“Corn-Market, Paris’, 1836. The Corn and Flour Hall was built in 1772
by the Paris authorities, enlarged in 1782 and rebuilt after a fire in 1802”

How a Visionary French Philosopher Accidentally Fueled Famine, Riots and Revolt
by Jacob Soll / 10/16/2022

“World markets continue to reel from the British government’s free market reform fiasco. New British Prime Minister Liz Truss believed she could cut taxes without taking into account the policy’s immediate effects on the market, or its actual overall cost. The result has been a full-fledged economic disaster. One might call it a free market reform that the market rejected. It’s a funny concept, but it’s not the first time such a thing has occurred.

Indeed, the first attempt to liberalize an economy was based on the same idea: that liberalizing markets was all that it took for markets to function. In fact, it turned out, markets need much more tending and plenty of governmental care. The French found this out the hard way in the 18th century after new free-market reforms led to market failure, uprisings and famine — and perhaps even the first sparks of the French Revolution. The ensuing government reversal bears an eerie resemblance to Britain’s crisis today. In the 1760s, Anne Robert Jacques Turgot began a series of reforms to liberalize the French economy. Turgot was a famed French philosopher and high government administrator (known as a royal intendant) whose responsibilities were to manage the monarchy’s legal affairs, taxes and political questions in the provinces. A leader of Enlightenment thought, he believed in religious tolerance, the abolition of slavery, secular public schools, free speech and more democratic representation.

Most of all, Turgot was influenced by the new French free-market school of thought called physiocracy, which held that all wealth came from farming (as opposed to commerce and industry), and that, therefore, landowners and farm laborers should be freed from taxes and regulations so that farming could prosper and produce capital investment for improvement and progress. Turgot was a visionary of economic liberalism. He wrote that the state should never opt to go “bankrupt” because it could take on debt or raise taxes. The most important reforms it could make were to cut spending and use better accounting to manage public finances. While there was growing interest in these ideas, France was still a feudal country dominated by landed aristocrats — who, by privilege, paid no taxes — and their peasant serfs, who paid high taxes to both the royal government and to their noble masters. The idea that fabulously rich nobles paid no taxes infuriated Turgot who wanted a fair, proportional tax system that favored economic growth and productivity by spurring the farming sector and consumer demand.

At the center of France’s agrarian economy was the grain trade. Since the 1400s, rules were in place to make sure famines did not get out of control. That meant grain merchants were heavily regulated so that they could not make large profits. Turgot saw this as the fundamental problem of the economy. “It is an error,” he wrote, “to sacrifice the rights of owners just to alleviate a bit of the suffering of the poor by forcing a product to be sold under its value.” While France’s population began to explode in the 1720s, its agricultural production and industrial expansion didn’t keep up and wealth inequality became acute. Jobs and food were scarce. The country lived in fear of famine, and the crown guaranteed bread prices and distribution. By the mid-century, wages lagged and grain prices skyrocketed. Turgot saw the state’s control of the grain trade as a hindrance to economic growth. Like his contemporary Adam Smith, Turgot believed that capital and economic growth came solely from farming. Therefore, he thought, if the grain trade were free, then France’s economy would grow in turn. One of the first advocates of the term laissez-faire, he hoped that a rationalized taxation scheme would free “capitalist entrepreneurs” to invest in farming and fuel an economic expansion. In 1761, King Louis XV named Turgot intendant of the poor Limoges region. His orders were to reduce the misery of the population and spur the local economy. It was here that he would begin the first large-scale liberalization project with the hopes of spurring the grain trade.

A fervent believer in lower, proportional taxes to ease pressures on poor peasant consumers, Turgot worked with top scientists to make a land survey to make taxes fairer. Crucially, Turgot at first came to think that before unleashing free markets, one had to first protect the poor from the immediate market shock of liberalization and that the state would have to step in to help those with no work and no food. In Limoges, he forced landowners to support the poor, and worked to end the feudal forced road-building labor of the corvées by developing a tax for building highways, which, in turn, he hoped would help facilitate grain transportation. He proposed establishing state-supported “Charity Offices and Workshops” to provide employment for the poor to do public works. Turgot even tried to import food to sustain his impoverished region to spur its growth so it could improve its grain production. He then employed his state powers to help found the now-famous Limoges porcelain industry, which still exists today. Turgot’s unorthodox and highly pragmatic mix of liberalizing and state intervention produced modest success.

But as he crafted a theory to solve France’s economic woes, he still saw excessive state intervention over bread, the main staple of people’s diet, as the central problem. In times of poor harvest, the crown capped grain prices, kept emergency stores and facilitated grain distribution. Additionally, a number of powerful players — including the king’s brothers — made a fortune on tolls and various grain taxes. Turgot’s Letters on the Liberty of the Grain Trade (1770) was based on the simple equation that if the crown removed its caps, guarantees, protections and other tolls, the grain trade would prosper and the market would expand, thus bringing more profits to farmers and lower prices to consumers. Turgot got a chance to try his models on a larger scale when he became King Louis XVI’s Controller-General of Finance in 1774. Other royal ministers had tried to liberalize the grain trade before him without success, but he pressed ahead, and abolished grain subsidies, price controls, state storehouses and bread distribution systems for the poor. Turgot believed that his economic ideas had to be pushed through, no matter what the cost, and seemingly without recalling his previous insight of softening the blow of liberalization in Limoges. By the end of the summer of 1774, harvests were poor, but Turgot went forward anyway, sure that liberalization would be the answer to France’s grain shortages.

In September, he signed a declaration completely freeing the grain trade. Believing in the force of liberalization, he had liquidated the state’s emergency grain reserves and had not made advance plans for poor relief. Almost immediately, there was grain price inflation, panic, speculation and shortages. Turgot tried to ease the pain by importing grain from Poland to keep supply working. He also liberalized more internal tolls to free circulation. Still, the results were catastrophic. Over the following months, with speculation, hoarding, inflation, bread shortages and famine, riots broke out across France. Bakers and grain merchants were attacked, and the houses of the rich were pillaged in some cities. The rioters came from the rural laboring classes but also were found among the common tradesmen who were now ruined due to grain prices. Turgot demanded a crackdown on the “brigand” rioters, and state agents arrested butchers, blacksmiths, wig masters and masons.

Turgot became convinced that there was a conspiracy behind the uprising and subjected rioters to rough interrogations to find out who was behind the disturbances. He demanded that priests support the government by teaching “the sublime precepts of religion… that will assure the maintenance of order and justice.” The problem was resistance to Turgot’s reforms was not a matter of conspiracy or sheer obstinance; it was a market crisis. Rising grain prices and the collapse of the old state price controls, storehouses and distribution networks reduced the laborers, artisans, and humble merchants to starvation. One observer noted that the poor were “ashamed to beg,” but had nothing, so they rioted. As the crisis worsened in April of 1775, Turgot called for more charity workhouses. Yet it was impossible to get them up and running to counter the food crisis. Turgot called up an army of 25,000 soldiers to suppress the “brigands,” but uncontrollable inflation and shortages continued to spark organized resistance to the government.

Chief among Turgot’s critics was the famous Italian diplomat, economist and wit, Ferdinando Galiani (better known as the abbé Galiani), a fixture in the Parisian salons. Galiani believed that society was too dependent on farming to simply leave it to the market. He warned that one bad harvest could ruin not only agriculture but the industrious towns that depended on food supplies. The whims of nature could deprive farmers of “all funds” to replant. Therefore, the state needed to regulate and oversee some of the market to keep it running, particularly in times of dearth. Nature, Galiani noted, did not respect even the finest philosophical ideas. Most worrisome for the crown was that the riots, known as the Flour Wars, were now morphing into an outright revolt.  The constant pressure of famine and subsistence living created a vicious circle of regular, organized uprisings and growing political criticism. Turgot’s reforms had rallied large groups of opposition to the government. Indeed, Turgot’s enemies at court whispered in the king’s ear that his ministry was, in fact, trying to undermine royal power.

On May 12, 1776, Louis XVI dismissed Turgot. His reforms were promptly reversed, but by then, the state had been seriously weakened. A powerful movement of opposition had arisen, which many historians believe provided the foundations for the uprising of the French Revolution. Turgot was a visionary. He was right that the grain markets would benefit from liberalization. And his early initiatives showed a viable path to reform: working carefully with civil society to create better market conditions, providing protections for the poor, supporting industrial development and building the market slowly. However, as time wore on, he became impatient and enamored with the belief that free market reform could trump the harder project of moving society slowly to a more liberal model. It ended in famine, collapse and revolt. Today, the markets themselves again show that, even as they cry out for liberalization, they also depend on good government and industrial strategy, balanced books and investments in society and people. Now as then, you can’t fill an empty stomach with ideology alone.”

“A Victorian fruit seller on a London street in 1873”

by Robin Kaiser-Schatzlein / October 13, 2022
There’s No Such Thing as a Free Market : the long sordid history of an economic fantasy

“In 1753, Adam Smith was a moral philosopher specializing in Stoicism, teaching at the University of Glasgow. After publishing his first book, Smith became a minor intellectual celebrity. His friend David Hume helped him leverage his fame into a cushy job tutoring the son of a wealthy English duke while traveling with the boy across Europe. In France, Smith met a group of thinkers who profoundly affected his thinking and led him to the central ideas of his most famous work, The Wealth of Nations. These thinkers were called the physiocrats. They theorized that agriculture was the foundation of any stable society, a reaction to France’s current economic development. The country was on the cusp of industrialization, and the French government, in an attempt to catch up to more developed countries like England, had forcibly directed investment to industry and the country’s infrastructure.

The physiocrats hated all this. They thought that the land, and by extension, the elite class who owned it, should be the priority for state protection—not the grubby merchants and industrialists with their grimy factories. They were a cult of nature and defenders of the feudal organization of an agrarian society. Smith concurred. The physiocratic system, he said, “with all its imperfections is, perhaps, the nearest approximation to the truth that has yet been published upon the subject of political economy.” As a scholar of ancient Rome and Stoic philosophy, he believed that cultivation of virtue through civic action was the path to riches, and Smith thought that the landed aristocracy was the sole group capable of possessing this virtue. Well-educated, inculcated with similar values, and familiar with each other’s moral code, the trust this landed elite had in each other bound them together. And trust was, in Smith’s mind, a prerequisite for smoothly running trade. Merchants and corporations were unnatural, debased, and could not be trusted.

The swaying rhythm of the growth and harvest of crops synchronized trade—with certain constraints. “To maintain what was seen as nature’s equilibrium of constant production,” Jacob Soll writes of Smith in his new history of free market ideology Free Market, “landowners had to dominate government, in order to make sure farming was untaxed and unregulated.” The government, in other words, needed to liberate and defend this allegedly natural order with a strong hand, by, say, protecting commerce along England’s imperial trade routes. This is the basis of Adam Smith’s ideas of free markets: the landed aristocracy, free to do whatever they want and completely in control of the state, will create wealth for all, because they are such good people. More than two hundred years later, Smith’s elitist agricultural vision is dead, but the notion of the free market lives on in a totally different, totally extreme, and totally mangled version of his ideas. Smith was writing in defense of colonialism, slavery, empire, and farming. Today’s free market zealots, from Milton Friedman to Peter Thiel, praise innovators, industrialists, technologists, and financiers, who are said to create wealth out of nothing but vaporous dreams and have no obligation to anyone but themselves.

This is a radical and speculative vision of freedom that purports to hold the coercive powers of the government at bay. But as Jacob Soll sets out to show in his book, throughout the long history of free market thought, the idea of free markets has been very different from our modern conception of them. “It is hardly surprising that modern free market thinkers rarely, if ever, mention that Smith was an admirer of the Roman senatorial oligarchy,” or the fact that he “was himself a government bureaucrat,” Soll writes. So how did free market thought go from a theory of benevolent economic domination to today’s supposedly anti-authoritarian defense of business? Soll looks for answers by tracing the history of the idea in Europe from Cicero through thinkers like Saint Augustine, Franciscan monks, John Locke, Hume, Smith, and up to the present. He argues that today’s ideas of the free market are an aberration, but he also makes clear what today’s free market proponents share with Smith, and what we might do about them.

Soll begins his history with Cicero, a politician and philosopher in the decaying days of the Roman republic. Cicero was a senator from the equestrian class just below the ruling elite that controlled the Roman empire. In a time of creeping authoritarianism, he was a striver who desperately wanted to defend the nobility and function of the elite landowners. He wrote that when the “best men” rule in “moderation,” the “citizens enjoy the greatest happiness.” Moderation has never been the hallmark of the ruling classes, but sure, why not put all our hopes in them? Cicero rejected the idea that self-interest motivated economic life. He believed that the quest for virtue among those in charge prevented them from exploiting others or perverting markets. For him, Soll writes, “good morals… drove a healthy market, allowing ethical people to make exchanges in confidence. Trust was a mechanism that freed trade.” Cicero had a profound, almost touching, yet doomed faith in the goodness of the ruling class. In the end, Marc Antony, a general, proved him wrong, ordering his beheading. Cicero, as many after him would do, likened free trade to a force of nature.

In his time, Soll notes, Rome’s well established, well-defended trade routes that crisscrossed the Mediterranean seemed permanent and everlasting. “Imperial shipping routes… had given the impression that free movement of goods was part of the natural order of things,” he writes. But when the Roman empire began to crumble, Cicero’s notions about this “natural” order had to be reconsidered in a harsher light. His belated realization has a contemporary parallel: international trade deals and other forces of globalization long gave people the same feeling, right up until the pandemic fractured the supply chains they’d learned to take for granted. After Cicero, thinkers continued to debate what animated trade, what produced wealth, and how to achieve prosperity. Many rejected Cicero’s notions of civic virtue. Saint Augustine, the early Christian philosopher, suggested that wealth was God’s gift to humanity and that the hunt for it was divine (bonus if you donated some of it to the church). He believed that people would choose to be non-materialistic of their own free will, and over time Christian morality replaced Stoic philosophy as the moral constraint on trade.

Another major shift in free market thinking arrived as industry began to crest on Europe’s horizon, threatening to displace agriculture as the economic engine of society. This process unfolded dramatically in France. In the seventeenth century, Jean-Baptiste Colbert, a state planner with authoritarian tendencies—he served as Comptroller-General of Finances under Louis XIV—mercilessly trashed agricultural supremacy and set out to modernize the country. He tossed away internal tariffs and standardized industries to promote trade, such as in fabric production, where the central government regulated the size, name, and quality of products. Colbert also built canals to move goods and subsidized tapestry and glass works. Soll suggests this type of centralized, state-led development anticipated the similar rise of modern-day China.

Adam Smith was intrigued by Colbert, but also appalled. While many of Colbert’s initiatives were successful, King Louis XIV still held extraordinary power. He could, and did, quickly dispense with economic development in favor of paranoid wars. Smith and the physiocrats thought that if landowners ruled a country instead of a monarch, war would be less appealing because the landowners would want to keep trade open as much as possible. This was similar to the erroneous Thomas Friedman hypothesis of the mid-1990s that “No two countries that both have a McDonald’s have ever fought a war against each other.” It also goes to show that free markets are often not seen in purely economic terms: their theorists have imagined them as total governing philosophies. Soll highlights how often economic thought is, at its base, political thought about how to maintain or achieve peace (although peace for whom? remains the unresolved question).

Smith called Colbert’s system mercantilism, and it spoke to a question that was at the core of free market thinking for hundreds of years: Should merchants or land-owners rule society? But there were dissenters to this idea. Proto-populist arguments put forth by thinkers like Jean-Jacques Rousseau suggested economic production could be maintained by the public, rejecting the previous binary. Unlike Cicero and Smith, Rousseau dismissed the idea that private virtue could work in the service of public good. The rise of ideas about popular government seems to be the moment that free market thinking ran off the rails, becoming a reaction to ideas about social democracy and populism. Differing levels of state-controlled commerce (like central banking and bureaucratic regulation), coupled with expanded suffrage and modes of republican government, opened the operations of business to the whims of the public—not to mention that Marxist notions of state socialism were also proliferating. By the late nineteenth century, economic theorists like Alfred Marshall at Cambridge, inspired by the invention of Newtonian physics, created mathematical theories of why free markets were best, radically altering the philosophical and political questions that had previously dominated the field. These theories did not comport with the fact that monopolistic merchants in unregulated markets were swallowing economies on both sides of the Atlantic. “It was as if Cambridge were cut off from the rest of the world,” Soll writes. Yet Marshall’s classical theories would define economic orthodoxy for generations. The field of economics has never been a slave to reality.

With the moral basis for free markets gone, twentieth century economic thinkers like Milton Friedman and Friedrich Hayek could selectively read Adam Smith’s work and turn him from a starched moral philosopher into a Hoover Institution-approved libertarian economist. The neoliberal ideology that Friedman and Hayek espoused gripped the Western imagination, but it was always more of an aspirational philosophy than an effective playbook for creating a free society: Hayek in particular advocated for extreme free markets during a time of rapid mid-century economic transformation led by strong states. Road to Serfdom, his most famous book, Soll writes, “stands out for its total lack of engagement with the realities of the postwar growth period and its fanatical vision of the state as a force of evil.” Much of neoliberal theory suggested it was an antidote to totalitarianism and proclaimed that the state was incapable of directing economic growth, creating an opposition between state action and free markets that, according to Soll’s thousand-year history of European economic thought, had not really existed. Nonetheless, the neoliberal trash-talking of state actions ramped up during the Reagan administration and continued almost unimpeded until the financial crash in 2008—all while government spending increased, and corporations took huge tax breaks, bailouts, and other legal protections. Even libertarian defenders of the free market faith, like the Koch family, rushed into industries with the highest level of government subsidies and protections, like paper and oil. The reality, Soll argues, is that we never saw the radically unregulated markets that we were told work so well.

Despite the distortion of free market thought from its philosophical origins, in practice, much has stayed the same from feudal England. While divorced on the surface from Smith’s theory, neoliberalism did maintain the idea that, as Soll puts it, “wealth-producing people should have a special status in society.” Smith argued for the supremacy of agriculture; today’s free market proponents fought for, and won, the supremacy of business. It’s a very limited vision of freedom, one that always seems to be propped up by an empire, whether it be Roman, English, or American. Wealth, and the coercive power of a vast military and legal apparatus, are what keep trade running smoothly. So it’s no surprise that as each of these three global empires waned, faith in the power of the free market dimmed with it. Today, Soll argues, we are in an “essentially abusive relationship with free market thought.” We constantly look to it to provide better products, lower prices, and wide-spread wealth: feats it never achieves. The state, like it or not, remains crucial to the operation of economic life. And so long as it is dominated by business interests, it does little to help those at the bottom. The question is not whether the state is intrinsically good or bad, but who the state is prioritizing in its economic program.

Soll suggests we need to re-embed democracy and government in the economy. While this sounds good, it’s more important to stress that the operations of business, commerce, and finance need to become much less important. Economic growth is not always good and can be, in fact, quite harmful. In terms of reform, making economic life more democratic, by, say, nationalizing finance and creating citizen-led committees to decide on which industries receive federal subsidies would be a start. But we have to stop looking to business and industry to create a peaceful society; the amount of wealth or even the quantity of jobs produced by commercial interests is not a gauge of success without considering how that wealth is distributed, or the health of the country at large. The United States is one of the wealthiest societies of all time, and yet some eleven million children here live in poverty. Gross domestic product, average wealth: these are delusional, almost completely useless metrics. Ultimately, though, this book is not about policy, it’s about an idea. And the more I read it, the more I felt that Soll’s history wasn’t owning up to the fact that the phrase “free market” obscures much more than it clarifies. Free Market, while quite thorough, makes no argument for why we should even use this phrase anymore. To avoid getting stuck in the muck of our oligarchy’s reality-warping argument, a better approach would be to abandon the label altogether and reckon with what we really have: a state government captured by business interests that shape society so that businesses and their owners benefit first. It’s freedom for commerce, and chains for everyone else.”



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