The Tragedy Caused by Robespierre’s Milk Price Controls

The case of milk price controls imposed by Maximilien Robespierre, the radical leader infamous for the “Reign of Terror” during the French Revolution in the 18th century, clearly shows how disastrous the consequences can be when the government artificially intervenes in the market.

After the revolution, public sentiment grew increasingly unstable as citizens voiced anger over rising prices for daily necessities. In an effort to stabilize prices and win popular support, Robespierre declared, “All children in France have the right to drink cheap milk,” and ordered a reduction in milk prices. In other words, he officially mandated that milk prices be cut in half. In addition, anyone who violated the order and sold milk above the fixed price was fined double the illicit profit. His stated intention, in his own way, was to make it possible even for the poor to give milk to their children.

Under Robespierre’s fearsome threats, milk prices initially fell, and citizens cheered. But the result turned out to be the exact opposite of what he intended. Before long, milk prices began to surge, while the amount of milk reaching the market also dropped sharply. Because the fixed price did not even cover the cost of feed, namely hay, dairy farmers could no longer make ends meet by raising cows for milk, so they gave up dairy farming and slaughtered the cows to sell them as beef instead. In other words, as the number of dairy cows declined, milk production also fell, which drove milk prices even higher. In this process, ironically, only beef prices collapsed.

When Robespierre summoned dairy farmers and asked why they were no longer raising cows, they answered that feed, or hay, was too expensive. In response, he forcibly lowered the price of cattle feed as well in an attempt to increase the milk supply.

The feed producers, or hay producers, also concluded that the business was no longer viable and gave up producing feed that did not even cover costs, burning their hay instead. As a result, feed prices also soared. Consequently, milk became even scarcer, and its price jumped tenfold, making it difficult to obtain milk even for newborn babies. Only a small number of wealthy people could afford to drink it.

Robespierre also imposed maximum price systems on various crops and other goods, but such price controls only resulted in food and essential daily goods disappearing from the market altogether. Arrogantly believing he could control the market at will and govern benevolently for the people, Robespierre instead, paradoxically and contrary to his intentions, brought about harmful results that threatened the very citizens he sought to help.

There are similar cases in Korea as well. This example, in particular, is frequently mentioned these days, and the reason is actually simple: policies implemented with good intentions(?) have all too often ended up magnifying harmful side effects. Sharp increases in the minimum wage and real estate policies are representative examples. Even when such policies were introduced, economic realities should have been taken into account, but they were not. As a result, concerns over excessive intervention that undermines market functions have grown markedly louder.

When supply increases, prices fall; when demand increases, prices rise. That is the principle of the market. This is the law of supply and demand, and the “invisible hand” mentioned by Adam Smith. If someone artificially controls prices that should be determined naturally in the market, market distortions arise and the system eventually breaks down. “Robespierre’s Milk” vividly demonstrates how futile price controls are when they run counter to market principles.

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Original title: 로베스피에르의 우유 가격 통제가 불러온 비극

Author: Seong-u Jeong

Date: 2020-04-10

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=14&idx=22548