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22: Of the Circulation of Grain - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship [1776]

Edition used:

Commerce and Government Considered in their Mutual Relationship, translated by Shelagh Eltis, with an Introduction to His Life and Contribution to Economics by Shelagh Eltis and Walter Eltis (Indianapolis: Liberty Fund, 2008).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


22

Of the Circulation of Grain

When one is without the means to wait for a second crop, say one only has corn for nine months, one is threatened with running out of it if none arrives; and it becomes all the more expensive, as one has less hope of seeing any corn arrive.

This rise in price which causes the price to go above the true price becomes dearness. So one cries out at dearth, not because one is completely without corn, but because one is threatened with a lack of it, and those who cannot pay the price it stands at are already without.

This dearth, which would be real if there was indeed not enough corn, is only a dearth in people’s minds, when corn, which is not lacking in the barns, is only missing from the markets. This is what happens when there is a monopoly. The monopolists hold back from putting it on sale so as to find a greater profit in a greater increase in price. Their greed alarms the people: the belief in dearth grows, and corn reaches an excessive price.

When the dearth is real, we can only look to foreigners for help: they must bring us all we need.

If it is only in opinion, it is enough for them to show us some corn. At the mere rumour that corn is coming, the merchants, who would like to profit from the moment when it is still at a high price, will hurry to put it on sale, and, consequently, they will soon cause the price to fall.

Even in surplus, there would be a high price and the appearance of dearth if those who have corn persist in keeping it in their barns, or only putting for sale an amount which would not meet daily consumption; and, in the greatest scarcity, there would be a low price, and the appearance of surplus, if they were forced to put all their corn on sale at the same time, or merely a quantity a little more than enough for a day’s consumption.

In the first case, the people would suffer as in a real dearth; and in the second, the cultivators and merchants would be harmed.

It would be just as damaging to put on sale, all at the same time, a quantity of corn that ought to serve for several months’ subsistence, or to put on sale on each occasion only an amount that is insufficient for subsistence from one market to the next.

Therefore corn should come out of the barns gradually. It is enough that one delivers the amount that is wanted, and that the sale is made in proportion to need.

But the farmers would like it to be scarce in the markets in order to sell the corn dear, and the people would like it to be over-plentiful, to buy it cheaply. However, in both cases there would be harm to one side or the other, and even to both at the same time.

It is true that when the farmer sells dear he makes a greater profit on what he sells: but he sells a smaller quantity, because he forces the people to live off chestnuts, potatoes, roots, etc. Thus he gets them used to consuming less corn; and by reducing consumption, he reduces sales for following years and, in consequence, his receipts. What if the people revolt and ransack the barns? The farmer who wants to sell dear is thus the victim of his own greed.

The people are no less misguided when they want to buy cheaply. It is true that they find there a fleeting advantage. But we have seen that cheapness is always followed by dearness, where the people lack bread and cannot even work to earn it.

The harm which the farmer and the people do to each other turn and turn about, by too high and too low a price, rebounds on them.

So it matters that corn is put on sale in neither too great a quantity, nor too small; since it is important that it should be neither too expensive, nor too cheap.

But, because it is being consumed constantly, it is important that there should always be on sale as much of it as people need to consume, and it is then that it will be at its true price.

Corn does not grow the same everywhere. Not an ear is produced in the towns, where there is the greatest consumption. They do not even know how it is grown elsewhere; and there you have the explanation why people commonly reason so badly about the corn trade.

Be that as it may, for corn always to be on sale and in adequate quantity everywhere, it is essential that, from the places where it is in surplus, it never stops pouring into the places where it is lacking, which can only happen through a movement which is prompt and never disturbed: I say prompt and never disturbed, since every day consumers have the same need of it. This movement is what I call the circulation of grain.

The flow occurs from near at hand to near at hand, or at a distance.

At close quarters, when people bring the corn to the markets, and it moves in succession from one to another.

These markets, which are so many outlets, cannot proliferate too much. There must be some on all sides, and they must be in the most convenient places for the sellers as for the buyers. They should be where they choose, without dues and without hindrance.

The flow takes place at a distance when in a province people send convoys of grain to another, or when it is carried abroad.

To have these outlets, roads, canals, navigable rivers and a merchant navy are needed, an absence of tolls, no customs, no kind of feudal rights.

There we have the route traced for circulation; let us see how it must be made.

The need to attend to cultivation does not always permit a farmer to sell his cereals even in the closest markets. Indeed, will he leave his fields on a day that is just right for ploughing, for sowing, for harvesting, with the risk that there will not be another day as suitable? Now if he cannot always take his corn to the nearby market in person, he is even less in a position to take it to distant markets.

So it is essential that merchants are established to buy from the farmer in order to sell on to the consumer.

These merchants are men whom experience has moulded. They will only succeed in their trade in so far as they busy themselves with it exclusively, and to the extent that they have acquired a body of knowledge which is only built up over time.

They must know about the quality of the cereals in order not to be deceived in their choice; they must have learned to transport them at the best possible cost; they must know how to calculate the wastage, the costs of transport, and all the risks to be incurred; they must be able to work out the source from which corn can come to the places to which they intend to carry it, and they must predict the time of arrival. Because it is only the merchants who show up first who are assured of being able to sell profitably.

They will also need to have prepared other outlets and to know where they should carry the grain, in the event that they have speculated wrongly, so that they are not forced to sell it on at a loss.

Because one cannot see to everything oneself, and will be all the less able to as one undertakes more extensive and far-flung trade, it will be necessary to have intelligent and attentive correspondents, whose competence is known: otherwise false advice would drag one into ruinous enterprises. It is no less necessary to make sure of the accuracy and good faith of all those to whom one entrusts the protection or the sale of one’s corn. And one must have men used to transporting it, on whom one can count equally; it is through the co-operation of a host of agents always moving about that the circulation of corn takes place. People in the towns are far from conceiving of it.

It is relevant to distinguish two kinds of corn merchant. The one type are wholesale merchants who, undertaking this trade in a big way, undertake to supply distant provinces whether inside or outside the kingdom. The others are small merchants who, in retailing in a restricted area, seem to limit themselves to stocking a canton. It is by the latter in particular that trade is carried on from place to place. They are called corn chandlers [blatiers].

The merchants require large warehouses in more than one place, many servants to watch over their cereals, correspondents or associates everywhere, and carriers of some kind on all the ways. It is clear that while they can make great profits, they also run great risks. The more extensive their trade, the more speculative the investments they have to make, and the more uncertain is the success of the enterprise.

As they have made great outlays, they wish to make large profits. So they are not in a hurry to sell. They seek out the moment. But because corn is a foodstuff which one cannot keep for a long time without great expense, and in keeping it there is ever-growing wastage, and always more risks to run; if the opportunity for a huge profit is delayed too long, they are forced to be satisfied with a smaller profit. So their hand is forced, and they serve the public in spite of themselves. It will not take them much experience to learn that it is in their interest to sell every time that they find in the sale all their expenses and a profit.

The corn chandlers buy from the farmers to sell on. They hardly need a warehouse. If they have one, the protection of it is not costly; and they have little wastage to fear because they empty it almost as soon as they have filled it. One servant is enough for them. They only need a donkey or a mule to transport their grain; and they have no need of agents, as they carry on their trade in a small canton where they live.

They have less outlay than the great merchants, fewer expenses, fewer risks, and they are satisfied with a smaller profit; they are always in a hurry to take their profit, because they are not rich enough to risk waiting for a larger one. Their interest is to sell promptly, so as to buy again in order to sell again. In order to subsist they need repeated purchases and sales to make their first outlays pass continually through their hands with a profit.

The circulation of corn is thus handled by a great number of merchants and by a larger number of corn chandlers.

If we need corn, all these merchants have no less a need to sell it. We shall not lack for it therefore, if the greatest liberty gives rise to the greatest competition.

Let us assume that a rich merchant buys, or makes a down payment, on all the corn of a province, intending to put a high price on it, he will probably cause an increase in price, but a temporary one. Because corn will flow in from all the nearby provinces; and the merchant, disappointed in his attempt, will be forced by a great number of competitors to lower the price of his corn. So he will not be tempted to repeat this operation. In this monopoly there would only be risks and losses. A clever merchant will not try it.

Instead of planning to cause dearness in a region that has a plentiful supply of grain, where in consequence the price will not be able to be kept up, a merchant has a surer and easier way to carry out profitable trade in his corn: that is to send it wherever a high price is the natural consequence of dearth. Let him cast his eyes over all Europe, and always be ready to send shipments: if he is well informed of the state of the crops, or only of the view held of them in each nation, he will be able to anticipate in which places prices will rise, and to take measures to send shipments there in time.

So it is that a host of merchants watch over the needs of all the peoples, when trade is completely free. Let us therefore rely on the interest they have in not letting us lack for corn; leave them alone, and we shall not want for it. Since there is always somewhere a natural rise in price which offers them a certain profit, why should they busy themselves with ways of causing artificial price rises, which will not guarantee them the same profit? The more self-interested we consider them to be, the more we should believe that they will be enlightened about their own interests.

Driven by this self-interest, merchants, great and small, multiplied by reason of our needs, will cause the corn to circulate, will put it everywhere at a level, everywhere at the true price; and each one will be drawn by the general movement, which he will not be able either to slow down, or to precipitate.

You will say that monopoly would then be impossible. Certainly it would be, in the situation where the corn trade enjoyed full, entire and permanent freedom. Now it is with this assumption that I have just examined the circulation of corn. We shall see elsewhere how monopoly becomes only too easy.*

[* ] I often see that many objections can be raised against my arguments. They arise in great number in the complicated subject I am treating, and which I seek above all to simplify. I should like to reply to them all at once. But that is impossible. To be understood I must take myself from proposition to proposition: as, in the last resort, if no one understood me I should be wrong to write. Happily my reader cannot interrupt me, however much he wants to. He must necessarily put down my book, or wait for my response to his problems. However, I do not delude myself that I can reply to all; as people might make some very strange objections.