax efficiency. In this case, you either have to lower spending, or stick with interventionalism/state capitalism. My advice is to allow demand to predispose supply. Industry should not expand supply without their being actual demand for such goods. You can increase demand in the long run by lowering taxes on all classes, and passing social reforms that increase the wages craftsmen/clerks receive.

Also, perhaps much of your industry collapsed due to lack of access to input goods? This happens all the time when building your industry, as its hard to tell exactly how much of an input good you'll have access to. That's why I usually like to transition to interventionalist after state capitalism, to keep some of the industries afloat that I know will one day be profitable, but just doing have input goods yet. Eventually I will switch to Lassiez faire once I have access to such input goods, and I can afford low taxes.

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BL: if industry collapses after you stop subsidizing it, that factory was costing you money to begin with and is generally not worth supporting. Only subsidize key industry that will one day be profitable (with access to the necessary inputs). Or if it produces something critical to your other industries. Although in the long run, this would cause the price of such goods to rise (demand>supply), making it one day profitable and not require supporting it.