Date: 3 June, 2020
The story of “the monopolist grocer” is one the ninetheenth century French economist Gustave de Molinari used several times in his early works to show the predictable and inevitable problems caused by any monopoly (such as high prices, poor service, high profits to the producer, and lack of choice for the consumer) and the inconsistency of those who defended competition in some sectors of the economy but not in others. His solution to the problem of monopoly was to have competition in everything, even in the provision of all public goods including police and defense services, thus making him the first advocate of the theory of “anarcho-capitalism.” In his later writings he would refer to this argument in more general terms as his “hypothesis.”
The “story of the monopolist grocer” was first used in two works which Molinari published during the tumultuous years of the Second Republic and early years of Napoleon III’s Second Empire. The first occasion was in a more popular work which consisted of a collection of evening conversations (or what he calls “soirées”) between a Conservative, a Socialist, and an Economist, Les Soirées de la rue Saint-Lazare (1849) which the Guillaumin publishing firm published as part of its extensive anti-socialist campaign during 1848–49 at the height of the 1848 Revolution. The second appeared five years later in Molinari’s economic treatise, the Cours d’économie politique (1855, 1863) which was based upon a course of lectures which he had started in 1847 in Paris and continued when he relocated to Brussels and was aimed at a more academic audience.
Telling stories with an economic lesson was not unusual in France. It had been done occasionally by the great fabulist La Fontaine and even by the more staid Jean-Baptiste Say, but most often and most successfully by Frédéric Bastiat, so it was not unusual for Molinari to have tried something similar. It was part of a long tradition of trying to popularise economic ideas by putting them into a more accessible format.
In his pathbreaking 1849 work Les Soirées de la rue Saint-Lazare his purpose was to show his interlocutors, the Socialist and the Conservative, (and by extension his readers) for the first time in history that every single so-called “public good”, from water and roads, to funeral services and the post office, could and should be provided competitively on the free market. After working through most of the government monopolies which existed in his own day in the second last chapter of the book, Soirée number 11, he finally turns to the most entrenched government monopoly of them all, what he would later call “this antiquated superstition,” namely the provision of police and defense services. In this he was the first to advocate that police services and law courts could be provided by private insurance companies which sold these services to their policy holders in order to protect their property from theft and destruction.
The specific purpose of introducing the story of the grocer was to show that, just as a monopoly of the grocery business would lead to well-known and understood economic problems (with which many people would agree), so too does the monopoly of the security business (or what he called “la production de la sécurité” - the production of security) lead to exactly the same problems (which of course most people would not agree with). Thus, it too he thought, like the grocery business, should be opened up to competition for the sake of consumers. So he has the Economist (Molinari’s own voice of course) argue that:
|Accordez à un épicier la fourniture exclusive d’un quartier, défendez aux habitants de ce quartier d’acheter aucune denrée chez les épiciers voisins, ou bien encore de s’approvisionner eux-mêmes d’épiceries, et vous verrez quelles détestables drogues l’épicier privilégié finira par débiter et à quel prix! Vous verrez de quelle façon il s’engraissera aux dépens des infortunés consommateurs, quel faste royal il étalera pour la plus grande gloire du quartier… Eh bien! ce qui est vrai pour les services les plus infimes ne l’est pas moins pour les services les plus élevés. Le monopole d’un gouvernement ne saurait valoir mieux que celui d’une boutique d’épiceries. La production de la sécurité devient inévitablement coûteuse et mauvaise lorsqu’elle est organisée en monopole.||Grant a grocer the exclusive right to supply a particular part of town, forbid the inhabitants of that district to buy any commodities from neighboring grocers or even to provide themselves with their own groceries, and you will see what trash the privileged grocer will end up selling and at what price. You will see how he lines his pockets at the expense of the unfortunate consumers, what regal splendour he will display for the greater glory of the neighbourhood… Well, what is true for the smallest services is no less true for the greatest ones. A monopoly government is certainly worth more than that of a grocery shop.|
He likens opposition to such a proposal by “un novateur audacieux” (some audacious innovator) or “ce rêveur de la belle manière” (this great dreamer) (like himself perhaps) to the similar opposition which had been expressed during the highly regulatory economic system of ancien régime France before the 1789 Revolution to the liberalizing reforms of politicians like Turgot and the other Physiocrats:
|A l’époque où le régime réglementaire retenait l’industrie prisonnière dans l’enceinte des communes, et où chaque corporation était exclusivement maîtresse du marché communal, on disait que la société était menacée chaque fois qu’un novateur audacieux s’efforçait de porter atteinte à ce monopole. Si quelqu’un était venu dire alors qu’à la place des malingres et chétives industries des corporations, la liberté mettrait un jour d’immenses manufactures fournissant des produits moins chers et plus parfaits, on eût traité ce rêveur de la belle manière. Les conservateurs du temps auraient juré leurs grands dieux que cela ne se pouvait concevoir.||At the time when the regulatory regime kept industry prisoner within its communal boundaries, and when each privileged corporation had exclusive control of the communal market, people said that society was threatened, each time some audacious innovator strove to attack that monopoly. If anyone had come and said at that time that instead of the feeble and stunted industries of the privileged corporations, liberty would one day build immense factories turning out cheaper and superior products, this dreamer would have been very smartly put in his place. The conservatives of that time would have sworn by all the gods that such a thing was inconceivable.”|
Molinari concludes his discussion of the monopolist grocer in Les Soirées by agreeing that in the revolutionary circumstances of his own day (1848–49) the people had every reason to be unhappy with their inefficient and expensive governments and that their unhappiness should extend to the government’s monopoly in providing police services:
|(L)es peuples ont de bonnes raisons pour se débarrasser de leurs vieux dominateurs. Le monopole du gouvernement ne vaut pas mieux qu’un autre. On ne gouverne pas bien, et surtout on ne gouverne pas à bon marché, lorsqu’on n’a aucune concurrence à redouter, lorsque les gouvernés sont privés du droit de choisir librement leurs gouvernants.||(T)he people have good reasons for liberating themselves from [p. 308] their old despots. Monopoly government is no better than any other (monopoly). One does not govern well and above all one does not govern cheaply, when there is no competition to be feared, when the governed are deprived of the right to choose their rulers freely.|
However, the Conservative won’t let the Economist go until he answers the obvious question, “what would the market for security look like in a fully competitive system”? The Economist answers that:
Cela ne regarde pas les économistes. L’économie politique peut dire: si tel besoin existe, il sera satisfait, et il le sera mieux sous un régime d’entière liberté que sous tout autre. A cette règle, aucune exception! mais comment s’organisera cette industrie, quels seront ses procédés techniques, voilà ce que l’économie politique ne saurait dire.
Ainsi, je puis affirmer que si le besoin de se nourrir se manifeste au sein de la société, ce besoin sera satisfait, et qu’il le sera d’autant mieux que chacun demeurera plus libre de produire des aliments ou d’en acheter à qui bon lui semblera.
That (the specifics) does not concern the Economists. Political economy [p. 329] can say: if such a need exists, it will be satisfied and done better in a regime of full freedom than under any other. There is no exception to this rule. As to how this industry will be organized, what its technical procedures will be, that is something which political economy cannot tell us.
Thus I can affirm that if the need for food is plainly visible in society, this need will be satisfied, and satisfied all the better, when each person remains as free as possible to produce food or to buy from whomever he thinks fit.
|Je puis assurer encore que les choses se passeront absolument de la même manière si, au lieu de l’alimentation, il s’agit de la sécurité.||I can give assurances, too, that things will work out in exactly the same way, if rather than food, security is the issue.|
Very confidently, perhaps too confidently perhaps, Molinari concluded this section with the prediction that:
|Je prétends donc que si une communauté déclarait renoncer, au bout d’un certain délai, un an par exemple, à salarier des juges, des soldats et des gendarmes, au bout de l’année cette communauté n’en posséderait pas moins des tribunaux et des gouvernements prêts à fonctionner; et j’ajoute que si, sous ce nouveau régime, chacun conservait le droit d’exercer librement ces deux industries et d’en acheter librement les services, la sécurité serait produite le plus économiquement et le mieux possible.||Therefore, I maintain that if a community were to announce that after a given delay, say perhaps a year, it would give up financing the pay of judges, soldiers, and policemen, at the end of the year that community would not possess any fewer courts and governments ready to function; and I would add that if, under this new regime, each person kept the right to engage freely in these two industries and to buy their services freely from them, security would be generated as economically and as well as possible.|
The Economist’s answer might seem evasive but it is an answer most economists would give today if they too were asked exactly what a market for a good or service might look like in the future. If for example an economist had been asked 30 years ago what the mobile smart phone market would look like today what would they have said? Remember that the first commercial handheld cell phone was the Motorola DynaTAC which was invented in 1984, and the iPhone in 2007. In Molinari’s day the big innovation which was beginning to transform the retail industry in Paris and elsewhere in the 1840s was the department store. Had an economist been asked in the late 1830s what the modern retail industry would look like in 50 years or even in 20 years time they would have been unable to give a satisfactory answer as the effects of this innovation were not readily apparent as the final organisation of the “department” store had yet to be determined.
No economist then could have imagined how this new invention of the competitive market for the sale of consumer goods would transform cities like Paris and the shopping experience for consumers all over the western world. All that lay in the future and is something we now take for granted. A French entrepreneur named Aristide Boucicaut founded the first department store named appropriately enough, “Le Bon Marché” (the cheap or low cost market), in Paris in 1838 which was rapidly evolving into its modern form in the late 1840s and early 1850s with its individual “departments” (or shops within a shop) selling a vast range of goods under one roof, at fixed prices, and offering the customer exchanges or refunds for unwanted purchases. Just as this new phenomenon had emerged unplanned and unanticipated out of the competitive market place for consumer goods, so Molinari imagined a similar new market would emerge for the buying and selling of security services in ways unimagined by economists.
Therefore, Molinari argued perhaps not unreasonably, that he did not believe it was the economist’s job here or in any other area of economic activity to specify in advance exactly how goods and services would be provided at some time in the future, how many companies might be set up to supply these services, at what prices these goods and services would be traded, and so on. This of course would be impossible to do because markets are different in every different place, with different consumer needs, different relative costs of labour and other supplies, and so on. The only things an economist needed to know is whether or not there is a demand for a good or service, whether or not there are people willing to supply this good or service at a given price, and if there are no legal impediments to these two parties coming together to trade with each other; then the economist can say with some certainty that markets will emerge to satisfy this demand.
That economists cannot do this is possibly the Achilles heel of advocates for economic liberty in the eyes of those who want to know beforehand exactly and in some detail what sort of society completely unfettered economic liberty might produce.
Six yers later, after he had relocated to Brussels to escape the oppressive regime of Napoleon III, Molinari returned to the topic of the privatisation of all public goods in the treatise based on his lectures, the Cours d’économie politique (first edition 1855, second edition 1863). This was a much more detailed analysis of the problem which was aimed at academic economists and not the general reader. In fact, the 50 page chapter devoted to the topic of “Public Consumption” is a very important document in classical liberal thinking about the proper functions of the state which needs to be translated into English in its entirety (we include an extract below). Here Molinari returns to his story of the monopolist grocer and uses it rhetorically to show up (even mock) the inconsistencies in the thinking of the other political economists on the matter of the universal application of competition. If everyone could agree that a grocery business with a geographical monopoly created poor service, high prices, and unhappy customers, Molinari asks, why couldn’t they also see that a geographical monopoly of the security business would result in the same thing? Once he had demonstrated the absurdity of this proposition Molinari then went on to explore in much more detail what he called “la liberté de government” (free and competitive governments). By this he meant the political equivalent of “la liberté des échanges” (free trade).
This chapter was written after Molinari had been vigorously attacked for the views he had expressed in Les Soirées at meetings of the Political Economy Society which followed its publication in September 1849 and the chapter should be seen as Molinari’s response to his critics. His article the previous February on “The Production of Security” in the main scholarly journal of the economists was the first expression of his anarcho-capitalist views and the 11th soirée was a continuation of this for a more popular audience. The political economists at their monthly meetings in October 1849 and January and February 1850 took up his challenge and discussed what they thought were the proper functions of the state. They rejected his views unanimously and reaffirmed that in general competition was essential except for a few exceptions, most notably the provision of security which they believed had to be a government monopoly. A spectrum of views were expressed by the members of the Society with Frédéric Bastiat supporting a position which defended the most limited powers of the state (what I would call the “ultra-limited government” position) but which still had a monopoly in the use of coercive power. The other economists defended a range of even more extensive powers for the state.
Molinari perhaps wisely did not attend these meetings but in his writings he expressed frustration at what he thought was their theoretical inconsistency in not seeing that their criticisms of the harmful effects of monopoly applied equally to the state. Furthermore he argued that economists were foolish in not taking this into their account of how governments operated and how their operations might be improved in the future. Molinari in the Cours identified six ways in which the state acted in what he called an “anti-economic” manner, that is to say, violated basic principles of economic theory and which explained why states were so poor at providing services to the taxpayers / consumers. His economic analysis of the state was considerably ahead of its time I would argue and deserves greater attention by historians of economic thought. He also thought his colleagues’s inconsistency extended to politics and history since the monopoly of power held by the state meant that it was in the present and had been in the past captured by vested interest groups who used that power for their own benefit and to coerce other people to do their bidding. He like Bastiat developed a classical liberal theory of class in order to analyse the groups which benefited from the use of political power. Bastiat had his theory of “la classe spoliatrice” (the plundering class), “les classes spoliées” (the plundered classes), and the key idea of “la spoliation légale” (legal plunder) which made the whole class system possible; Molinari had his theory of “les mangeurs de taxes" (tax eaters), “les payeurs de taxes” (tax-payers), and “la classe budgétivore” (the budget eating class) which provided the conceptual framework of his theory of the state which he developed in his two-volume work of political sociology some twenty years later.
Hence the importance of his story of the monopolist grocer in trying to overturn what he called “quelque antique superstition” (some ancient superstition), the idea most people held that the monopoly provision of security by the state was both necessary and god-given.
His story in the Cours had now expanded into a much broader historical account of how society made the transition between the “era of monopoly” where there had been the monopolistic provision of nearly every good and service under the old regime to the “era of competition” where a greater and greater degree of competition in the provision of these goods and services was permitted. Like most of his colleagues in the Political Economy Society he believed that this transition had begun but failed with the reforms attempted by Turgot in the 1760s and 1770s, then partially achieved by the first French Revolution (especially with the decrees of August 4, 1789 which abolished the last remnants of “feudalism”) and then intermittently since then with further setbacks under Napoleon Bonaparte during the Empire and the attempts to create a new welfare state during the1848 Revolution. Molinari thought that the pressure to open up more and more of the economy to competition was intense and would grow greater in the near future until each and every sector, including things traditionally monopolized by the state, were provided privately and competitively. In this historical account Molinari used the story of the grocer as a typical example of a small-scale, local monopoly which may have been useful and necessary at an earlier stage of society (the “era of monopoly”) but which was now no longer necessary or useful now that society was gradually being exposed to the forces of competition as it entered a new “age of competition.” He believed that it was only a matter of time before all government monopolies were broken up and the services they had provided would be provided by privately owned companies competing for business in a free market.
Of courses for Molinari, “the grocer” was a rhetorical prop for his real intention which was to argue for the private and competitive “production o security.”
I believe the entire section about the “monopolist grocer” is worth quoting at length to get a sense of Molinari’s thinking on this important topic. Before doing so one needs to appreciate the following related aspects of his theory of the state and economic development:
Au moment où nous sommes toutefois, cette unité économique ne semble pas près encore d’être reconstituée. Tandis que les entreprises qui pourvoient à la consommation privée sont déjà, pour le plus grand nombre, placées sous le régime de la concurrence, les gouvernements producteurs des services publics se trouvent encore attardés dans le vieux régime du monopole. De là, une situation anormale et périlleuse, car, de même que des gouvernements communautaires ne pouvaient plus suffire à des sociétés qui étaient entrées dans la phase du monopole, des gouvernements de monopole ne peuvent plus suffire à des sociétés qui sont entrées dans la phase de la  concurrence. En termes plus brefs, si les gouvernements de la première phase étaient antiéconomiques dans la seconde, ceux de la seconde doivent être antiéconomiques dans la troisième.
Nous nous servirons encore d’une simple comparaison pour mettre en pleine lumière ce défaut d’unité qui se manifeste de plus en plus entre la constitution des gouvernements et celle de la multitude des entreprises entre lesquelles se partage l’activité sociale. Reportons-nous à la boutique de village, et recherchons quand elle s’établit et comment elle se développe. Elle s’établit quand les familles dont la réunion constitue la société embryonnaire du village sont devenues assez nombreuses et assez aisées pour lui fournir un débouché permanent, et pour procurer ainsi des moyens d’existence suffisants au boutiquier. A l’origine toutefois le boutiquier est obligé, à cause de l’exiguité de son marché de consommation, d’exercer avec son commerce un ou plusieurs métiers et de comprendre dans ce commerce des articles fort divers. Mais que le village devienne un bourg, puis une ville, que le “marché” de la boutique s’étende en conséquence, le boutiquier devra spécialiser davantage ses occupations et sa vente. S’il continue à exercer quelque autre métier, il ne pourra plus suffire à son commerce dont le débouché aura grandi. S’il continue à débiter les mêmes articles, il lui sera également de plus en plus difficile d’y suffire, car la consommation exigera à la fois une plus grande quantité et un assortiment plus varié de chaque marchandise. S’il s’agit de coutellerie, il lui faudra désormais non seulement des couteaux, mais encore des ciseaux, des canifs, des rasoirs, etc.; s’il s’agit de parfumerie, au lieu d’une espèce grossière de savon, il lui en faudra d’une douzaine de qualités, sans parler des essences et des cosmétiques. De boutiquier devenu commerçant dans un  marché de consommation agrandi, il devra donc spécialiser de plus en plus son commerce. Au lieu de vendre des épiceries, de la mercerie, de la parfumerie, de la coutellerie, il devra se borner à vendre des épiceries ou même une seule sorte d’épiceries, du thé ou du café par exemple. Bref, au lieu d’exercer une vingtaine de commerces à l’état embryonnaire, il devra se borner à en exercer un à l’état de spécialité. Les choses ne manqueront pas de se passer ainsi, en admettant que le commerce demeure libre dans les phases successives du développement économique du village. Dans ce cas, la pression de la concurrence obligera le boutiquier primitif à spécialiser sa vente; car, en la maintenant sur l’ancien pied, il s’exposerait à perdre sa clientèle, qu’il ne pourrait plus servir aussi bien et à aussi bas prix que ses concurrents dont les établissements seraient spécialisés. Mais il en sera autrement si le boutiquier, d’abord investi du monopole naturel de l’approvisionnement du village, a eu assez de pouvoir ou d’influence pour maintenir ensuite ce monopole à l’état artificiel. Dans ce cas, comment les choses se passeront-elles? Le boutiquier continuera d’exercer son commerce sur l’ancien pied; seulement, à mesure que son débouché s’agrandira, il sera obligé d’augmenter les proportions de son établissement, et finalement, lorsque le village sera devenu une grande ville, d’en faire un bazar colossal. Que s’il lui est impossible de subvenir à une demande qui comprend maintenant autant de milliers d’articles qu’elle comprenait primitivement d’unités, il abandonnera peut-être quelques-unes des branches les moins lucratives de son monopole, ou du moins il tolérera l’établissement de quelques autres magasins pour ces branches secondaires, à la condition qu’ils ne subsisteront que sous son bon plaisir et qu’ils lui payeront tribut. En revanche, il ne  manquera pas de conserver et de défendre avec un soin jaloux les branches principales de son monopole.
Cependant, à mesure que le marché de consommation s’agrandit et se diversifie, l’établissement de l’épicier monopoleur se trouve placé dans des conditions de production moins économiques. Tandis que les autres branches de travail se séparent en vertu du principe de la division du travail, se développent dans leurs limites naturelles et se perfectionnent sous le stimulant de la concurrence, celles qu’il monopolise grandissent artificiellement, en dehors de ces conditions organiques de la croissance économique. Qu’en résulte-t-il? c’est que les industries de concurrence livrent à la consommation des produits de plus en plus parfaits et à des prix décroissants, tandis que le commerce monopolisé demeure chaque jour davantage en retard sous ce double rapport. Néanmoins, si ce commerce porte sur des articles indispensables à la consommation, les bénéfices du monopoleur croîtront quand même, par le seul fait de l’agrandissement progressif du marché.
Poursuivons jusqu’au bout notre hypothèse. A mesure que les progrès des industries de concurrence rendront plus sensible et plus dommageable le retard de perfectionnement du commerce monopolisé, les consommateurs murmureront davantage contre ce monopole. Cependant, s’il est sauvegardé par quelque antique superstition, si l’on est universellement convaincu qu’il est dans la nature du commerce de l’épicerie d’être exercé sous forme de monopole, on se bornera d’abord à le réglementer, en imposant au monopoleur l’obligation d’approvisionner convenablement le marché qui lui est inféodé, comme aussi peut-être en soumettant ses marchandises à un maximum. Peut-être enfin, les consommateurs chargeront-ils des délégués de veiller  à ce que cette réglementation préservatrice de leurs intérêts soit strictement observée. Le monopoleur s’efforcera naturellement de repousser une semblable immixtion dans ses affaires, et il emploiera pour s’en débarrasser tantôt la violence et tantôt la corruption. En admettant qu’il réussisse à remettre les consommateurs complétement à sa merci, il aura le choix entre deux partis: 1° Il pourra interdire, sous des peines rigoureuses, toute plainte au sujet de la qualité et du prix de ses marchandises, et jouir ainsi de son monopole avec quiétude. Mais alors la société retardée et épuisée par un monopole sans frein ira s’affaiblissant, et elle finira par périr en entraînant le monopoleur dans sa ruine. 2° Il pourra donner satisfaction à ses consommateurs mécontents, en améliorant ses marchandises sous le double rapport de la qualité et du prix, mais l’assiette antiéconomique de son commerce l’empêchera quoi qu’il fasse, d’opérer cette amélioration d’une manière suffisante et durable. Le mécontentement renaîtra bientôt, et si les consommateurs ont crû en nombre et en puissance, ils réussiront peut-être, à leur tour, à mettre le monopoleur à leur discrétion. Quelles seront les conséquences de cette “révolution?” De deux choses l’une, ou les consommateurs se borneront à imposer au monopoleur un ensemble de règles et de garanties destinées à assurer la bonne qualité et le bas prix de ses marchandises, en d’autres termes, ils l’obligeront à accepter une constitution, ou ils voudront exploiter pour leur propre compte le monopole de l’épicerie en constituant une gérance et un conseil de surveillance ad hoc, avec diverses précautions pour en assurer la bonne gestion, mais l’un et l’autre remèdes seront presque également inefficaces. De quelque façon qu’il soit organisé et géré, le monopole de cette multitude de branches dans lesquelles se  ramifie maintenant le petit commerce de l’épicier primitif n’en demeurera pas moins antiéconomique, et, chaque jour même il le deviendra davantage; chaque jour, en conséquence, il causera à la société des nuisances plus nombreuses et plus sensibles. Peut-être cherchera-t-on alors des remèdes d’une autre nature à ce mal chronique. On s’imaginera, par exemple, que le débouché ouvert au commerce monopolisé est insuffisant, et l’on s’efforcera de l’agrandir par “l’annexion” de nouveaux consommateurs, ou bien encore on se persuadera que le mal vient de ce que ceux qui vendent les épiceries et ceux qui les achètent n’appartiennent pas tous à la même race, et l’on s’appliquera à réorganiser le monopole de l’épicerie conformément au “principe des nationalités.” Mais l’expérience ne tardera pas à démontrer que ces soi-disant panacées aggravent le mal au lieu de le guérir. Enfin, en désespoir de cause, la série des remèdes empiriques étant épuisée, on aura recours aux procédés de l’observation et de l’analyse pour remonter à la source du mal, et l’on découvrira, non sans surprise, qu’il n’est pas vrai, ainsi que les monopoleurs s’étaient appliqués à le faire croire, le croyant du reste eux-mêmes, que le monopole soit la forme nécessaire et providentielle du commerce de l’épicerie. En conséquence, au lieu de poursuivre l’œuvre impossible d’une meilleure “organisation” de ce monopole, on travaillera à le démolir, en faisant passer successivement les différentes branches de commerce qui s’y trouvent agglomérées, dans le domaine de la concurrence. Cette agglomération contre nature étant dissoute, chaque branche devenue libre pourra se développer dans ses conditions normales, en proportion des besoins du marché, et la société débarrassée d’un monopole qui la retardait et l’épuisait croîtra plus rapidement en nombre et en richesse.
C’est là l’histoire des gouvernements depuis que la société a commencé à passer de la phase du monopole dans celle de la concurrence.
However, this economic unity does not yet seem to have been achieved in the position in which we currently find ourselves. Whilst enterprises which provide (goods and services) for private consumption are already for the most part to be found in the regime of competition (le régime de la concurrence) government producers of public services (les gouvernements producteurs des services publics) are still found to be held back in the old regime of monopoly. As a result, (there is) an abnormal and dangerous situation because, just as communal/local governments are no longer adequate for societies which had (earlier) entered the phase of monopoly, governments based upon monopoly (des gouvernements de monopole) can no longer be adequate for societies which have entered the phase of competition.  In short, if the governments in the first phase (of development) were anti-economic in the second (phase), those in the second phase will be anti-economic in the third (phase).
We will now use a simple comparison to show as clearly as possible this lack of unity which is increasingly revealed between the nature of the governments and that of the multitude of enterprises among which social activity is divided. Let me return to the village (grocery) shop (la boutique) and examine when it was established and how it developed. It was established when the families, who got together to form the embryonic society of the village, became numerous enough and well off enough to provide it with a permanent market, and to thus provide a sufficient standard of living for the shopkeeper. However, in the beginning the shopkeeper was obliged, because of the smallness of the market for consumer goods, to practice along with his commercial (activity) one or more other jobs and to sell many different products. But as the village became a town and then a city, and as the “market” of the shop was extended as a result, the shopkeeper had to specialize more and more in his activities and in the things he sold. If he continued to carry out some other tasks he would no longer be able to adequately carry out his business whose market will have increased (so much). If he continued to supply the same goods it would become equally difficult to satisfy (demand) because consumers would demand both a greater quantity and a more varied type of each product. If it was a matter of cutlery, henceforth he would need not only knives but also scissors, pocket knives, and razors, etc. If it was a matter of toiletries, instead of just having a basic kind of soap he would have to have a dozen different kinds, not to mention with different perfumes and cosmetic properties. The shopkeeper would become a merchant in a consumer market  which had become much larger. Instead of selling groceries, millinery goods, toiletries, and cutlery, he would have to limit himself to selling groceries or even a single kind of grocery, such as tea or coffee for example. In brief, instead of undertaking 20 different kinds of commerce in the embryonic state, he will have to limit himself to undertaking (only) one of them in a state of (the) specialisation (of labour) (l’état de spécialité).
Thus things will inevitably happen in this way, if one assumes that commerce remains free in the successive phases in the economic development of the village. In this case the pressure of competition will oblige the original shopkeeper to specialize in his sales; because, by remaining in his old situation he would expose himself to losing his clients, as he could no longer serve them as well and at as low a price as his competitors whose businesses would have specialized. But things would have been different if the shopkeeper, who at the beginning had been invested with a natural monopoly in supplying the village, had had enough power or influence to maintain henceforth this monopoly in an artificial form (à l’état artificiel). In this case, how would things have happened differently? The shopkeeper would continue to carry out his business on its original basis. However, to the degree that his market increased, he would be obliged to increase the size of his establishment, to the point that if the village had become a great city he would have to turn it into an enormous bazaar (un bazar colossal). If it became impossible to cater to a demand which now included many thousands of goods when once it it included only one, he perhaps might abandon some branches of the business which were less lucrative, or at least tolerate the establishment of some other shops for these secondary branches, on condition that they would survive only at his good pleasure and that they would pay him (some kind of) tribute. In return, he would not fail  to keep and defend jealously the principle branches of his monopoly.
However, to the degree that the market for consumer goods and services [le marché de consommation] grows and diversifies, the establishment of the monopolist grocer (l’établissement de l’épicier monopoleur) will find itself in a position where production becomes less economic. While all the other branches of economic activity become specialized as a result of the division of labour, develop within their natural limits, and improve themselves under the stimulus of competition, those which (have a) monopoly grow artificially outside these organic conditions of economic growth. What is the result of this? It is that competitive industries (les industries de concurrence) provide products for consumption which are steadily improving (in quality) and (are offered) at an ever decreasing price, while commerce which has been monopolised (le commerce monopolisé ) is held back in both these respects. Nevertheless, if this (monopolized) commerce brings to the market (consommation) goods which are indispensable, the profits of the monopolist will increase as well for the sole reason that there is steady growth in the size of the market.
Let us follow our hypothesis (notre hypothèse) to the end. To the extent that the progres of competitive industries (des industries de concurrence) makes the lack of improvement of monopolized commerce more noticeable and more damaging, consumers will complain more about this monopoly. However, if it is protected by some ancient superstition (quelque antique superstition), if everybody is convinced that it is the nature of the grocery business that it be exercised as a monopoly, (then the complaints) will be limited at first to regulating it, by imposing on the monopolist the obligation to properly supply the market which has been “enfeoffed” to it (le marché qui lui est inféodé), perhaps just as (prices) for some products (under the old regime) were subject to a maximum (price). Perhaps finally, consumers will instruct their representatives  to make sure that this regulation which protects their interests is strictly observed. The monopolist will naturally attempt to avoid such an intervention in its affairs and will try to get around it, sometimes by using violence and sometimes by using corruption. By admitting that it might succeed in again having consumers completely at its mercy, it (the monopolist) will have a choice between two courses of action: firstly, it will be able to prevent under threat of harsh penalties all complaints concerning the quality and the price of its products and thus to enjoy its monopoly in peace. But then society which has been held back and exhausted by an unchecked monopoly will continue to grow weaker and it will end up dying, thus leading the monopoly to its ruin. Secondly, it will provide satisfaction to its unhappy consumers by improving its products in both quality and price, but the anti-economic foundation (upon which) its commerce/business rests will prevent it from doing this, namely to carry out this improvement in a satisfactory and lasting manner. The unhappiness will soon return and if the consumers have grown in numbers and strength they in turn will succeed in getting the monopolist under their control.
What would the consequences of this “revolution” be? One of the following options: either the consumers will limit themselves to imposing on the monopolist a collection of rules and guarantees designed to ensure the high quality and the low price of its products, in other words they will oblige it to accept a “constitution”; or they will want to carry out the monopoly of the grocery business themselves by establishing an ad hoc board of management and a supervisory council, with several precautions (in palace) in order to ensure its good management. However, both remedies will be equally ineffective. In whatever manner it might be organised and managed, the monopoly with this multitude of branches into which the small business of the primitive grocery shop has spread will not be any less anti-economic, and every day it will become more so. As a result every day it will create in society more numerous and more painful harms (les nuisances). Perhaps someone will then look for remedies of another kind for this chronic illness (ce mal chronique). One could imagine for example that the market which is open to this monopolised commerce is inadequate and one might attempt to expand it by “the annexation” of new consumers; or one might be persuaded that the harm comes from (the fact that) those who sell the groceries and those who buy them don’t all belong to the same race and one could attempt to reorganize the monopoly of the grocery business to conform to the “principle of nationality”. But it will not take experience long to show that these so-called panaceas will aggravate the illness instead of curing it.
Finally in desperation, the series of experimental remedies having been exhausted, one might have recourse to the processes of observation and analysis in order to reveal the source of the illness, and one will discover that, not to anyone’s surprise, that it is not true, as the monopolists have attempted to make us believe, nevertheless believing it themselves, that monopoly is the necessary and providential (god given) form for the grocery business (du commerce de l’épicerie). As a result, instead of pursuing the impossible task of (finding) a better “organisation” of this monopoly, one could work on demolishing / destroying it (démolir), by pushing one after the other the different branches of commerce which one finds amalgamated here (in it) into the domain of competition. Once this unnatural amalgamation (conglomerate) is dissolved, each branch will become free to develop under its normal conditions, in proportion to the needs of the market, and society, once it is freed from a monopoly which has held it back and exhausted it, will grow more rapidly in number / size and in wealth.
This has been the history of governments since society began to move from the phase of monopoly to that of competition.
Fifty years later Molinari was still putting forward much the same “hypothesis” even though he had had no support from his colleagues then or in the intervening period. In an essay he published towards the end of his life in the Journal des Économistes in 1904 he asks perhaps rather forlornly “Où est l’utopie?” (Where is Utopia?). His answer was that it had been postponed as a result of the rise of socialism, protectionism, militarism, and colonialism, but he was confident that its realisation in a classical liberal form was still possible. This suggests that his radicalism had barely weakened over the years and that his vision of a completely free market in everything operating everywhere was still with him. In this essay he is still putting forward his “hypothesis” about the desirability of competition in all things, but without using the prop of the “monopolist grocer” to assist him:
|Faisons maintenant une hypothèse. Supposons que cette action de la concurrence puisse, un jour, s’opérer sans obstacles sur toute la surface du globe et dans toutes les branches de l’activité humaine ; que tous les marchés, maintenant encore séparés par des barrières naturelles ou artificielles, ne forment plus qu’un seul et vaste marché …||Let me now put forward a hypothesis. Let us suppose that one day this process of competition is operating across the entire surface of the globe and in all areas of human activity without any obstacles in its way; that all the markets which are currently separated by natural or artificial barriers now make up one single vast market …|
|Nous convenons volontiers que cette hypothèse peut sembler chimérique, mais lorsque nous considérons l’avenir que nous prépare le régime protectionniste, étatiste et militariste actuellement en vigueur dans toute l’étendue du monde civilisé, et celui par lequel le socialisme se propose de le remplacer, nous nous demandons si cet avenir ne serait point par hasard encore plus utopique que le nôtre.||We readily agree that this hypothesis might seem fanciful, but when we consider the future being prepared for us by the protectionist, statist, and militarist regime which is at present in power throughout the entire civilised world, and that which the socialists plan to put in its place, we have to asks ourselves if this future wouldn’t end up being even more utopian than ours.|
His continued belief in this radical “hypothesis” shows a remarkable consistency in his thinking which spanned half a century. The fact that he never gave up hope in it or the prospects for liberty even when the tide was turning against liberalism in the late 19th and early 20th centuries is something which might inspire us in these dark days of lockdown socialism and public health Keynesianism.
Gustave de Molinari, Les Soirées de la rue Saint-Lazare; entretiens sur les lois économiques et défense de la propriété (Paris: Guillaumin, 1849). Online version in French: http://oll.libertyfund.org/titles/1344. Draft translation: https://oll.libertyfund.org/pages/gdm-soirees3. ↩
Gustave de Molinari, Cours d’économie politique, professé au Musée royal de l’industrie belge, 2 vols. (Bruxelles: Librairie polytechnique d’Aug. Decq, 1855). 2nd revised and enlarged edition (Bruxelles et Leipzig: A Lacroix, Ver Broeckoven; Paris: Guillaumin, 1863). Online version: http://oll.libertyfund.org/titles/1829. ↩
See David M. Hart, “Negative Railways, Turtle Soup, talking Pencils, and House owning Dogs”: “The French Connection” and the Popularization of Economics from Say to Jasay“ (Sept. 2014) http://davidmhart.com/liberty/Papers/Bastiat/BastiatAndJasay.html. A shortened version was published by the Independent Institute: David M. Hart, ”Broken Windows and House-Owning Dogs: The French Connection and the Popularization of Economics from Bastiat to Jasay," Symposium on Anthony de Jasay, The Independent Review (Summer 2015), vol. 20, no. 1, pp. 61–84. Online https://www.independent.org/publications/tir/article.asp?id=1065. ↩
Draft translation https://oll.libertyfund.org/pages/gdm-soirees3#toc39. ↩
Cours, vol. 2, p. 512. https://oll.libertyfund.org/titles/653#Molinari_0253-02_596. ↩
In S11 he refers to “un épicier (avec) la fourniture exclusive d’un quartier” (a grocer with the exclusive right to supply a particular district. p. 308 https://oll.libertyfund.org/titles/1344#Molinari_0383_1399) and “l’épicier privilégié” (the legally privileged grocer,
p. 308 https://oll.libertyfund.org/titles/1344#Molinari_0383_1399). In the Cours he refers to “l’épicier monopoleur” (the monopolist grocer) (p. 512
https://oll.libertyfund.org/titles/653#Molinari_0253-02_595) or simply as “la boutique de village” (the village (grocery) shop) p. 510 <https://oll.libertyfund.org/titles/653#Molinari_0253–02_594>. ↩
Les Soirées, p. 308 https://oll.libertyfund.org/titles/1344#Molinari_0383_1399. ↩
Les Soirées, p. 329. <https://oll.libertyfund.org/titles/1344#Molinari_0383_1515>. ↩
Les Soirées, p. 307.https://oll.libertyfund.org/titles/1344#Molinari_0383_1399. ↩
Les Soirées, pp. 328–29. <https://oll.libertyfund.org/titles/1344#Molinari_0383_1510>. ↩
Les Soirées, p. 329. <https://oll.libertyfund.org/titles/1344#Molinari_0383_1513>. ↩
The phrase “un gouvernement à bon marché” (a cheap or bargain priced government) was later adopted by Molinari to describe the kind of government he wanted to see. The phrase is used in S11, p. 309 https://oll.libertyfund.org/titles/1344#Molinari_0383_1399 and dozens of times in Cours d’économie politique in relation to how government services should be provided. ↩
Cours d’économie politique (1863), vol. 2, Quatrième Partie. De la consommation. Douzième Leçon. Les consommations publiques, pp. 480–534. <https://oll.libertyfund.org/titles/653#lf0253–02_head_025>. ↩
“De la production de la sécurité,” Journal des Économistes, S. 1, T. 22, N° 95, 15 février 1849, pp. 277–290. It was popular enough to be re-issued as a separate pamphlet: Molinari, Gustave de. De la Production de la sécurité, par M. G. de Molinari. Extrait du n° 95 du “Journal des économistes”, 15 février 1849. (Paris : Guillaumin, 1849). In–8° , 16 p. It was translated for the first time by J. Huston McCulloch. “The Production of Security,” Occasional Paper Series no. 2 (New York: Center for Libertarian Studies, 1977). See my revised and corrected translation. ↩
On the evolution of Molinari’s ideas about the production of security, see David Hart, ”Was Molinari a true Anarcho-Capitalist?: An Intellectual History of the Private and Competitive Production of Security,” a paper at the Libertarian Scholars Conference, NYC (Sept. 2019) <davidmhart.com/liberty/Papers/Molinari/ProductionSecurity/index.html>. ↩
The minutes of these meetings can be found here: “Séance de 10 oct. 1849,” in “Chronique,” JDE, T. 24, no. 103, October 1849, pp. 315–16; also ASEP (1889), pp. 82–86; “Séance de 10 jan. 1850,” in “Chronique,” JDE, 15 January 1850, T. XXV, pp. 202–205; also ASEP (1889), pp. 94–100; and “Séance de 10 fev. 1850,” in “Chronique,” JDE, T. XXV, no. 107, 15 fev., 1850, pp. 202–5; also ASEP (1889), pp. 100–5. ASEP is Annales de la Société d’Économie politique, publiées sous la direction de Alphonse Courtois fils, secrétaire perpétuel (Paris: Guillaumin, 1889). ↩
See my note on “Bastiat’s Theory of Class: The Plunderers vs. the Plundered” in Further Aspects of Bastiat’s Thought, in Bastiat, Collected Works, vol. 3, pp. 473–85. https://oll.libertyfund.org/titles/2731#lf1573-03_head_235. ↩
Gustave de Molinari, L’évolution économique du XIXe siècle: théorie du progrès (Paris: C. Reinwald 1880); and L’évolution politique et la Révolution (Paris: C. Reinwald, 1884). ↩
Cours (1863), vol. 2, pp. 509–15. ↩
“Où est l’Utopie?” (JDE, 1904) republished in Questions économiques à l’ordre du jour (Paris: Guillaumin, 1906), pp. 377–80. ↩