[Market Economy Guide] Robespierre and Milk

“We should make children drink more milk,” so they forcibly lowered the price of milk.

Then people stopped raising dairy cows and sold them off, causing a milk shortage… and prices instead soared.

Good intentions can sometimes bring bad results. India’s spiritual leader Mahatma Gandhi is often said to have remarked, “The road to hell is paved with good intentions.” This is a famous Western proverb handed down since Roman times. It means that even if something begins with good intentions, its outcome can turn out badly, contrary to those intentions. How many times in history have good intentions ended up causing even greater tragedy? In the economy in particular, which is directly tied to people’s livelihoods, shortsighted “good intentions” often inflict serious harm.

Robespierre’s Good Intentions

There was also a case of damage caused by good intentions right after the 18th-century French Revolution. Robespierre, who led the French Revolution, declared, “Every French child has the right to drink milk,” and actually ordered milk prices to be lowered. His aim was to stabilize prices for the French people and make it possible for growing children to drink as much nutritious milk as they wanted. Robespierre’s reduction of milk prices came from pure goodwill, and no one could really object to that. But the result turned out to be the exact opposite of what he intended.

Of course, there was a short-term effect. No milk merchant was bold enough to defy the orders of Robespierre, who was infamous for the Reign of Terror, and as milk prices fell, it seemed to be a great help to the working poor. But the effect of lower milk prices did not last long. The real problem began when beef prices, rather than milk prices, started to fall. Some might ask whether lower beef prices were not a good thing, since people could eat beef more cheaply. But the reality was different. The price decline involved not beef cattle but dairy cows, and what had happened was that farmers, deciding milk was no longer profitable, began selling off their dairy cows. As everyone rushed to sell their cows, the number of dairy cows dropped sharply, and naturally the supply of milk also fell. What happens when demand remains but supply decreases? That’s right—prices skyrocket. And indeed, milk prices soared, with milk selling at prices far higher than before Robespierre ordered them lowered.

He Did Not Understand the Market Mechanism

The problem did not end there. Robespierre discovered that the reason farmers no longer wanted to raise dairy cows was the price of hay. Hay, used as feed for cows, was so expensive that it placed a heavy burden on farmers. So if they had to sell milk at a low price, the more milk they produced, the more money they lost. In that situation, they could not afford costly hay, and it made more sense simply to sell off their dairy cows.

By this point, everyone can probably guess what Robespierre ordered next: a reduction in the price of hay. He believed that if hay prices were lowered, farmers would be able to produce and sell milk cheaply. So, just as Robespierre had hoped, did milk prices stabilize and make it possible for all French people to enjoy milk freely?

Not at all. Unfortunately, the result was the complete opposite of Robespierre’s intention: milk became an expensive food that only aristocrats and the bourgeoisie could afford. The reason was that hay dealers, ordered to lower hay prices, simply burned all their hay. Rather than sell at a loss, they chose not to sell at all. It was probably the same reasoning as the farmers who thought it better to sell off their dairy cows than produce milk at a loss.

Milk Prices Rose Even More

In the end, milk became unimaginably expensive. Not only low-income households but even the middle class could hardly think of buying it. Matters became so extreme that a black market in milk even emerged.

The failure of Robespierre’s milk price-cutting policy vividly shows how a well-intentioned policy can bring about the worst possible results. If Robespierre had followed market principles instead of imposing artificial price controls, what would have happened? At the very least, milk would not have become an expensive food reserved only for aristocrats and the bourgeoisie.

■ Please remember

“The road to hell is paved with good intentions.” This is a famous Western proverb that has been handed down since Roman times. It means that even if something begins with good intentions, its outcome may turn out badly, contrary to those intentions.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: [시장경제 길라잡이] 로베스피에르와 우유

Author: Sung-no Choi

Date: 2019-06-03

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=13&idx=20240