Chapter 3 of the Daodejing marks the second appearance of wuwei (無為) in the text. This term has been variously translated in English as non-doing or not taking action, but its true meaning is a lot subtler than that.
Wuwei is not a passive state in which you choose to nonchalantly play your fiddle while the world goes up in flames around you. It is more akin to being so deeply immersed in the flow of things that you unconsciously take the appropriate action or non-action to resolve the situation or challenge you are facing.
When Laozi wrote the Daodejing, China was riven by constant wars between states and vicious power struggles among the small and rapacious elite that left the common people eking out a miserable living. To restore peace and stability to society, he counseled that a ruler should avoid creating reasons for conflict, greed, and unrest among the people by leading a humble and unassuming lifestyle and focusing on promoting the collective good rather than his own personal glory.
The wise leader thus sets the right example for his people to follow. Because he himself does not indulge in materialistic consumption, he creates an environment in which everyone is content, well-fed, and lives in harmony with others.