Econlib

The Library

Other Sites

 Front Page arrow Titles (by Subject) arrow 12: Blows Directed Against Commerce: The Policing of Grain Import and Export - Commerce and Government Considered in their Mutual Relationship

Return to Title Page for Commerce and Government Considered in their Mutual Relationship

Search this Title:

12: Blows Directed Against Commerce: The Policing of Grain Import and Export - 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.


12

Blows Directed Against Commerce: The Policing of Grain Import and Export

What one understands by grain policing is the regulations that the government makes when it wants to direct the grain trade itself. To judge the effects of this policing, I assume that this trade had enjoyed complete and entire freedom at all times in our four monarchies; and that in consequence, as merchants have multiplied in response to need, the circulation of grain was unimpeded and put cereals everywhere at their true price.

This was the state of affairs when, in one of our four monarchies, it was asked which could be more profitable, to allow the import and export of grain, or to forbid them both; and soon the decision was taken for prohibition. It is not the case that disadvantages had been noticed in the freedom. But if, in the normal way, those who govern let matters carry on as they did before them, it also sometimes happens that they innovate for the joy of innovating. They want their ministry to be epoch-making. Then they make changes under the pretence of correcting, and disorder begins.

Our lands, they maintain, produce in normal years as much as we consume. It follows that our corn will fall to too low a price if more than we need is brought to us; and we will be short of it if we export some of the cereals we need. This problem has not yet arisen; but it is possible, and it is wise to anticipate it. Such was the cause of the prohibitions.

It is not true that this disadvantage was possible. You will be persuaded of that if you recall how free circulation necessarily puts corn at a level everywhere. People do not import more than is needed, because this excess would not sell, or would be sold at a loss; and one does not export cereals that are needed, since there would not be a profit in selling them elsewhere. These prohibitions thus rest on false assumptions: let us see what were their results.

In a first year of surplus the price of corn fell: in a second it fell further: it became dirt cheap in a third. The people cheered a government which procured it bread so cheaply. But this surplus was a calamity for the growers; and it would have been a source of wealth for them if it could have been sold abroad. So it is that the favours of Heaven turned into scourges through man’s supposed wisdom.

The people did little work. They could subsist without needing to work much. Often they did not think of asking for work and, for the most part, the cultivators did not think of giving them any. The labourers, previously hard-working, acquired a habit of idleness; and they demanded higher wages when the growers could scarcely pay meagre ones.

Cultivation fell: fewer lands were sown; and years of dearth occurred. The price of corn was excessive.

The people then asked for work. Forced by competition, every kind of worker offered to work on the cheap. They only earned low wages, and yet bread was dear.

There you have the result of the regulations which forbade export and import. It was no longer possible either for corn or for wages to find their true price; and there was only wretchedness, now among the cultivators, now among the common people.

You will say that all that was needed was to allow import. And that is what they said too in the other monarchies which perceived all the benefit they could draw from it. They offered corn and it was taken. But if the need of the moment had greater force than the regulations, it did not get them revoked. The government persisted in its maxims.

It is very well done, the government in another monarchy was saying, to forbid export because one must not expose oneself to scarcity. But one must never forbid import, which can make good the deficiency in a year of dearth. So export was forbidden and import allowed.

But as soon as export was no longer allowed, the grower sold in lesser quantity and at a lower price. As he was less rich, he was in less of a position to cultivate, and he grew less. Therefore, from year to year, the harvest was always less abundant; and export which had been banned to avoid exposure to scarcity produced an opposite effect: people went short. To add to the misery, import provided for nothing.

It must be noted that when I say that export was forbidden, it is the case that heavy duties had been placed on the exit of grain; and when I say that import had been allowed, it is that no duty had been placed on its entry.

In this state of affairs the merchants had several risks to run.

If a large number of competitors simultaneously brought a large quantity of grain, they caused the price to fall; and it could happen that most of them did not find an adequate profit in the sale. They made a loss, if they sold at the low price to which the grain had fallen; and if they wanted to take it back, they made another loss as they had to pay exit duties. Often they were even forced by the people or the government to give up their corn at a fixed price. So you can imagine that, since the country, which was open to them on entry, was closed to them on exit, they were not going to bring corn at the risk of being forced to sell it at a loss; and that, consequently, permission to import provided for nothing. We may conclude that, however free import may appear, it is ineffective whenever export is not allowed.

It is not export that one should forbid, they said in another monarchy. The more one exports, the higher the price of our corn: the higher its price, the more profit there will be for the grower, and the more profit there is for the grower: the more he will grow; and the more he grows, the more flourishing agriculture will be. So one must encourage export: one must even allow a bounty to the exporters. But one must not allow import, as it would make our corn fall to a miserable price.

One cannot deny that, in this monarchy, people reasoned better than in the other two. Export produced abundance, as had been expected.

But the bounty was too much: because export carries the bounty with it, since one exports whenever one finds more advantage in selling abroad than at home. Besides, this bounty had the disadvantage of preventing corn from reaching its true price; because the native merchants, who had received the bounty, could sell at a lower price than the foreign merchants.

There were still more disadvantages in forbidding import. This prohibition was not complete: it consisted in entry dues that were stiffer or weaker.

They were stiffer when corn was at a low price; because it was judged that import, if allowed, would have made it fall all the more. That was an error because merchants do not carry their corn into markets where they sell it less favourably.

These duties were weaker when corn was at too high a price in the monarchy. It was then that there was a need to have prices lowered; and since import would produce this result, people were right in judging that it should be approved.

There were several years during which this monarchy enjoyed the plenty it owed to export, when, a bad harvest having brought dearth, the entry duties were reduced: they were even cut back completely.

But the foreign merchants, who, for a long time, had not been at all accustomed to congregate in this monarchy’s markets, could not immediately take every necessary measure to bring it enough corn. Most of them lacked carters, agents or representatives for this purpose. So too few of them came and the dearth continued.

Then the government forbade export. A useless precaution. Could it imagine that native merchants would take abroad cereals they could sell more profitably in their own country?

As it had forbidden import, this monarchy deprived itself of any expedient in a dearth, and placed itself at the mercy of monopolists.

Now when monopolists have a stranglehold on trade, the price of corn can no longer be permanent. It rises and falls suddenly in turn, and as though by shocks; it is costly or cheap depending on the rumours that it is or is not arriving.

During these variations the government does not know what course to take. From one day to the next it increases the entry duties on corn: from one day to the next it reduces them.

Therefore foreign merchants themselves have no idea on what they may count. If, when the import duties were slight, they got ready to make consignments in the hope of the profit that the high price seemed to promise them, often, when their corn arrived, the import duties had risen, because cereals had fallen in price; and they found that they had incurred large costs to bring their corn and to take it away at a downright loss. You can imagine that they tired of trading with this monarchy and that consequently when it was in dearth they left it there.

So there were only abuses in these three monarchies. In the fourth it was reckoned that one should have no permanent prohibition or interdiction, either of export or of import; but that one should, turn by turn, allow and forbid export and import, following the circumstances. This course seemed the wisest, and yet it was the least wise. It had all the drawbacks we have mentioned and even greater ones still.

It had, I say, all the drawbacks when it forbade export or import: and it had even greater ones, because it injected an uncertainty into trade which constantly held up the circulation of grain.

Since, in this monarchy, the policing varied following the ever-varying circumstances, prohibitions and permissions could only be transitory. Export was permitted with the proviso: until it is otherwise ordained, when the corn fell in price; and when it rose import was allowed, always with the proviso: until it is otherwise ordained. This proviso was necessary, because circumstances could change from one day to the next; and they were bound to change, without the government being able to predict the variations, since it rested with the monopolists to make the price of cereals fall when they wanted to import, and to make them rise when they wanted to export.

But when import was allowed for an uncertain time, people in the heart of the monarchy did not know if one could export before the permission was revoked; as a result there were risks in taking steps to export; and those who did not want to incur them, only saw in the permission the equivalent of a prohibition. So the internal provinces did not benefit from these outlets, which seemed to be closed to them almost as soon as they had been opened.

Merchants on the frontiers who foresaw a new prohibition rushed to send their corn abroad. They set up their storehouses outside the country to remove them from the police. Then the corn rapidly rose in price, because export was happening in rapid succession and in a large amount.

Permission to export, favourable to the merchants alone, came too late for the ploughman. As he was obliged to pay his lease, his taxation, wages of the day-labourers, he had sold the corn when it was at a low price; or if he had not sold it, permission still came too late, since the season that was right for the work of tillage had already passed. In the one case he had lost on the sale of his grain, in the other he could not use his profit to ensure for himself an abundant crop for the next year.

Finally, these short-lived permissions were all the more harmful as the cultivator, fearing a prohibition, hurried to sell; and consequently sold badly, or at too low a price.

However, all the surplus corn had been exported, when a harvest was reaped that was inadequate for consumption. Then the government banned export and allowed import, still with the clause which left its duration uncertain. Immediately the native merchants, who congratulated themselves on having sent their corn abroad, hurried to bring it back at various times, but each time in a small quantity; and people bought back from them at a very high price what had been sold to them cheaply.

The dearness lasted. They sustained it because they were the only sellers. The foreigner did not come at all, either because, lacking the time to take measures for sending consignments, he feared he would only arrive when import had been forbidden, or because he feared being forced by some blow from authority to leave his corn at a low price.

There you have the results of temporary permissions. There are no rules, either for giving them or for revoking them. All the duties on the entry or exit of cereals are necessarily arbitrary, and one could not say why one placed them at one rate rather than another. So export and import are only carried out at risk every time they occur following uncertain and changeable regulations. Then trust is lost, and trade, given up to monopolists, is continually stopped in its tracks. Let us move on to the regulations which it has been thought necessary to make on the internal circulation of grain.