Gustave de Molinari, Les Soirées de la rue Saint-Lazare: entretiens sur les lois économiques et défense de la propriété (Evenings on Saint Lazarus Street: Discussions on Economic Laws and the Defence of Property) (1849)

[A Draft of Liberty Fund's new translation]
[May 17, 2012]

[6th Evening]

[SUMMARY: The right of exchange. – On the exchange of labor. –Laws on unions. – Articles 414 and 415 of the Penal Code – The Union of Paris Carpenters, 1845. – Proof of the law which makes the price of things gravitate towards their production costs. – Its application to labor. – That the worker can sometimes dictate to the employer. – An example from the British West Indies. – The natural organization of the sale of labor.]

Title Page of the original 1849 edition	The photo of Molinari (1819-1912) which accompanied his obituary in the Journal des économistes

Introduction

Molinari's book Les Soirées de la rue Saint-Lazare; entretiens sur les lois économiques et défense de la propriété. (Paris: Guillaumin, 1849) is being translated by Liberty Fund. The translation was done by Dennis O'Keeffe and it is being edited by David M. Hart. The critical apparatus of foontnotes and glossary entries, and introduction are being provided by David Hart. We welcome feedback from Molinari scholars to ensure that this edition will be a great one and thus befitting Molinari in his centennial year.

This page has a detailed Table of Contents and links to other Chapters.

The Sixth Evening

[p142]

SUMMARY: The right of exchange. – On the exchange of labor. –Laws on unions. – Articles 414 and 415 of the Penal Code – The Union of Paris Carpenters, 1845. – Proof of the law which makes the price of things gravitate towards their production costs. – Its application to labor. – That the worker can sometimes dictate to the employer. – An example from the British West Indies. – The natural organization of the sale of labor.

THE ECONOMIST

Exchange is even more hindered than lending and borrowing. The exchange of labor is subject to legislation on passports and workbooks^[186] and to union law;^[187] buying and selling of real-estate is subject to costly and oppressive formalities; the trade in goods is burdened, domestically, by various indirect taxes, notably by licensing duties, and externally by customs. These different impositions on the property of those who engage in exchange, result invariably in reduced output and perturbations in the equitable distribution of wealth.

Let us consider first of all the obstacles placed in the way of the free exchange of labor.^[188]

THE SOCIALIST

Ought we not, before that, finish examining the various aspects of external property?

[p143]

THE ECONOMIST

We can think of labor as external property. The entrepreneur who buys labor does not buy all the worker’s faculties and productive powers; he buys the portion of these which the worker separates from himself by the act of working. The exchange is not really concluded or closed until the worker, who has separated from himself a part of his intellectual and moral capabilities, has received in exchange, products (most commonly precious metals) likewise containing a certain quantity of labor. This is truly, therefore, an exchange of two external properties.

To be equitable, all exchange must be perfectly free. Are not two men who effect an exchange the best judges of their interest? Can a third party legitimately intervene and oblige one of the two contracting parties to give more or receive less than he would have given or received had the exchange been a free one? If one or the other reckons that the thing he is being offered is too dear, he will not buy it.

THE SOCIALIST

What if he is forced to buy it in order to live? What if a worker, pressured by hunger, is obliged to relinquish a considerable amount of labor in exchange for a very low wage?

THE ECONOMIST

This is an objection which will oblige us to follow a very long, roundabout route.

THE SOCIALIST

Admit, though, that the objection is a very strong one…it really contains the whole socialist case. The socialists have [p144] recognized, confirmed, that there is not and cannot be equality under the present arrangement for the exchange of labor; that the employer is in the nature of things stronger than the worker, so that he can always lay down the law to the latter and does so. Having clearly asserted this manifest inequality, they have sought the means of eliminating it. They have found two of these: the intervention of the state between seller and buyer of labor; and the Association of Workers which cuts out the private sale of labor.^[189]

THE ECONOMIST

Are you quite sure that the inequality of which you speak exists?

THE SOCIALIST

Am I sure of it? But the masters of political economy themselves have recognized this inequality. If I had the works of Adam Smith to hand…..

THE CONSERVATIVE

Here they are in my library.

THE ECONOMIST

Here is the page.

THE SOCIALIST

Give me your attention please:

“What are the common wages of labour, says Adam Smith, depends every where upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour.

“It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorises, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long–run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.”

Please listen to this, too:

“We rarely hear, it has been said, of the combinations of masters; though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is every where a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things which nobody ever hears of. [p146] Masters too sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen; who sometimes too, without any provocation of this kind, combine of their own accord to raise the price of their labour. Their usual pretences are, sometimes the high price of provisions;7 sometimes the great profit which their masters make by their work. But whether their combinations be offensive or defensive, they are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage. They are desperate, and act with the folly and extravagance of desperate men, who must either starve, or frighten their masters into an immediate compliance with their demands. The masters upon these occasions are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combinations of servants, labourers, and journeymen. The workmen, accordingly, very seldom derive any advantage from the violence of those tumultuous combinations, which, partly from the interposition of the civil magistrate, partly from the superior steadiness of the masters, partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence, generally end in nothing, but the punishment or ruin of the ringleaders. [p147]”.^[190]

So there you have, is it not true, an eloquent condemnation of your system of free competition, from the pen of the very master of economic science? In the arguments over earnings, the employer is stronger than the worker – Adam Smith himself confirms it! After this admission by the master himself, what ought his disciples to have done? If they had truly possessed any love of justice and humanity, ought they not to have searched for ways to establish equality in the relations of employers and workers? Have they fulfilled this duty?...With what have they proposed to replace the wage earners, that ultimate embodiment of servitude, as M. de Châteaubriand has so aptly put it?^[191] What do they propose in place of this iniquitous and primitive laissez-faire^[192] which builds the prosperity of the master on the ruin of the workers? What have they proposed, I ask you?

THE ECONOMIST

Nothing.

THE SOCIALIST

In fact they said they could do nothing against the natural laws which govern society; they have shamefully confessed their powerlessness to come to the aid of the workers. This duty of justice and humanity, which they have failed to recognize, has been fulfilled, however, by us socialists. In replacing the wage earners by Associations of Workers^[193] we have put an end to the exploitation of man by man and to the tyranny of capital.

THE ECONOMIST

I…um!

[p148]

THE CONSERVATIVE

Allow me first of all to make a simple observation. In the passage from Adam Smith which has just been cited, the subject is laws which repress unequally the employers’ coalitions and those of the workers. Thank God, we do not have anything like this in France. Our laws treat all equally. There are no longer inequalities in France.

THE ECONOMIST

You are wrong. On the contrary, French law has established a flagrant inequality between employer and worker. To prove this to you it will be enough for me to read articles 414 and 415 of the Penal Code.^[194]

“Art.414. Any coalition between those who give the workers employment, which is aimed at forcing down wages, unjustly and improperly, followed by an attempt at carrying this out or actually beginning to do so, will be punished by an imprisonment of from six days to a month, and a fine ranging from two hundred to three thousand francs.

Art.415. Any coalition, either attempted or initiated, on the part of the workers, which is aimed at bringing all work to a halt simultaneously, forbidding activity in a workshop, preventing people going there or staying there before or after certain hours, and in general, stopping, preventing or making production more expensive, will be punished by an imprisonment of at least one month and no more than three months. The ringleaders or instigators will be punished with an imprisonment of two to five years.”

As you see, the employers can be prosecuted only when there is an unjust or improper move on their part to force earnings down; the workers are prosecuted [p149] purely and simply for attempting to form coalitions; moreover the punishments are monstrously unequal.^[195]

THE CONSERVATIVE

Has not the National Assembly reformed these two articles?^[196]

THE SOCIALIST

It would perhaps have reformed them were it not for the opposition of an economist.^[197] In the meantime these articles remain in force and God knows what disastrous influence they exert on the price of labor. Remember the union of Parisian carpenters in 1845. The workers formed a union to obtain a rise of one franc on their wage, which at that time stood at four francs. The management combined to resist.

THE CONSERVATIVE

The union was never established.

THE SOCIALIST

On the contrary it was fully established. At that time when associations were explicitly forbidden, the master carpenters had obtained authorization for the setting up a trade association for the improvement of their industry; but in this hotbed of improvement there was more concern with wages than with anything else.^[198]

THE CONSERVATIVE

So what do you know about it?^[199]

THE SOCIALIST

The discussions during the legal proceedings have clearly established the facts. The representatives of the workers addressed their remarks to the chairman of the carpenters’ trade association in order to gain an increase in wages. The chairman turned this down after a long deliberation among the participants. The employers, however, were not [p150] prosecuted and in reality they could hardly be so. They had combined, truth to tell, but not to lower wages “unjustly and improperly”; they had combined to prevent wages rising.

THE ECONOMIST

Which came down to exactly the same thing.

THE SOCIALIST

But the legislators under the Empire had not understood it thus. The employers were sent away absolved. The leaders of the workers’ union were condemned, some to five years, others to three years of imprisonment.

THE ECONOMIST

Yes, this was one of the most deplorable condemnations which the annals of justice record.

THE CONSERVATIVE

If I am not mistaken the union resorted to blatant ill treatment. Certain workers ill treated fellow workers who had not wanted to go along with the union. But your theory of laissez-faire^[200] perhaps authorizes such procedures.

THE ECONOMIST

Much less than your theory does. When people say unlimited freedom, they mean equal freedom for everybody, equal respect for the rights of one and all. Now when a worker prevents another worker from working, by intimidation or violence, he is making an assault on a right, he is violating property, he is a tyrant and a plunderer and ought to be sternly punished as such. The workers who had committed this kind of offence in the case of the carpenters, were in no way excusable and it was right [p151] and proper to condemn them. But not all of them had been involved. The union chiefs had neither carried out nor ordered any violence. They were however more severely punished than the others.

THE CONSERVATIVE

The law will be reformed.

THE ECONOMIST

As long as it remains it will be an iniquitous law.

THE CONSERVATIVE

What? Even though it no longer upheld any difference between masters and workers?

THE ECONOMIST

Yes. What does Adam Smith say? He says the employers can make agreements with much greater ease than the workers and that the law can get them much less easily. Now if the law strikes at four trades unions for every one association of the employers, is the law just?

In practice, the effect of this law is disastrous for the workers. The employers, knowing that the law restrains them only with difficulty, while it restrains the workers easily, are encouraged to raise and submit exploitative claims in the management of labor prices. Any law on these unions, however equal we make it, therefore constitutes an intervention by society in favor of the employer. In the end, people were convinced of this in England and this law relating to unions, which had incurred the just condemnations of Adam Smith, was duly abolished.

THE CONSERVATIVE

Let us see though! Are unions legitimate or are they not? Do they constitute a fraudulent agreement or a proper one? That is the question. Well, on this question [p152] the opinion of our General Assemblies has never been in doubt. The members of our first Constituent Assembly and of the Convention itself, set their faces unanimously against any union, any agreement either on the part of the entrepreneurs or the workers. Chapelier,^[201] a member of the National Convention, in one of his reports wrote the following sentence which has become famous: “It is absolutely necessary to stop both entrepreneurs and workers from combining over their alleged common interests”.^[202] What do you think of that?

THE ECONOMIST

I think the most discerning specialist in criminal law would be hard put to find anything criminal in the action of two or more men coming to an understanding in order to secure an increase in the price of their merchandise; I think that in issuing laws in order to suppress this alleged crime, we encroach unjustly and harmfully on the property rights of producers^[203] and workers.

I go further. In forbidding unions we are preventing agreements which are often crucial.

THE SOCIALIST

Have not the economists always regarded unions as harmful or at least as pointless?

THE ECONOMIST

That depends on the circumstances and on the way combinations are led. In order to have you see clearly, however, those circumstances in which a union can be useful, and how it must be led to yield good results, I am obliged to return to the fundamentals of the debate. You have asserted that no justice is possible under [p153] the wage-system; that the employer, being naturally stronger than the worker, must therefore naturally oppress him.

THE CONSERVATIVE

That outcome is not inevitable. There are philanthropic sentiments which moderate the excessive sharpness which private interests may display.

THE ECONOMIST

Not at all. I accept the outcome as inevitable and believe it to be such. We do not pursue philanthropy in the business domain, and rightly so, for philanthropy would be out of place there. We will return to this issue later….

So you are of the opinion that the employer can always dictate to the worker and that therefore the wage system precludes justice.

THE SOCIALIST

I am of Adam Smith’s opinion.

THE ECONOMIST

Adam Smith said that the employer can oppress the worker more easily than the worker can oppress the employer; he does not say that the employer always finds himself necessarily in a position to lay down the law to the worker.

THE SOCIALIST

He identified a natural inequality which exists in favor of the employer.

THE ECONOMIST

Yes but this inequality can be absent. The situation may be such that the worker is stronger than the employer.

THE SOCIALIST

If the workers form a union?

[p154]

THE ECONOMIST

No, without their combining. I will give you an example in a moment. Now, if inequality does not always come about may it not be the case that it never does ?

THE SOCIALIST

Good! You are coming over to the idea of the organization of labor.^[204]

THE ECONOMIST

God preserve me from that!

On my way here I passed by Fossin’s boutique.^[205] There were, in the display window, very beautiful sets of diamonds. On the pavement opposite an orange-seller was offering her wares. She had oranges of two or three grades and on one corner of her stall a packet of over ripe oranges which she was selling at cut price.

THE CONSERVATIVE

What is this riddle about?

THE ECONOMIST

I would ask you to observe the difference between the two industries. Fossin sells diamonds, an essentially durable product. Whether or not a purchaser comes, the diamond merchant can wait without fearing that his merchandise will undergo the least deterioration. If the orange-seller, however, does not succeed in getting rid of her wares, she will soon be left without a single sound orange. She will be forced to throw her merchandise on to the waste heap. There is, certainly, a striking difference between the two kinds of industry. Fossin can wait a long time for buyers without worrying that his products will spoil, but the orange seller cannot. Does this mean that the orange-seller [p155] is more exposed than Fossin to purchasers laying down the law?

THE SOCIALIST

That depends. If the orange-seller does not take care to match exactly the quantity of her goods to the number of her buyers, she will be obliged to cut her prices or waste some of her oranges.

THE CONSERVATIVE

Well she will be doing very bad business.

THE ECONOMIST

So, will any orange seller who knows her trade carefully avoid loading herself with goods that she may not sell at a profitable price?

THE CONSERVATIVE

What do you understand by profitable price?

THE ECONOMIST

I understand by it the price which covers the production costs of the good including the natural profit for the merchant.

THE SOCIALIST

You are not resolving the difficulty. In a year in which the orange harvest is superabundant, what will one do with the surplus if the traders demand no more than usual? Will the superabundant oranges have to be left to rot?

THE ECONOMIST

If more oranges are harvested, more will be supplied and price will fall. With falling price, demand will increase and the harvest surplus will thus find buyers.

[p156]

THE SOCIALIST

By what proportion will it fall?

THE ECONOMIST

According to all the research gathered so far, we can assert the following:

When supply exceeds demand in arithmetic progression, price falls in geometric progression, and similarly when demand exceeds supply in arithmetic progression, price rises geometrically.^[206]

You will not be slow to spot the beneficial results of this economic law.^[207]

THE SOCIALIST

If such a law exists, must it not have on the contrary, essentially dire results? Suppose for example that the proprietor of orange groves normally gathers five hundred thousand oranges a year and can sell them at two centimes a piece. This gives him a sum of ten thousand francs with which he pays his workers and his own labor as director of the farm, covering in a word his production costs. A year of abundance comes along. Instead of five hundred thousand oranges he harvests a million. As a result he supplies twice as many oranges to the market. In line with your economic law, the price falls from two centimes to half a centime, and the unfortunate owner, victim of abundance, receives only five thousand francs for a million oranges, when in the previous year he had received ten thousand francs for half that number.[p157]

THE CONSERVATIVE

Certainly a super abundance of goods is sometimes harmful. We had better ask our farmers if they prefer a year of abundance or an average year, a year where corn is at twenty two francs or a year when it falls to ten francs.

THE ECONOMIST

These are economic phenomena that can be explained only by the law which we have just formulated. It does not follow at all from that law, however, that the doubling of a harvest must lead to a three quarters fall in price, since demand always grows more or less insofar as price falls. Let us go back to the example of the owner of orange groves. At two centimes a piece this owner would cover the production costs of five hundred thousand oranges. If the harvest were to double, production costs would not increase in the same proportion. Nevertheless they would increase. You need more labor to gather a million oranges than to gather five hundred thousand. Moreover the owners will be forced to pay this labor more because wages always rise when the demand for labor increases. The costs of production will therefore rise by half perhaps. They will climb from ten thousand to fifteen thousand francs. To cover this last sum, which represents his production costs, the proprietor will have to sell his harvest of oranges at a rate of one and a half centimes each.

The question is whether, even if he succeeded in selling five hundred thousand oranges at two centimes each, he would succeed in selling a million at a centime and a half. Would a lowering of price by half [p158] a centime be enough to bring about a doubling of demand?

If the reduction in price is not sufficient, our proprietor will have to lower his price further for fear of not selling some of his merchandise. This, however, will mean he faces losses. If he sells only nine hundred thousand oranges at a centime and a half, he will not cover his costs; if he sells a million at a centime and a quarter, he will lose even more.

Experience is the only guide in this case. A given drop in price does not increase the demand for all goods equally. A fall by half in the price of sugar, for example, can double consumption. A fall by half in the price of oats or buckwheat will occasion only a weak expansion in demand for these two products. In a year when the harvest exceeds customary expectations, it is therefore hard to know whether it is better to increase supply in line with the increase in the harvest, or to hold back part of the output in order to maintain the price.

THE SOCIALIST

And if the commodity is not conservable, it will be advantageous to let it go to waste, therefore.

THE ECONOMIST

Yes, or what comes to the same thing economically, to distribute it gratis to people who could not have bought it at any price. There are very few goods, however, that one cannot conserve in one form or another.

If you still have some doubt about the economic law I have just indicated, look at what happened recently in the grain trade. In 1847 our grain harvest was in deficit; instead of [p159] gathering sixty million hectoliters of wheat we harvested only about fifty million.

You know what effect this harvest deficit had commercially. From twenty or twenty two francs, its normal price level, wheat rose to forty or fifty francs. The following year, on the contrary, the harvest was abundant, yielding ten or twelve million hectoliters more than usual. From forty or fifty francs, price fell then by successive stages to fifteen francs, and in certain areas as low as ten francs. In the first of these two years, a fall in supply of a quarter led rapidly to a doubling of price; in the second a rise in supply of a quarter drove price successively down to a half of its normal level. ^[208]

The same law regulates the price of all goods. The only thing is, we must always take good note when we are studying this law, of the increase in demand which results from a fall in price and vice versa.

THE SOCIALIST

If a slight fall in supply can lead to such a sizeable increase in price, I am beginning to understand a fact that until now had remained very obscure to me. At the end of the last century there was a famine in Marseille. The price of wheat had risen very high… but not high enough for the liking of certain merchants who undertook to make it rise further still. Consequently they thought about throwing part of their supplies into the sea. This happy idea was hugely profitable for them. But a child had witnessed their impious and criminal action. His young soul reacted [p160] with profound indignation. He wondered what this society could be in which it proved useful to some to starve others, and he declared everlasting war on a civilization which gave birth to such abominable excesses. He devoted his life to putting together a new form of Organisation… This child, this reformer, was, as you know, Fourier.^[209]

THE ECONOMIST

The anecdote may be true since this happens often in years of famine as also in years of plenty; but for me this proves only one thing: that Fourier was a very bad observer.

THE SOCIALIST

Upon my word!

THE ECONOMIST

Fourier saw the effect but he did not see the cause. At that time purchases of foreign wheat were encumbered by the difficulty of communication and also by the Customs regulations.^[210] So the domestic suppliers of wheat enjoyed an effective monopoly. To render this monopoly more fruitful still, they did not put on to the market, did not put on sale, more than a part of their output. If the law had not interfered in their activities, they would have kept the rest in the warehouse, for wheat is one of those goods which can be stored for a very long time. Unfortunately there were at that time laws against monopolists. These laws forbad merchants to keep in store more than a certain quantity of foodstuffs. Faced with the alternative of putting all their wheat on the market, or destroying some of it, they often found it more advantageous to [p161] to adopt the latter option. It was barbarous, it was odious if you will, but whose fault was it?

Under a regime of complete economic liberty nothing like this could happen. Under this regime, the price of all goods tends naturally to fall to the lowest level possible. Indeed the very fact that a small difference between the two levels of supply and demand, leads to a sizeable difference in price, means that equilibrium must necessarily establish itself. As soon as the supply of a commodity is not sufficient in respect of demand, price rises with such rapidity, that it is soon found very profitable to bring an additional amount of that commodity to the market. Now men being naturally on the lookout for all business which yields them some advantage, the various competitors combine to fill the gap.

As soon as the deficit is closed and equilibrium re-established, the flows stop of their own accord; for prices tending to fall progressively as supplies increase, it does not take long for suppliers to be making losses.

Thus if producers or merchants are left completely free to take their goods where the need for them is felt, supplies will also always be as closely proportionate as possible to the requirements of consumption; if on the contrary, in one way or another there are attacks on freedom of communication,^[211] if merchants are harassed during the free exercise of their industry, it will take a long time for equilibrium to be reached, and in the interval the leading producers in the market will be able to realize huge returns, at the expense of the unfortunate consumers.[p162]

Let us note again that returns increase all the more with people’s increasing inability to go without the commodity. Let us suppose that a company gains a monopoly over the sale of oranges in a country. If this company takes advantage of its monopoly in order to reduce by a half the quantity of oranges supplied compared to previously, in the hope of increasing the price fourfold, demand will likewise decrease. The gap between supply and demand still remaining in consequence very small, the market price of oranges will not be able to rise much above the natural price.

It will be different if a company manages to grab a monopoly of the production or sales of cereals. Wheat being a commodity of primary necessity, a diminution of a half in supply, and consequently a progressive rise in price will occasion only a slight contraction in demand. Such a fall in supply which would make the price of oranges rise only very little would result in a doubling or tripling of the price of wheat.

When a commodity is an absolutely prime necessity like wheat, demand shrinks only with the loss of part of the population or the draining away of its resources.

In brief, in certain circumstances a given commodity whose price could not rise very high in ordinary circumstances, suddenly acquires uncommon value. For example, let’s transport an orange seller into the midst of a caravan which is crossing the desert. At first, [p163] she has to sell her merchandise at a modest price for fear of not selling anything. But, water becomes scarce and immediately the demand for oranges doubles, trebles, quadruples. The price rises progressively as demand increases. It is not long before it exceeds the resources of the less affluent travellers and threatens the resources of the richest travelers: in a few hours the worth of an orange can climb in this way a million times. If the orange seller, herself suffering from thirst, reduces her supply as her own need becomes more urgent, a point will come when the price of oranges exceeds all the available resources of her companions in the caravan, be they all nabobs.

By observing carefully this economic law you will be explaining to yourself a host of phenomena which until now probably have eluded you. You will know precisely why producers, in certain areas, have always aimed at obtaining exclusive privilege or monopoly with the respect to the sale of their products; why above all they show themselves very keen on monopolies which affect goods of primary necessity; why in a word these monopolies have been immemorially the terror of populations.

I now return to my orange seller and to Fossin.

THE CONSERVATIVE

At last!

THE ECONOMIST

Thanks to the special nature of his merchandise which is durable, Fossin can, without too much inconvenience, augment [p164] his supply of precious stones beyond the needs of the moment. Nothing forces him to release the surplus immediately. The orange seller finds herself in a very different situation. If she has bought more oranges than she can sell at a worthwhile price, she lacks the ability to hold the surplus indefinitely in reserve, since these oranges are subject to decay. By putting her whole stock on sale, however, she is at risk of lowering the price of oranges to the point of losing even the value of this surplus. What will she do therefore? Will she destroy this surplus with which she has unwisely burdened herself? No! She will sell it outside its normal market, or perhaps wait for some of her oranges to be slightly spoiled so that she can sell them to a particular group of purchasers, in such a way as not to compete with the rest of her supply. This explains those little piles of semi-spoiled oranges on the corner of the sellers’ stalls.

THE CONSERVATIVE

What does it matter to us?

THE ECONOMIST

You will soon see. These piles of fruit are more in evidence the less the merchants understand their business, or when the consumption of oranges is subject to stronger fluctuations. We would see fewer of them encumbering the stalls, however, if the sellers knew exactly how to proportion their purchases to their sales, and also if consumption were never subject to sudden variations. If conditions were like that, the orange sellers would always be able, like Fossin, to [p165] balance their supply to demand, without experiencing losses; they would stop selling part of their output at a loss for fear that the surplus would spoil, or wait until that surplus is ruined to sell it off dirt cheap.

THE CONSERVATIVE

No doubt.

THE ECONOMIST

Well, if you examine closely the situation of workers with respect to the entrepreneurs of industry, you will find it perfectly analogous to that of orange-sellers with respect to their buyers.

If you examine likewise the situation of entrepreneurs with respect to workers, you will find it absolutely the same as Fossin’s with respect to their clientele.

Labor indeed is an essentially perishable commodity, in the sense that the worker, quite lacking in resources, risks perishing in a short space of time if he does not succeed in selling his goods. Thus the price of labor can fall to an excessively low level at times when the supply of labor is sizeable and when the demand for it is weak.

Fortunately charity intervenes at this point by removing from the market in order to feed them for nothing, a section of the workers who are offering their labor unsuccessfully. If the charity is insufficient the price of labor continues to fall until part of the labor unsuccessfully offered, perishes. Then equilibrium starts to establish itself again.

The entrepreneur who offers wages to the workers [p166] is not obliged, at least usually, to hurry himself up to the same degree. When labor is scarce on the market, the entrepreneur can hold in reserve some of these wages, and like Fossin, proportion his supply to demand.

There are, however, exceptions to this rule. It sometimes happens that entrepreneurs have to sell their wages very cheaply, to exchange high wages for small amounts of labor, or, if I may use the common expression, to find the workers laying down the law to the management. This happens when they have a need for more labor than currently available on the market.

This is what happened in the British West Indies at the time of emancipation.^[212] When slavery kept the workers on the plantations, the owners had enough ready labor to keep their holdings more or less profitable. When slavery had been abolished, however, a great number of slaves began to work on their own account. The numbers who continued to work in the production of sugar-cane proved insufficient. At the same time the laws of supply and demand made their influence felt on the price of labor. In Jamaica, where the daily work of a slave yielded scarcely 1 fr. in revenue, the same quantity of free labor was sold for 3, 5, 10 or even as much as 15 or 16 fr.^[213]This absorbed the greater part of the indemnity paid to the planters. Soon, however, after very many owners had abandoned their plantations, because they were unable to pay these exorbitant wages, demand [p167] fell, while on the other hand, the appeal of these wages having drawn in labor from every country, even from China, supply increased. Thanks to this double movement which ceaselessly and irresistibly realigned supply and demand, the price of labor in the British West Indies has today reverted more or less to its natural level.

THE SOCIALIST

What do you mean by the natural wage level?

THE ECONOMIST

I mean by this, the sum necessary to cover the production costs of the labor. I will give you a fuller explanation of the situation in a subsequent discussion.^[214]

You see, in short, that entrepreneurs cannot escape the laws of supply and demand any more than the workers themselves can. When the equilibrium between them is adversely disturbed, when the balance of labor is in favor of the workers, the entrepreneurs can doubtless keep in reserve – usually at least – some portion of the wages they pay, and thereby prevent the wage climbing too high. They can imitate the jewelers who hang on to their jewels and precious stones rather than sell them unprofitably. In the end, however, a point comes when under threat of going bankrupt or of giving up their business they are forced to put the wages they have available onto the market.

When equilibrium moves against the workers, when the balance of labor favors the entrepreneurs, the workers are, even so, commonly forced to sell their labor, unless charity comes to their aid, or they succeed, one way or [p168] another in withdrawing the excess labor from the market. The situation is then worse than that of the employers when the latter are short of labor, because they are like the orange traders in that they sell a not very durable commodity, one which perishes easily or is easily destroyed.

If, however, well aware of the nature of their commodity, they had exercised sufficient prudence never to overload the market, and always to proportion their supply of it to demand, would not they, too, like the orange sellers who know their business, always sell their wares at a worthwhile price?

THE SOCIALIST

Is it indeed always possible to align supply and demand? Do the workers have the power to prevent crises from overturning industry? Can they also easily shift excess labor from one place to another, the way bales of merchandise are transported? This equilibrium, which would allow workers to sell their labor at a decent price, must it not, in the very nature of things, be incessantly disrupted to their disadvantage? And in this case, will not the price of labor, like that of any other perishable good, drop in the most frightful way?

THE ECONOMIST

The obstacles which you attribute to nature are more often than not artificial. If you study industrial crises more closely, you will see that they almost always have their origin in the restrictions which hamper production and the circulation of wealth, at various points around the world.^[215] Look more closely also for the causes of [p169] the difficulties workers encounter in aligning their supply to the level of demand. You will find that these difficulties arise, in the main, either from the institutions of government charity, which encourage workers to increase in number constantly, or from the obstacles put in the way both of workers’ easy understanding amongst themselves, and of the free circulation of labor, obstacles such as economic legislation on unionization, on apprenticeships, or labor workbooks and passports. Then there is civil legislation refusing foreigners equal rights with those of nationals. However weak the action of these artificial obstacles on the behavior of supply and demand may be, they are registered very substantially, even enormously, on the movement of prices, since the arithmetic progression on one hand, engenders a geometric progression on the other.

I have already shown you that the laws against unionization must necessarily and inevitably strengthen the employers’ side in wage discussions. In the absence of these dire laws, moreover, the workers would always have ways – lacking to them today – to secure the prompt alignment of the supply of labor to the demand for it. Let me explain.

I return to the example of the seller of oranges, assuming that she sells some hundred oranges every day. One day the demand falls by half; no more than fifty are now purchased. If she persists on this particular day with her wish to sell a hundred, she will have to drop the price sharply and will experience a marked loss. It will be better for her to remove the excess fifty oranges from the market, even if the fruit set aside might perish during the day.

Well, the situation is exactly the same for those sellers of labor, the workers.

[p170]

THE CONSERVATIVE

I would like to see this, but who will volunteer to play the part of the oranges destined to rot in the shop?

THE ECONOMIST

No one, individually! If the workers are intelligent, however, and if the law does not prevent their coming to agreement amongst themselves, do you know what they will do? Instead of letting wages fall progressively as demand falls, they will remove from the market that surplus whose presence generates that fall.

THE CONSERVATIVE

But here again, who will agree to being withdrawn from the market?

THE ECONOMIST

Probably no one will do so, unless the workers as a whole compensate those who will be withdrawn; but there will be competition to quit the market if the mass of workers allots compensation to the withdrawn workers equal to the wages they were receiving at work.

THE CONSERVATIVE

Do you believe the workers remaining in employment will regard this scheme as in their interests?

THE ECONOMIST

I think so. Let’s take an example. One hundred workers receive a wage of four francs a day. Demand happens to fall by a tenth. If our hundred workers nevertheless persist in offering their labor, by how much will the wage fall? It will fall not by a tenth but by close to a fifth, (it would be exactly a fifth if the fall in the price of the commodity did not always increase demand by some small amount); it will fall to 3fr. 20. The total sum of wages will fall from 400 fr. To 320 fr. But if the workers [p171] in concert withdraw from the market the ten surplus workers, granting them compensation equal to the wage, perhaps 40fr in total, instead of receiving no more than 320fr. ( 100 x 3fr. 20), they will receive 360fr. (90 x 4). Instead of losing 80 fr., they will lose only 40 fr.

You see that unions can have their usefulness, that they are required, perhaps accidentally, by the very nature of the goods which workers bring to the market. To ban them is therefore, with regard to the great mass of workers, to commit a real act of plunder.

If trades unions were legal, while at the same time the laws on labor workbooks and passports did not harass the movements of workers, you would see the mobility of labor developing rapidly on an immense scale. Adam Smith, looking into the extremely low level of wages in certain localities said: “After all that has been said of the levity and inconstancy of human nature, it appears evidently from experience that a man is of all sorts of luggage the most difficult to be transported.”^[216] The means of communication however have been very much improved today compared with what they were in Adam Smith’s time. With the railways and the aid of the electric telegraph, we can rapidly and cheaply transport a great mass of workers from one place, where labor abounds, to another where it is in short supply.

You will understand, nevertheless, that the buying and selling of labor could not undergo the development of which it is capable, while the law continued to shackle it.

THE SOCIALIST

The government should go so far as to guide the workers [p172] in their searching. It ought to indicate to them the places where labor is abundant and where it is scarce.

THE ECONOMIST

Let private industry be free to go about its business^[217] and it will serve the workers much better than the government could. Give full freedom of movement and “d’accord” to the workers and they will be perfectly able to seek out the places where the sale of labor operates most advantageously; active and shrewd intermediaries will help them at the lowest possible price ( provided that no one takes it upon himself to limit the number of these intermediaries, nor to regulate their activities). The supply of and demand for labor, which spontaneously move one towards the other, will in these circumstances, come to equilibrium without difficulty.

Let the workers be free to go about their business,^[218] allow the free movement of labour, that is the solution to the problem of the wage earners.

Appendix: Molinari’s Plan for a Labor Exchange

Struck, some years ago, by the difficulties workers experience in finding the places where they can obtain a good outlet for that species of merchandise we call labor, I called for the establishment of a labor exchange,^[219] along with publicity for the current rates, on the lines of what is done for capital and consumer commodities.^[220]

Later I tried to put flesh on this idea, and in the Courrier français, edited at that time by M. X. Durrieu, I addressed the following appeal to the workers of Paris:

For a long time the capitalists, producers and merchants, have been taking advantage of the publicity that the press offers them, for placing their capital or selling their merchandise most advantageously. All the newspapers regularly publish a bulletin of the Stock Exchange. All have also opened their columns to industrial and commercial advertising.

If such publicity renders to capitalists and merchants, services whose importance today no one could deny, why [p173] should they not also be put within the reach of the workers? Why not use it to light the way for workers in search of employment, as it already helps capitalists looking for outlets for their funds and merchants seeking to place their merchandise? Is not the worker who lives by the sweat of his brow or the use of his intelligence, at least as keen to know which places attract the most advantageous wages, as the capitalist or trader can be to know the markets where their funds or goods will fetch the highest rewards? His physical strength and his brain are his personal capital: it is by exploiting them, making them work, and exchanging their output for the output of other workers like himself, that he manages to subsist.

…It is the press which publishes the industrial bulletins. It would also be the press that would publish an employment bulletin.

So we propose to all state bodies in Paris, to publish each week, free of charge, an employment bulletin, indicating the level of earnings and the disposition of supply and demand. We would divide this state bulletin by the different days of the week, in such a way that each trade had its publication on a fixed day.

If our suggestion is accepted by the state service, we will ask our colleagues in the various départements (regions) to publish employment bulletins for their localities, as we will publish the one for Paris. Each week we will bring them all together and create from them a general bulletin. In this way, every week, all the workers in France will be able to have in front of them, a picture of the employment circumstances in the various parts of the country.

We will be aiming above all at the workers employed by the state service in Paris. They are already organized. They already have official Labor Exchanges. Nothing would be easier than for them to advertise the bulletin of their daily transactions. Nothing would be easier than for them to provide France with publicity for the labor-force.” (Courrier français 26th July 1846).

Following this appeal, I got in touch with some of the Parisian guilds, among others with the Stonemasons, who introduced me to one of their comrades, surnamed Parisien la Douceur, one of the most intelligent workers whom [p174] I have met. Parisien la Douceur liked my plan very much and promised to explain it to the Stonemasons’ Guild. Unfortunately, the Guild did not share its delegate’s opinion. Fearing that the publication of wage data in Paris might attract a considerable increase in the number of workers in this great centre of population, it refused to collaborate with me. Nor were my attempts elsewhere more successful.

After the February Revolution, I tried to launch this idea again. I wrote to M. Flocon, at that time Minister of Agriculture and Commerce,^[221] to enlist his support, if not for getting labor exchanges set up in Paris, at least for putting the already established Stock Exchange at the service of the workers. Businessmen go to the Stock Exchange in the afternoon; could not the workers go there in the morning? Such is the question which I put to M. Flocon; but M. Flocon, busy with lots of other things did not reply to me.

The same idea was taken up again some time later, and a plan for a Labor Exchange was even presented to the Chief of Police, M. Ducoux, by an architect, M. Leuiller. M. Emile de Girardin^[222] gave his support to this initiative and he even offered to devote part of page 4 of La Presse to publicizing labor business.

In order to give the reader an idea of how far this very necessary publicity might extend, and of the services it could render to the workers in their capacity as ‘traders in labor’, with the help of the electric telegraph and the railways, I reproduce here an extract from a brochure in which I developed this idea at some length:^[223]

Let us examine how the electric telegraph should be set up in such a way as to give workers in all countries the means of ascertaining instantly the places where labor is demanded on the most advantageous conditions.

The telegraph lines have been established alongside the railways.

In every one of the great states of Europe, the main railway lines gravitate towards the Capital as to a common center. They link all the secondary towns to the metropolis. The secondary towns, in their turn, serve as centers for other means of communication which terminate in population centers of the third rank.

Suppose that in France, for example, there are established in twenty secondary towns, markets and Labor Exchanges, dealing both with the sale of labor and the placement of capital and [p175] goods. Let us also suppose that the morning is given over to labor transactions and the afternoon to those of capitalists and merchants. Let us see next how the labor market works.

On the day of the opening of twenty Exchanges, workers who lack employment and directors of industrial firms who need labor, go to the market, the former to sell, the latter to purchase, labor. Note is made of the number of transactions effected, and at what price, and of the relative proportions of jobs offered and jobs demanded. The market bulletin, drawn up at the end of the session, is sent by telegraph to the central Stock Exchange. Twenty bulletins arrive at the same time at this central gathering point, where a general bulletin is composed. This latter, which is dispatched immediately, either by rail or by telegraph, to each of the twenty Secondary Exchanges, can be published everywhere before the Exchange opens the next day.

Informed by the general labor bulletin, as to the situation in the various labor markets of the country, the workers available in certain centers of production, can send their supply details to those where there are jobs available. Let us suppose, for example, that three carpenters are without work in Rouen, while in Lyon the same number of workers in the same trade are in demand at a wage of 4 fr. Having consulted the labor bulletin published in the morning paper, the Rouen carpenters go to the exchange, where the telegraph line comes in, and they send a message to Lyons along these lines:

Rouen ––– Rouen 3 carpenters at fr. 4.50 ––– Lyon

The message goes to Paris and from there to Lyon. If the wage asked by the Rouen carpenters is acceptable to the employers in Lyon, the latter respond immediately with an agreed sign of acceptance. If they think the wage asked too high, a debate takes place between the two parties. If eventual agreement is reached, the carpenters, bearing the message of agreement stamped by the employee at the telegraph, make their way immediately to Lyon by railway. The transaction has been concluded as rapidly as it could be in the Rouen exchange.

Let us now assume that Frankfurt is the central point on which converge all the telegraph lines connecting with the various central Stock Exchanges of Europe. It is to Frankfurt that all the general bulletins of [p176] each country come, there also that a general European bulletin is put together and sent to all the Central exchanges, whence it is transmitted to all the secondary ones. Thanks to this apparatus of publicity, the number of jobs and the numbers of workers available, along with the wages on offer or asked for, are made known to us, almost instantly, everywhere in Europe.

Suppose, then, that an unemployed seaman in Marseilles, looking at the European bulletin of labor, learns that there is a shortage of sailors in Riga and that a decent wage is being offered in that port.

He goes to the Exchange and sends Riga a telegram offering his services. From Marseilles his message goes to Paris, in two or three stages, depending on the power of the transmission. From Paris the message is sent to Frankfurt, from Frankfort it goes to Moscow, the Central Exchange in Russia, and from Moscow to Riga. This distance, in the region of 4000 kilometers, is covered in two or three minutes. The reply is transmitted in the same way. If telegrams are priced at the rate of five centimes per hundred kilometers, our seaman will pay about fr.4 for the telegraph messages sent and received. If his demands are acceded to, he will take the train and arrive in Riga in five days. On the supposition that his fare will be set at the lowest price possible, say, ½ centime per kilometer, his costs of moving, including the telegrams, will add up to some fr. 24.

Thus Europe becomes one huge market, where labor transactions are carried out as rapidly and easily as in a city market-place. The Exchanges of Europe correspond with those of Africa and Asia by way of Constantinople. Thus steam locomotion and the electric telegraph are, in a sense, the material instruments of the liberty of labor. By giving individuals the means of freely marketing themselves, and of always making their way to countries where life is easier and more agreeable, these vehicles of providence push societies irresistibly in the direction of progress.

Bourrienne

Endnotes