11. Extracts from “Letters on the Grain Trade”

CHAPTER 11

Extracts from “Letters to the Contrôleur-général on the Grain Trade”

FIRST LETTER

Limoges, 30 October

he first letter is more or less a preamble to what is to follow. Turgot’s argument in it can be summarized as follows: I have promised to write you on the advantages of the free trade in grain, and propose to deal with this subject in a considerable amount of detail. You have not given me enough time to reply to your request for advice on this subject, since it deserves to be treated at book length and time is too pressing. However, you owe it to the public, to the King, and to yourself as minister, to treat this matter carefully, since it has repercussions on the whole country and not just on agriculture. The problem is also controversial; on the one hand, the economists have supported freedom of the grain trade; while on the other, many reputable writers have opposed this policy.]

SECOND, THIRD, AND FOURTH LETTERS

Tulle, 8 November; Egletons, 10 November; Bort, 13 November

[These letters have unfortunately been lost, and only du Pont’s summaries have been preserved. These are reproduced by Daire and Schelle, but will not be summarized here. The second letter deals with the “interests of the cultivator,” the third with the possibility of establishing grain stores, and the fourth with a statistical analysis of the average price of grain, and some further conclusions on grain stores.]

FIFTH LETTER

Saint-Angel, 14 November

Sir, at the end of the letter which I had the honor of writing you from Bort yesterday on the freedom of the grain trade, I promised you a fifth letter, intended to discuss the arguments with which you presented me at Compiègne, and with which you then appeared to be greatly taken.

“Three types of people,” you said, “are interested in the selection of a plan for the policy of grain: the proprietors of landed estates, the cultivators, and the consumers.

I agree that the system of freedom is immensely favorable to the proprietors.

In connection with the cultivators, the advantage of such a system for them is purely a temporary one, since on the expiration of the leases, the proprietors are well versed in appropriating the whole of this advantage for themselves by increasing their rents.

Finally, the consumers obviously suffer the greatest harm from the freedom, which raises the prices to a level which no longer has any relation to their means of subsistence, and which increases all their expenses.”

You even added on that occasion “that, in the last few years, it had cost the King several million for the excess value of bread which it was necessary to grant the troops.”

You concluded from this that “the policy of freedom was favourable only to a very small number of subjects; that it is immaterial to the cultivators, and that it is most harmful by far to the greatest number of the King’s subjects.”

I do not think I am mistaken in the exposition of your arguments; allow me now, sir, to take up its three aspects in succession.

You agree, first of all, that the policy of freedom is very advantageous to the proprietors, whose revenues it increases. We are certainly very much in agreement on this conclusion; but I doubt whether we are as much in agreement on the principles from which we derive it, and, as these principles are very important, I will stop to discuss them.

First of all, however, I want to point out all the advantages you granted me by admitting that the policy of freedom increases the revenue of the proprietors.

This revenue, sir, is the security for all the mortgaged income from landed property.

It is the source of the greater part of the wages, which enable the people to live, for the people, the day-laborer, the artisan, have nothing by themselves; they live on the produce of the soil; they obtain this produce only by buying it with their labor, and can buy it only from those who gather it and who pay them for their work with that produce or with the money which represents it. It is therefore the sum of subsistence goods or rather, the mass of values produced annually by the soil which forms the fund of the wages for distribution to all classes of society. The cultivator immediately consumes what is necessary for his subsistence; the rest is divided between him and the proprietor; and both, by their expenses, whether these have as objective the continuation or the improvement of cultivation, or whether they are limited to the satisfaction of their needs, distribute this remainder in wages to all the other members of society as the price of their labor. The values which the latter have received return to the hands of the cultivators through the purchases of commodities they consume, to leave them again by a circulation the continuity of which is essential to the life of the body politic, just as the circulation of the blood is essential to the life of the animal body. Anything that increases the sum of values produced by the soil increases, therefore, the sum of wages to be distributed among the other classes of society.

Finally sir, the revenues of the proprietors are the only source from which the State can draw its revenue. No matter in what manner the taxes are levied, and in what form they are collected, in the final analysis they are always paid by the proprietors of landed estates, either through the increase of their expenses, or through the decrease of their receipts.

The self-evidence of this truth is very easily shown, for it is quite clear that every tax imposed on consumption will be paid forthwith, in part by the proprietors, in part by the cultivators, in part by the stipendiary class, since these three classes consume and since every consumer is included in one of these three classes.

There is no problem with respect to the portion which the proprietor pays on his own consumption.

The part paid by the cultivator is evidently an increase in the costs of cultivation, since these costs consist of the whole of the cultivator’s expenditure, they must return to him every year, with a profit, in order that he may be able to continue his cultivation, and he must necessarily deduct the whole of these costs from the products before determining the portion of the proprietor, or the rent, which is reduced accordingly. The proprietor therefore still pays this portion of the tax through the reduction of the revenue.

The part which the wage earners pay on their consumption thus remains; but it is very clear that if the competition of workmen on the one hand, and those who spend, on the other, had fixed the daily wage at 10 sous, and the wage earner lived on those 10 sous (it is well known that the wage of a man who has only his arms is ordinarily reduced to what is necessary for the subsistence of himself and his family); if, I say, it is then assumed that a new tax on his consumption increases his expenses by 2 sous, it is necessary that his day’s work be paid more dearly, or that he reduce his consumption. It is obvious that if he is paid more for his day’s work, this is at the expense of the proprietor or the cultivator, since they alone have the wherewithal to pay, and when it is the cultivator who pays, it is still at the expense of the proprietor, as I have shown above; but the less well off the laborer, the less domineering he can be, and the proprietor will at first not give in easily to the increase in wages. It will be necessary for the wage earner to reduce his consumption and to suffer. Now, this decrease in consumption will diminish the demand for commodities in proportion, and in the final analysis, always that for subsistence goods. These goods, consequently, will decrease in value; now, this decrease in value, on whom does it fall? On the seller of the commodity, on the cultivator, who, deriving less from his cultivation, will give proportionately less to his proprietor in rent. The latter therefore pays all in every case.

In reality, this forced reduction in the consumption of the day laborer could not be permanent, because it puts him in a state of penury. Before the tax, wages were on a level with the customary price of commodities, and this level, which is the result of a multitude of causes combined and balanced with each other, must tend to re-establish itself. It is certain that competition, by causing wages to be at a lower level, reduce those of the simple unskilled workers to what is necessary to their subsistence. It should not be thought, however, that this necessity is thus reduced to the essentials for avoiding starvation to such an extent, that nothing remains outside it, which these men may have at their command either to obtain some little luxuries, or, if they are thrifty, to create a little movable fund which becomes their resort in unforeseen cases of sickness, or times of high prices, or unemployment. When the objects of their expenditure increase in price, they first begin to cut down on this little superfluity and the enjoyments it can procure for them. But it is of this type of luxury especially, that it can be said that it is a most necessary thing; it is essential that there is a little of it, just as it is necessary that there is some play in every machine. A watch of which all the wheels would work into each other with mathematical precision and without the smallest gap, would soon cease to go. If by an unexpected decrease in wages or increase in expenses, the worker can put up with being reduced to strict essentials, the same causes which had forced wages to rise a little above the necessary of yesterday, continue to operate and cause them to rise once more until they attain a higher level, in the same proportion with the necessary of today. If an absence of the ability to pay stands in the way of this return to the natural proportion, if the decrease of the revenue of the proprietors persuaded them to resist this increase in wages, the worker would go elsewhere to look for the competency without which he cannot exist; population would diminish up to the point where the decrease in the number of workers, by curtailing their competition, enables them to lay down the law and to force the proprietors to raise wages. I admit, if the lowness of the price of produce caused by the decrease in consumption continued, the increase in wages would be less considerable; but this lowness of the price of commodities having diminished the profits of the cultivator, would force him to diminish his productive expenditure, and consequently, production: now, from the smaller production an increase in price must result. If each of these effects occurred to the fullest extent, the loss resulting from the new tax would fall on the proprietors in several different ways, since he would have less revenue and would not be able to obtain the same objects of enjoyment with the same revenue, which would cause a double loss. But there is reason to believe that the one compensates the other, without it being possible to determine just how they compensate, and if they balance completely. In whatever way this compensation occurs, and even supposing it to be complete, it follows at least that the proprietor always bears the whole of the new tax, either in the increase of his expenses, or in the decrease in his revenue.

The question of who pays import duties must also be considered. In a large State, foreign trade is small as compared with domestic trade, because objects of foreign trade are usually luxuries. There are some exceptions to this, like the trade with the American colonies, which is a trade in necessities. The only enduring type of trade is that trade where imports and exports balance in the long run, and where the balance of trade is therefore small compared with the volume of trade. In such trade, import duties will reduce the volume of trade and raise the price of imported commodities, which increase is ultimately borne by the revenue of the proprietors.

Be that as it may, the principle that the whole of the tax is paid by the proprietors and from the revenue of the soil, must be regarded as unchangeable. And it is very essential that the revenue of the soil, that is, the part of the produce which remains after the deduction of the expenses of cultivation, the wages and profit of the cultivator, pays the whole of the tax; for everything else, whether produce from the soil, or profit of any type whatsoever, is destined for the reproduction and the continuation of work of every kind, on which the whole edifice of society depends. In the world, there is only land and human labor: it is by labor that the land produces; it is the produce of the soil which pays the wages of labor, and, generally, all the labor which is required in the service of society, and which occupies the different classes of men.

From the produce of the soil, the cultivator must first deduct his subsistence, and that of his family, since this is the indispensable wage of his labor, and the motive which induces him to cultivate; next, the interest on his advances, and this interest must be sufficiently high for him to discover an appreciable advantage in placing his capitals in agricultural enterprises, rather than in any other form. Without these two conditions, agriculture would lack advances, and advances are no less necessary there than human labor. The cultivator must also appropriate the wherewithal to meet all the expenses which the continuation of his cultivation requires, for without these expenses, the reproduction of the following year would cease.

This then is the share of the cultivator; it is inviolable, and tyranny could encroach upon it only at the risk of stopping the reproduction, and of damaging the source of taxation. In vain the cultivator is taxed personally; he must either be able to pass on the tax to the proprietor, or reduce his cultivation.

The surplus produce, that which remains after the portion of the cultivator has been deducted, is the net product or the revenue of the soil. It is this net product which the cultivator is able to hand over, and which indeed he does hand over to the proprietor in order to obtain permission from him to cultivate. It is also from this net product, at the expense of the revenue of the proprietor, that all the charges on the land are taken: the tithe of the Clergy, the rent of the lord, and the tax levied on behalf of the King. And it is very essential that all this is taken from the net product, for only this net product is disposable; only this portion of the fruits of the earth is not absolutely necessary for the reproduction of the following year. The remainder is the share of the cultivator, an inviolable share as has been said, which cannot be encroached upon without stopping all activity in the political system.

All the wages of the workmen, all the profits of the entrepreneurs in every type of manufacture and trade, are paid, partly by the cultivator, namely, for the expenditure required by the satisfaction of their needs, or by the work of their cultivation; partly by the proprietors and the other partakers of the net product, such as the clergy, the fund holder, the sovereign, for the expenses they pay from this net product to obtain all the objects of pleasure, or usefulness, whether individual or public. All these wages, all these profits, are no more disposable than the share of the cultivators in the fruits of the earth; competition necessarily limits them to what is essential for the subsistence of the simple working man, to that interest on the advances of all manufacturing and commercial enterprises, and to that indispensable profit of the entrepreneurs, without which they would prefer other uses of their money, which would entail neither the same risk nor the same effort. I have demonstrated above how the whole part of the tax which, it might be imagined, they could be made to pay, would, in the final analysis, always fall on the proprietor alone.

This digression is longer than I had intended, but the importance of the revenue to the kingdom had to be demonstrated to you. I will now return to the major objective of this letter, that is, the discussion of the three points put forward by you.

Your arguments rest on your erroneous assumption that the effect of the policy of freedom will be dearer grain. This is not necessarily true, as the statistics of average grain prices show. The assumption, so often put forward, that a large part of the harvest will be exported when the policy of free trade is adopted, similarly does not necessarily follow. The English, in spite of their encouragement of exports, do not export a great deal of grain.

There are, on the contrary, some very strong reasons to believe that the average price will fall. I have pointed out above that the price is determined by a comparison between demand and total production. It must therefore fall when total production increases at a faster rate than total requirements. Now, this increase in production is more than likely. If the extension of cultivation is a consequence of the increase in the profits of the cultivator, as soon as the earth produces more, it must follow, at least until the number of consumers is increased, that the commodity falls in price. This fall is assured as long as it does not conflict with the profit of the cultivator.

Recall, sir, what I had the honor to explain at length in my letter written Thursday last from Tulle, on the difference between the average price to the producer and the average price to the consumer. I think I showed there that the mere equalization of the prices, true aim and unfailing effect of the policy of freedom, without raising the price for the consumer to any extent, and simply by bringing this price together with that of the producer-seller, assures the latter of a tremendous profit. This profit is sufficiently large for much of it still to remain even when it decreases a little by the lowering of the price to the advantage of the consumer. Now, if there is still some profit for the cultivators when the price falls, the competition among the cultivators will cause it to fall. Perhaps, subsequently, the increase in the revenues, by increasing the sum total of wages, will cause an increase in demand; those who used to eat only buck wheat porridge will then eat bread; those who used to be limited to rye bread will add some wheat. The increase in public affluence will increase the population and by this increase in wants a slender increase in price will be generated; fresh encouragement to cultivation which, through the increase in production, will again cause its value to fall. It is by these alternating, small fluctuations in price that the whole nation will slowly progress to the highest state of cultivation, affluence and population which it is able to enjoy relative to the size of its territory. The revenues and the public wealth will increase without involving an increase in the average price for the consumer; this price may even fall a little.

All this can be shown from the experience of free trade at various points of time both in France and England, and by a comparison between England and France at the present time. These statistics prove that freedom of the grain trade will not necessarily increase the average price of grain.

SIXTH LETTER

Angoulême, 27 November

In my last letter I stated that I would answer your three points on the benefits for the three classes which are affected by a policy of free trade in grain. I have already discussed the interest of the proprietors and now turn to that of the cultivators who, contrary to your assumption, would not be indifferent to it. The reason you gave for this assumption is that their gains are short lived, and that they will lose them on the renewal of their leases. Even if we assume that this is the case, there is still a great deal of advantage in the temporary increase in the wealth of the farmers.

Now, this increase in wealth for the class of farmer-cultivators represents a tremendous benefit for them and for the State. If it is assumed that the real increase in the produce of the land is one sixth of the rents, which is not far from the truth, and probably an underestimate, this sixth, accumulated over six years to the profit of the cultivators, forms for them a capital equal to the revenue of the rented lands. I say a capital, for the profits of the cultivators are not squandered on luxuries. If it is assumed that they place it in the national debt, in order to draw interest from it, this would certainly be a net profit for them, and it cannot be denied that they will be the richer for it: but they are not so stupid, and they have a much more lucrative use for their funds. This use is to pour them back into their agricultural enterprises, to increase the sum total of their advances with them, to buy cattle and agricultural implements, to increase all kinds of manures and fertilizers, and to plant and marl the estates, if they can obtain a second lease on these terms from their proprietors.

All these advances have as their immediate objective to increase the amount of produce, to the benefit of the entire State, and to give the cultivators an annual profit. It is essential that this profit is greater than the ordinary interest of loan money, for otherwise, the owner of the capital would prefer to lend it. It is also necessary that this profit is kept completely for the farmer-cultivator, without him yielding the least part to the proprietor: for if this profit was not entirely for the farmer, he would prefer to invest his money in another manner, so as not to share the interest with anyone else. Here then a permanent increase in wealth, to the advantage of the cultivators, equal at least to the interest of the annual revenue of all the leases, converted into capital. This is surely a great deal.

This item is altogether unrelated to the increase in the leases which causes the gain for the proprietor; it only makes the revenue more secure by further assuring the solvency of the farmer.

But this is not all; this capital and this interest, firmly assured to the farmer-cultivator, and steadfastly used by him to swell the advances of cultivation, must, following the present course of events, increase the produce in a much greater proportion than the interest of these new advances. Undoubtedly, the cultivator will in time agree to yield the proprietor his share in this increase in profit; but this will always happen only after he has wholly benefited from it himself up to the time of expiry of the lease: the argument I have put forward as regards the initial profit resulting directly from the policy of freedom is applicable to the second profit, and also to that resulting from this second increase in wealth. Hence, there results a progressive increase in the wealth of the cultivators, in the advances in agriculture, in the total produce and the values gathered annually from the soil. This progression may be fast or slow: but if the outlets continually raise sales, either by regular exportation, or by an increase in population, it will have no other limit than the physical one of the fertility of the soil.

This happy picture must be contrasted with the unhappy results of the curtailing of the freedom of the grain trade. In this case, the value of the produce of the soil will decline, and the cultivators will be impoverished.]

You have also argued that on the expiration of the leases, the proprietors appropriate all the profit of the farmers. This assumption is a lot further from the truth than you suppose. It is, of course, essential that the proprietors can appropriate the whole of the net product over and above the necessary advances of cultivation, but the tenant has the interest of these advances for the further accumulation of new capitals. The proprietors cannot risk appropriating either the advances or the interest on these advances, for that would cause the decline of cultivation and produce. It is true, however, that at the end of the lease, competition will ensure that the new rent is equal to the net product of cultivation, after all costs have been met.]

No sir, it is not at all in this sense that it must be, or has been, said, that the freedom of the grain trade is of tremendous benefit to the cultivators. The situation of the cultivators taken individually must be improved by it; but this result is but a trifle compared to the immense advantage which must result from it for cultivation in general, through the growth of the capitals used for drawing the produce from the soil, and from the increase in the number of cultivators.

I must insist on this observation, because it attacks directly the major flaw in the arguments which you have permitted me to criticize. As soon as the raising of rents has as its sole cause the competition among a great number of agricultural entrepreneurs, when each of them, individually, would not gain any more, would not draw a better share than previously from his capital and labor, it would still remain true that the number of laborers and agricultural entrepreneurs would be greater, that the sum of capitals employed in agriculture, and consequently the produce, would be greatly increased. Now, that is what really interests the State as a whole.

The benefits of large advances in agriculture are seen in the provinces of Flanders, Picardy, Normandy, etc., where the land is exploited by wealthy tenant farmers who can afford to pay large rents. If these farmers were deprived of a market, or if their market were diminished, their enterprises would decline, and the prosperity would disappear from these districts.

In the poorer provinces, land has a much smaller value. This is not caused by the different fertility of the soil; it is caused by the less capital intensive cultivation. It is to be hoped that all provinces will follow the more capital intensive methods in the future, to the ultimate benefit of the whole of the State. On the calculation of M. Dupré de Saint-Maur, these poor provinces are more than four sevenths of the whole nation. Freedom of the grain trade should greatly diminish this proportion.

Do not believe, sir, that this will be harmful to the consumers. In my next letter, I will deal with the interest of this class of people in the policy of a free trade in grain.

SEVENTH LETTER

Limoges, 2 December

Sir, in my last letters, written from Saint-Angel and from Angoulême, I dealt with the interest of the proprietors and that of the cultivators in the freedom of the grain trade. To complete the reply to your objections against this freedom, I have to discuss the interest of the consumers, whom you believe to be injured by the suppression of the constraints of the old regulations.

As for me, sir, I together with many others, am thoroughly convinced that the policy of freedom is no less advantageous, and that it is even more necessary, for the consumers than it is for the cultivators and the proprietors. I even dare to feel sure I can convince you of this, if you will be so good as to consider my arguments carefully.

Two things are necessary for the livelihood of the consumer: firstly, the existence of the produce; secondly, that it is within his reach, and that he has sufficient means to obtain it. How then could his interest be opposed to that of the cultivator and the proprietor of the land, since it is from them that he receives both the produce and the wage with which to purchase the produce?

Consumption first of all implies production: thus, the livelihood of men is no less based on cultivation than is the revenue of the soil. Now cultivation only takes place because it is profitable to cultivate, and if the cessation of that profit destroys the revenue, it also destroys cultivation and the livelihood of men.

The profits of the cultivator, divided between him and the proprietor, form, through the expenses they pay from them to procure the different objects of their wants, the unique wages-fund of all the other classes of society. These wages are the price of labor and of industry, but labor and industry have only as much value as there is the wherewithal to pay for them, that is, as much as agriculture has generated in consumable produce suitable for the enjoyment of man, over and above what is necessary for the subsistence of the cultivator; the consumer there is doubly dependent on agriculture; he has a double interest in its prosperity, both in order that his livelihood exists, and in order that he, as a consumer, has the means to buy it by selling his labor. He has an interest in selling his labor at a price high enough to enable him to pay for the commodities he needs with the price he receives for it, and he must pay for these commodities at a price high enough for those who sell them to draw from this price the means to generate an equal quantity of produce in the following year, as well as the means to continue to buy his labor. Without this exact proportion, either the cultivator would cease to make the earth produce commodities and revenue, or the wage earner would cease to labor, or rather, these two things would occur at the same time, because cultivator and wage-earner, wages and labor, being necessarily correlated, and equally dependent on one another, must either exist, or be destroyed, together. Consequently, if this proportion did not exist, population would diminish and society would destroy itself. Let us not forget to observe that this reduction in the number of men would begin with the class of consuming wage-earners. If less subsistence is produced, someone must starve, and that will not be the cultivator, for before sharing his harvest with anyone else, he begins by taking what he needs himself. If there is only enough grain for himself, he will not give any of it to his shoemaker to pay for a pair of shoes: he will go barefoot and survive. If the production decreases to the point where it yields only just the necessary subsistence for the cultivator, the last grain of corn will be for him, and the proprietor will be forced to cultivate for himself to avoid starvation.

It can, therefore, be said that in a sense the consumer is more interested in the extension of cultivation than the cultivator and the proprietor. For the latter two, the question is only that of being more or less wealthy, of living more or less comfortably; but for the wage-earning consumer, existence is at stake; it is a matter of life or death.

If every man consumes three setiers of corn or other equivalent subsistence, as many men must be deducted as the number of times three setiers of corn are taken from the annual production. And these men who are deducted will be taken from the class of the wage-earning consumers, or, as they are called, the laboring poor.

For the existence of society it is essential that the necessary proportion between the price of commodities and the price of labor exists normally. But this proportion does not consist of a point so precise and indivisible that it cannot vary and gradually move away from the equilibrium which is most just and advantageous for the two classes. In that case, either one or the other suffers more or less, and both of them a little. Between health and death there is the middle state of sickness; there are even a thousand degrees of weakness between sickness and health. The proportion can be disturbed for shorter or longer intervals in such a way that a great number of men experience all the excess of misery, and that societies are in a state either of crisis and convulsion or weariness and decline. What ought to be desired? Two things: firstly, that this proportion between the price of wages and the price of commodities is the fairest, the closest to equilibrium, the most advantageous possible for the cultivators and the proprietor on the one hand, and the wage-earner on the other; the most suitable, in short, to procure for the whole of society the greatest amount of production, of enjoyment, of wealth and of strength; secondly, that the disturbances occasioned by natural causes are as rare, as short-lived, and as light as possible.

There, sir, is the true end of legislation on the matter of subsistence. All that is required now is to examine what means lead to this end in the best way, whether freedom, or prohibitions and regulations. I venture to say that this way of stating the nature of the question decides it, for the right price and the constant price both result necessarily from free trade, and can only result from free trade. I will not develop this idea any further here as it would lead me too far afield, and would cause me to digress from the particular aim of this letter. It is sufficient to have indicated at the outset the source of the wages of the consumer, and the manner in which his interest is linked with that of agriculture. I will now turn to an enumeration of the advantages which the consumers must derive from the free trade in subsistence goods.

The consumers certainly gain from the increase and improvement in cultivation which is caused by the policy of free trade. They also gain from the increase in produce brought to market as a result of free trade, because this raises the value of grain by extending the market, and makes the long term storage of grain more profitable, thereby preventing the use of grain for alternative employments.]

There are two methods of restoring prices to their level, despite the un-evenness of harvests. The one consists in transporting grain from provinces where the harvest is good to those where it is bad; the other is to store it up in abundant years for use in famine years. These two methods entail costs, and free trade will always choose that which, all told, entails the least cost. Barring special circumstances, this is usually transportation, since, on the one hand, the return of the funds is speedier, and, on the other, the waste product is less considerable, the grain being consumed the sooner. But if the government, by placing obstacles in the way of transportation, leaves no other alternative than storage, it is evident that it increases the share of the rats and weevils to no purpose; it increases it even more by prohibiting storage by the merchants, who, having no other occupation nor any other interest than to preserve their grain, are a great deal more attentive and skilled in this than the farmers, whose true occupation is to grow it, and who need all their attention for this.

There are several ways of overcoming these difficulties in the storing of grain; they have been described and practiced on previous occasions by people concerned with this matter. But to continue with the question at hand, production is proportioned to consumption, and as consumption increases, so will production. The problem of famine can therefore best be solved by encouraging consumption, including foreign consumption by exportation. The stimulus to production and capital formation given by the policy of free trade will increase the sum of produce in the nation, and therefore the fund from which everyone can consume. The increase and improvement of cultivation will also increase the possibilities for employment, thereby making it easier for the people to earn their living.]

But these advantages are not confined to finding work more easily; for, from the very fact that labor is more sought after, wages must rise by degrees, because laborers will become scarce relative to the wages offered. It is a well-known fact that in the last few years, while the building trade has been brisk in Paris, masons have been given higher wages. This increase is inevitable as long as the number of laborers does not increase in proportion to the new values put into the wages fund for distribution. The greater quantity of wages offered, and the affluence of the people, increase the population: but this increase, following the natural order, is much less speedy than that of production. The year after a field has been cleared, manured, and sown, it returns the wherewithal to feed a man; but, before a man is brought up, twenty years are necessary, and before these twenty years have passed, production would have had time to increase more and more if its progress were not hampered and restrained by the limits of consumption. Workmen coming from abroad can also prevent the increase of wages: however, men are too strongly attached to their native country for this immigration ever to be too large. But whether the increase in population comes from the influx of foreigners, or from the multiplication of the species, it will always be the result of the affluence of the people, and will always presuppose it. Here then, in the increase in values brought about by the policy of free trade, is an obvious advantage for the class of wage-earning consumers, since it causes a greater wages fund to be available for distribution, which produces: firstly, a greater certainty of finding work, and, for each laborer, a greater number of useful working days; secondly, an actual increase in the price of wages, through the competition of cultivators and proprietors, who will raise it in emulation of one another to attract workmen; thirdly, an increase in population, consequence of the greater affluence of the people.

The equalization of prices is another advantage of the policy of freedom. This results from the process of distributing grain evenly between provinces in times of harvest failure by allowing free transportation. It can also result from a policy of public granaries which distributes the grain more evenly over good and bad years. This has been done in various small states, and also in France on several occasions. It will of course require capital formation, but this should not be a difficulty. The people will also have to be convinced of the wisdom of the procedure. The profit made by these public granaries will, however, be an offsetting advantage to the treasury. This policy of purchasing in abundant years and selling in lean years will have the desirable result of greatly stabilizing grain prices.]

One of the great disadvantages of the inequality of the price for the consumer is based on the fact that the proportion which is established between the price of subsistence goods and the price of a day’s work, does not follow the average price exactly, but constantly remains below it, to the detriment of the day laborer; so that, if the prices of dear, average and cheap years were distributed in such a way that they were more or less equal every year, wages would be higher, to the advantage of the consumer, than they are when wages vary a lot. This is easy to demonstrate. The daily wage, like the price of every thing else, is determined by the relationship between offer and demand, that is, by the reciprocal need of those who give work and those who have to live by working. Wage-earning people, in good and bad years alike, have no other means to live than by working; they will, therefore, offer their labor, and competition will force them to settle for the wage necessary for their subsistence. They will not foresee and forecast the possibility of a dearth in order to force those who pay them to raise their wages; for, whatever this distant future may be, they must live at the present time, and if they make themselves too hard to please, their neighbor would take the work at a lower price. It is, therefore, on the customary rate that the price of wages will settle itself; it will even fall below this proportion in years of low prices, because, if on the one hand, this low price makes the people lazy and reduces the competition among the laborers, on the other hand, it deprives the cultivators, and, by repercussion, the proprietors, of the means of giving work. Then again, the increase in prices in dear years does not only fail to be considered in the determination of wages, but tends, rather to decrease them. Indeed, the misery of the people banishes idleness, and makes work so necessary for them, that they give it at a lower price. All those among the proprietors who have a fixed revenue, and even, in the case of excessive dearth, all those who are in a situation of giving employment, themselves suffer by the increase of their expenses, and are not compensated for this by the increase in their revenue (for it cannot be repeated too often that only the equality of prices causes the increase of the revenue of the cultivators, and that they are not compensated by a high price in the years of dearth, for the low prices of the years of abundance, because the quantity which they sell is proportionately far less than the rise in the price). They are themselves, therefore, in no situation to give employment; most often, they decide to do so only from motives of charity, and by profiting from the readiness of the workers to lower their wages. Thus, not only do the wage-earners fail to share in any way in the jolt which the transitory dearth gives to the price, but they do not even participate to the extent that the transitory dearth increases average prices. Yet it is mainly the years of dearth which raise average prices, even in the countries where the absence of free trade maintains a customary, rather low price, which is far below the mean price. It follows from this that, without the mean price of subsistence goods rising to the loss of the consumer, the price of wages will rise to his benefit by the simple equalization of the mean price between abundant and unfruitful years, because then the mean price will coincide with the customary price, and it is always to the customary price that the price of wages is related.

I cannot deny myself a reflection here. In my letter written from Tulle, and in even more detail in that from Bort, I showed you that the policy of free trade and the equalization of prices alone— the mean price remaining the same for the consumers—must assure the cultivators, the proprietors and the State of an immense increase in profits and revenues. I believe I showed you in this letter that, with the mean price still remaining the same for the consumers, by the mere effect of the equalization of prices and the policy of freedom, the consumers will gain by being remunerated in a proportion which is more advantageous for them, since their current wage is determined by its proportion with a price lower than the mean price, and since it will then be proportioned to the mean price, that is, to their real expenses. It appears to me that the combination of these two truths ought to inspire a great deal of confidence in the results of the policy of freedom.

I add that the advantage to the consumers will still be very great even when the mean price of consumption goods would rise, and that the welfare which would be procured for wage-earners by the re-establishment of the proportion between their wage and their expenses will always be equally real, even if the mean price were to rise, provided that it was always constant, or almost invariable.

I further add that the observation which has been developed here, completely refutes the objection which the adversaries of the freedom of the grain trade are so often heard to repeat. Experience shows, they say, that the price of wages does not rise with the price of grain, and, as they always assume that freedom increases the price of grain, they conclude from this that freedom is fatal to the consumers.

I believe to have shown, on the contrary, that even when the momentary dearth failed to increase the price of wages, and even when it lowered it below its natural proportion, it must be concluded that the evil lies in the momentary dearth, and, in order to remedy this, it is necessary to establish a price as constant and equal as possible, that is, to give trade complete freedom.

This can be shown by statistical data from England and France. Examples can be given which show the difference in the behavior of the average price over periods when there was free trade and when there was not. Forbidding the trade in grain between districts makes the people liable to the harmful effects of harvest failure and high prices. From free trade, as I have shown, only good results can follow.

I would also like to mention some specific dues which ought to be abolished: that of the droits de ménage et de péage, of the maîtrise des boulangers, and of the banalité des moulins.¹ These three raise the price of bread unnecessarily.]

I cannot help making some reflections on the danger of some remarks in the preface to your plan, which perhaps I have already made, but to whose repetition there can be no objection.

To announce to the people that the dearth which they experience is the result of scheming and not of the disturbance of the seasons, to tell them that they suffer dearth amidst plenty, this is to sanction all the past, present, and future slanders to which they themselves resort but too readily, and to which many people are eager to rouse them, against the administration and administrators of every rank. This is, at the same time, to become accountable for the dearths which may continue, or occur in the future, it is to undertake personally to provide them with abundance, whatever may happen: now, it is essential to be very sure about your facts before making such a promise. I admit that no plan for regulation would inspire me with such confidence. I would prefer to base my security on physical necessity and on justice. The people are well aware of the fact that the Government cannot command the seasons, and they must understand that it has no right to violate the property of the husbandmen and the grain merchants. It is a sign of strength, even in the eyes of the people, when they can be told: What you ask of me is an injustice. Those who are not satisfied with this reasoning, will never be satisfied with any, and will always slander the government, no matter what measures it takes to please them; for it will not gratify them seeing that it is impossible for the government to procure cheap grain for the people when the harvests have failed, and that there is no possible means of obtaining it at a lower price than that which would result from complete freedom, that is, from the observance of rigorous justice.

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Turgot’s letters to Abbé Terray, who was then Contrôleur-Général, on the subject of the grain trade, which were written at the end of 1770, have been considered to be one of his more important pieces of economic work. Of the seven letters originally written, only four have survived, since Turgot was unable to have copies made of the second, third and fourth letters. They were all written while Turgot was on a tour of inspection of his district, and therefore show signs of haste. Since the letters are long, only selections with theoretical interest have been translated. To give some continuity to the text, part of Turgot’s argument has been summarized. These summaries have been placed in square brackets in the text.

¹Droits de ménage et de péage: These were seigneurial toll rights dating back to feudal times. Many were abolished during the reign of Louis XIV, but there were plenty of them left in the eighteenth century. La Maîtrise des boulangers: master craftsmanship in the bakers guild which was difficult and costly to obtain, and therefore raised the price of bread. La banalité des moulins: the feudal right of the seigneur to force peasants to hire his mill for the grinding of their grain.

Letter to l’Abbé Terray on the “Marque des Fers”

Readers will not be surprised to learn that Turgot strongly opposes duties on iron. (The “marque des fers” mentioned in the letter is a duty on iron.) The only way to attain prosperity is to have unlimited freedom of trade. Opponents of free trade claim that restrictions will benefit home products at the expense of foreigners. These contentions are just an excuse by those who are attempting to secure a monopoly position at the expense of consumers. Those who claim to gain by restrictions ignore the fact that they lose as consumers when other people use restrictive measures to their own advantage. Even if one disregards the general argument for free trade, there is still excellent reason to avoid a duty on iron. If restrictions have to be imposed, they should be on consumption goods rather than on a commodity such as iron, which is essential for the production of numerous goods. A duty on iron would have a bad effect on the entire economy.