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14: Blows Directed Against Commerce: The Manoeuvres of Monopolists - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship [1776]

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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.


14

Blows Directed Against Commerce: The Manoeuvres of Monopolists

We have seen monopoly born from the regulations made for the policing of grain. In my design to make known the monopolists’ manoeuvres I should need them to give me some notes themselves. I shall limit myself to a few observations.

You could not carry on the corn trade at all without having obtained their permission. But it was not enough to ask for it in order to get it; you also needed to have protection; and protection was hardly ever granted except to those who would pay for it, or who would give up a share in their profit.

So the right to make a monopoly of corn was sold in some way to the highest and last bidder; and often when a person had bought it he also had to give money to prevent its being sold to others. Few people could therefore enjoy this privilege. Also the monopolists were too small in number to carry out a sufficiently extensive trade to deal with the needs of all the provinces. But they were not concerned with trading on a large scale: they simply cared about making a huge profit.

This profit was guaranteed to them, if they bought cheaply and sold dear.

Small farmers are forced to sell early from the month of September, October or November in order to pay the landowners, taxation, and the ex penses of cultivation. So then the price of grain falls through the surge of sellers. That is the time that the monopolists seize on to fill their stores; and they dictate to the farmers, who can only sell to them.

However, they used deception, as it would be dangerous for them to take advantage too openly of the exclusive right to carry on the grain trade. They provisioned themselves in the provinces where the harvest had been most plentiful, and they spread the rumour that it had been even more plentiful elsewhere. To confirm these reports, they made fictitious sales between themselves in public view in the markets, and delivered corn at the lowest price to each other. Then, as they had been given the privilege of buying every where, they went to the farms and they bought, or paid a deposit, on corn at the low price they had themselves set in the markets.

So now their only rivals are the large farmers who, not having been so pressed to make money, have waited for the moment to sell more advantageously. But these farmers have only a limited time in which to sell, as they are forbidden to hoard grain. The privileged merchants, on the other hand, sell when they wish. In the end it will happen that they are the sole sellers.

Then they put on sale a little at a time. They spread rumours about the latest harvests. They persuade that these have not been as plentiful as had been thought. Once again they do not fail to confirm this by fictitious sales, and they deliver corn to each other in public at the highest price.

So there is dearth; it is not that corn is lacking, but that it has been withheld from consumption.

However, the dearth is not general, because it matters to the monopolists themselves that it should not be. They must be able to pride themselves on the low price they maintain in some provinces in order to acquit themselves of the high price they set in others; and it is enough for them that dearth passes over all the provinces in turn. They caused such great disorders that sometimes in a province one saw the people compelled to feed themselves on all sorts of nasty roots; while in a nearby province the best wheat was thrown to the animals.

As they alone were responsible for making cereals flow back everywhere they were lacking, they did so slowly, with various excuses; and they found great profit in their slowness because they made the high price last.

Thus these monopolists made themselves wealthy, because they bought at a low price and they sold dear. There were others who made themselves no less wealthy, and yet bought at a high price and sold at a low one. I mean to speak of the commissioners who made purchases and sales of grain on the government’s account.

They were given 2 per cent profit on each purchase and 2 per cent on the sale.

The more grain they bought and the dearer they bought it, the more profit they had as a result. So they bought whatever the price was.

To make their operations easier, the merchants had been ordered to notify their associations, to make a declaration of their storehouses, and only to deal in the regulated markets on such and such a day and hour.

As all the merchants were known and all their storehouses revealed, it was easy to abort all their schemes. Wherever they might turn up to buy, the commissioners outbid them; and wherever they might present themselves to sell, the commissioners sold at a discount. So as the merchants could not keep up the competition without ruining themselves, one after the other they gave up the grain trade, and then the commissioners alone bought and sold.

The commissioners had an interest in buying much and dearly, since the 2 per cent profit was greater because of the high price of the purchases; and although the 2 per cent profit on the sale was smaller because of the low price, they had no less interest in selling cheaply, because they became the sole grain merchants.

It was the government that made all the advances for the purchases, as it made all the losses on the sales. It cost it several millions a year; and if it is true that to find one million, it was obliged to set three million in taxes, you may judge how this monopoly was in every way at the state’s expense.

The advances were paid to the commissioners in ready money. For the most part they turned their money to account in the capital, and they paid in the provinces or abroad with exchange operations. So this monopoly became a banking capital for them, or rather a veritable speculation.