Forty Centuries of Wage and Price Controls

5

The French Revolution

During the twenty months between May 1793 and December 1794, the revolutionary government of the new French Republic tried almost every experiment in wage and price controls which has been attempted before or since.

At the beginning of 1793, France found itself besieged by all the powers of Europe and blockaded by the British fleet. On the home front, her currency was rapidly falling in value and inflation was rampant. On the other hand, France was the richest agricultural country in Europe and the harvest of 1793 was to be particularly abundant.1

Her food problem in that year was not one of production but rather of distribution.2 A constant series of decrees and regulations, each one designed to remedy the defects of the last, had the effect of leading the bread basket of Europe to the brink of starvation.

LAW OF THE MAXIMUM

The first of these laws aimed at keeping prices down was passed by the Committee of Public Safety on May 3, 1793, together with a progressive tax on the rich and forced loans.3 This first Law of the Maximum, as it was called, provided that the price of grain and flour in each district of France should be the average of local market prices which were in effect from January to May 1793. In addition, farmers were required to accept in payment the paper assignats at their face value, just as if they were coin.

Naturally many farmers kept their produce away from the markets since they were not allowed to ask a fair price for their goods in a time of rising inflation. Popular uprisings took place in several departments and by August of that year the May law was generally regarded as a dead letter.

On September 11, 1793, a new plan, which might be called Phase II, was adopted by the National Convention: a uniform price for a long list of goods was set for the whole country, with allowances made for the cost of transportation. This plan, too, was soon discarded and the Law of September 29 was proclaimed (Phase III). The new system provided that prices should be fixed at the local rates of 1790 plus one-third.

In a little over a month, this plan too was clearly shown to be a failure and the Law of November 1 (Phase IV) was enacted. This later attempt at regulating prices was more complicated than the previous phases. Prices were to be based upon those of 1790 at the place of production, plus one-third, plus a rate per league for transportation plus 5 percent for the wholesaler and 10 percent for the retailer. Local governments were given the right to compel farmers to bring their grain to markets and to sell it at the fixed price. By the use of the army and police, enough farmers were physically transported (with their grain) to marketplaces to enable the French people to survive the last months of 1793 and the first months of 1794.4

The revised system of price control was, of course, no more successful than previous attempts. One scholar has succinctly explained why:

This scheme, judged from the point of view of modern experience, had two bad features. The first was the failure to guarantee the farmer a reasonable profit, and so encourage him to put more acres under cultivation and raise larger crops. Should his labors slacken and his crops become small, no amount of energy in insisting upon a fair distribution of the product would keep the people from going hungry. The scheme not only failed to encourage the farmer, it threatened him with ruin. His expenses for tools, draft animals and wages were steadily rising, but his profits were cut down, with the prospect of further losses every succeeding month.

The second blunder was the obverse of this; it was the assumption that force could be used successfully with the largest body of producing workmen the country had. The agents utilized to apply the force, when the last links in the chain of authority were reached, would be the farmers themselves, for the communal officers were either farmers or men dependent upon them.5

A large black market grew up all over France in response to the government’s repeated attempts to control the prices of foodstuffs. Butter, eggs and meat, in particular, were sold in small quantities door-to-door, mainly to the rich. It was impossible to control this contraband trade and the net effect was to insure that the wealthy had more than enough food while the poor were left to go hungry. In other words, the actual results of the Law of the Maximum were precisely the opposite of what was intended.

THE FAILURE OF CONTROLS

An Englishwoman, living in Amiens, wrote that “Detachments of dragoons are obliged to scour the country to preserve us from famine.” By the summer of 1794, demands were coining from all over the country for the immediate repeal of the law. In some towns in the south the people were so badly fed that they were collapsing in the streets from lack of nourishment. The Department of the Nord complained bitterly and with French precision that its shortages all began just after the passage of the by-now hated Law of the Maximum. They wrote to the Convention in Paris:

Before that time, our markets were supplied, but as soon as we fixed the price of wheat and rye we saw no more of those grains. The other kinds not subject to the maximum were the only ones brought in. The deputies of the Convention ordered us to fix a maximum for all grains. We obeyed and henceforth grain of every sort disappeared from the markets. What is the inference? This, that the establishment of a maximum brings famine in the midst of abundance. What is the remedy? Abolish the maximum.6

The attempts of the French Republic to control the prices of food were clearly doomed; many areas of France did not wait for the national government to act but repealed the hated law by popular vote. Finally, in December 1794, the extremists in the Convention were defeated and the price control law was officially repealed. When Robespierre and his colleagues were being carried through the streets of Paris on their way to their executions, the mob jeered their last insult: “There goes the dirty Maximum!”7

FOOTNOTES

1. Simon Litman, Prices and Price Control in Great Britain and the United States During the World War (New York: Oxford University Press, 1920) p. 7.

2. Henry Bourne, “Food Control and Price-fixing in Revolutionary France,” The Journal of Political Economy, February 1919.

3. Litman, op. cit., p. 6.

4. Henry Bourne, “Maximum Prices in France,” American Historical Review, October 1917, p. 112.

5. Bourne, Journal of Political Economy, op. cit., p. 88.

6. Bourne, Journal of Political Economy, op. cit., p. 93.

7. Bourne, Journal of Political Economy, March 1919, p. 208.