The only bakery in town

"It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong."

― Thomas Sowell

Once upon a time, there was a small town that was home to only one bakery. "The Only Bakery in Town", as it was called, was run by a wealthy and greedy businessman who had a monopoly on the baking industry, in that town at least.

And by monopoly I mean that, as there were no other options, the bakery had a strong hold on the market and the townspeople were used to paying whatever the price to get the products they wanted.

This was not well seen by the town major's son, who had recently graduated a prestigious college where he learned about monopolies and the importance of perfect competition conditions in commodities like bread. Here the prices of bread and pastries were surely exorbitant, and the quality was likely poor.

Since everybody loves bread and pastries and the townsfolk considered them daily necessity, this was used as an opportunity by politicians to campaign on the issue "the only bakery in the town" and to tackle down the monopoly.

The townspeople never paid much attention to these things, but the idea of lower prices and more products appealed to them. Little did they know that soon a lesson would have to be learned.

A town committee was formed to discuss the issue and come up with a solution. They decided to implement fair competition laws and antitrust regulations for bakeries. This would encourage other bakers to set up shop in the town, creating competition and driving down prices. The committee presented the proposal to the town council, and after much debate, the council agreed to implement some regulations.

As a first measure, the bureaucrats put a cap on the amount of bread the bakery could sell. The intention was to cut the earnings of the only bakery and promote investment in other bakeries. However, this policy backfired as obtaining a permit to open a new business takes time due to many regulations imposed to also protect consumers. Plus not everyone wants to become a baker or knows how to do it from one day to the next. The artificial scarcity caused by the cap on bread sales resulted in bread prices going up very quickly.

This was not well seen by the townspeople, who were frustrated and angry, as they were now paying much more for their daily bread.

The town committee and town council received numerous complaints and were forced to act. They realized that the cap on bread sales was not an effective way to promote competition and decided to proceed with the forced split of the bakery.

The baker businessman, who was now hated by everyone in the town, was not happy with the situation, but he saw that the best thing for him was to comply with the council's request.

Nonetheless, the council quickly realized that forcing the wealthy businessman to downsize or split his bakery was not as simple as it seemed and faced several challenges in their efforts to generate competition.

The first challenge was determining how many smaller bakeries should be created and who should keep the original and more senior baker and who should train new bakers. If they were very few, they would agree creating an oligopoly, if there were many, perhaps there would not be enough demand for all of them.

Another challenge was where to place the new bakeries, as location was a critical success factor. Some members of the town committee argued that the new bakeries should be placed in different areas of the town, while others believed that they should all be located in the same area to create a bustling bakery district.

Not all baked goods are equally profitable, and some are seasonal. Should all the bakeries sell the same pastries or specialize on just some licensed products? Wouldn't these specialized bakeries be tiny monopolies on their own?

The town council eventually decided to allow the wealthy businessman to keep his original bakery but also financed, with public funds and a new increase in taxes, four new smaller bakeries, to begin with, that would receive aid and soft loans, and would be located in different areas of the town, in accordance with the new zoning regulations, to reach more customers and ensure that the competition was fair. As many new jobs had been “created”, the need arose for a Bakery Workers Union and a Bakers Association.

However, this arrangement created some problems, as the original bakery was still the largest and most well-established bakery in town, and the new bakeries struggled to compete. While they faced problems with their location, as they were not in the ideal spot to attract customers, the split of staff, the time it took to make deals with flour suppliers and train new bakers had a significant impact on the quality of the bread and cakes for a while.

Moreover, the new bakeries, were still learning and experimenting with different recipes and ingredients, which led to inconsistent quality. Nor could they find good and prepared personnel, willing to get up early to make bread.

The Bakery Workers Union considered the early hours to be exploitative and as a result the working hours were regulated so that no bakery had an advantage to find employees and opening hours were restricted, which meant that customers could no longer get their morning bread as before.

The original bakery, which was once known for its high-quality customer service, was now struggling to maintain its standards.

The townspeople were disappointed and many of them switched to buying their baked goods from neighboring towns.

This was not well seen by the Bakers Association, who complained about how hard it was to keep their business running, and specially now when having to confront foreign competition. They claimed that this was be bad for the town's economy and something urgent needed to be done about it.

The city council met too often to discuss different issues, and the administration felt that it was becoming a drain on their time and resources. To address this issue, the Ministry of Competition was created, with a Secretary of Bakeries, full-time staff, offices, and a new budget, with the tasks of supervising and promoting fair competition in the town, through the implementation of policies and regulations.

The Secretary of Bakeries considered it important to protect the city's local businesses and ensure they could compete on a level playing field, so it proposed implementing tariffs on imported baked goods to protect local investments and labor from "unfair" foreign competition. This is how the "Buy Local" act was approved.

In order to properly enforce the controversial law, The Secretary of Bakeries and the Ministry of Competition also set up a customs agency and border patrol. The customs agency was responsible for checking incoming baked goods from other cities and enforcing the tariffs, while the border patrol was responsible for monitoring the borders to prevent smuggling of untaxed baked goods without proper sanitary labels.

However, the "Buy Local Law" also had unintended consequences.

The tariffs created incentives for a black market in baked goods, and as a result, increased levels of bribery and corruption. Organized crime became more violent as they sought to profit from smuggling. The situation became so dire that baking at home was declared illegal, as it was deemed a health risk and suspected to be related to criminal activity.

The home raids and confiscations of homemade baked goods increased, the police would use dogs trained to pick up the scent of flour, or any evidence of illegal bakery activity. The sight of police officers breaking down doors with dogs barking in tow was commonplace in the town, and it only added to the sense of fear and unrest among the residents. They felt that their rights were being violated.

This was not well received by human rights organizations, who objected that this was an unfair restriction of civil rights. The story of a grandmother who couldn't bake her grandchildren's favorite cookies touched the hearts of the townspeople and quickly made the local news.

Various vigils, protests and parades were held, a cookie monster graffiti was spotted all over public buildings and used as a way to mock current policies.

In response to the public outcry, the Secretary of Bakeries announced that a certain amount of baked goods for personal consumption would be allowed. This announcement was met with relief and things were calm for a while.

Although, without external competition, the quality of bread and pastries in the town began to decline, and prices increased. This was not well seen by the townspeople, who were frustrated and angry.

The Secretary of Bakeries conducted regular audits of the bakeries to ensure that they were operating within the rules and regulations set by the town council.

Auditors would sometimes try different pastries and take "samples" to their offices way to often and way to much.

This was not well seen by the Bakers Association, who demanded more transparency in the audition process.

So a series of taste tests were organized at the town fairs, where the public was invited to sample the baked goods from each of the bakeries and provide feedback. Based on the results of the taste tests, the Secretary of Bakeries provided support and resources in the form of subsidies and tax breaks to the losers, so that no one was left behind.

Fraud complaints were not lacking, since many fake bakeries participated in the competition only in order to obtain those benefits, resulting in a great waste of public funds.

The major would proudly grant the Yearly Baker's Price after a long speech of the current administration accomplishments. This was a big news in town, the winners would make headlines and become instantly popular.

The few bakeries that were able to make it to the podium found that their products would ran out of stock quickly, leading them to raise their prices even more, to keep up with the demand.

This was not well seen by the Consumers Association, who denounced "price gauging" practices, and demanded that policies be put in place to prevent it.

The best bakeries resisted these attacks, claiming that their prices were adequate and that it was in fact the other bakeries that were engaging in "predatory pricing" practices, by forming a joint cartel, wasting subsidies, and driving prices down to loss-making levels.

This led to a heated debate between the bakeries, the Consumers Association, and bureaucrats from the Secretary of Bakeries, as they tried to find a solution that would ensure fair competition while protecting the rights of both the business owners and the consumers.

The Secretary of Bakeries decided to implement a policy of fixed prices for each type of baked item, and strict stock and price controls. This is how the "Fair Prices Law" was approved.

It meant that the price of a loaf of bread, for example, would be the same across all bakeries in the town, regardless of the quality of the bread or the expenses incurred by the bakery in producing it, even yesterday's bread could not be sold at loss.

With the fixed prices policy and stock controls in place, the bakers no longer had the freedom to adjust their prices based on supply and demand. This resulted in a shortage of baked goods as the bakers could not raise prices to cover the cost of ingredients or labor, leading to frequent stockouts or decline in the quality of goods. The long lines for bread became a common sight as customers rushed to buy the limited supply of baked goods.

The lack of incentives to innovate or be creative in the industry led to a stagnation of new recipes, ingredients or even the use of new technology. Bakers simply followed the rules set by the Secretary of Bakeries, but with no rewards for doing something different or better, many lost the passion they once had for baking. The consumers also suffered as they were unable to enjoy new and exciting baked goods. The once thriving baking industry in the town had become dull and uninspiring.

Consumers had given up, and began replacing baked goods with substitutes like fruit and cheese, causing several bakeries to go out of business and massive layoffs.

This was not well seen by the politicians, the media, the artists and even the taxi drivers in the town, who were all in agreement that the situation with the bakeries was a "market failure" that required strong intervention from the authorities to protect the consumers. They argued that the distorted prices and shortage of baked goods was proof that the market was not functioning properly and that something needed to be done.

It was in this context that the bureaucrats decided to expropriate the bakeries and create a public bakery company, claiming that it would best serve the interests of the townsfolk by offering lower prices, eliminating the corporate greed of the private bakers, and avoiding waste in advertising. This is how the "Law of the Sovereign and Democratic Bakery for All" was approved.

The massive financial bailout was welcomed by the Bakers Association and the Bakery Workers Union, although it left the numbers of the already battered public accounts in the red.

The public bakery was named the "People's Bakery". At the expensive inauguration party, with media coverage and invited artists the bakery's logo was revealed, featuring a baker that closely resembled the current mayor, who was seen as the champion of the people's cause.

But things didn't change for better.

The decision-making process at the "People's Bakery" became heavily influenced by political interests, leading to a focus on producing the baked goods that were favored by the political class. Even the cake decorations all used the governing party's colors. In addition, the People's Bakery budget was often “adjusted” to accommodate other, more pressing political initiatives.

Minority groups, such as celiacs or those with special dietary requirements, struggled to find options to suit their needs, while religious communities also faced difficulties in obtaining products for important celebrations such as weddings or communions. According to current regulations, public funds had to be used for secular purposes only.

The situation was aggravated by the lack of incentives for the employees of the People's Bakery to innovate and improve the quality of their products, since there was no competition to drive them to do so, and they would receive their paycheck regardless of their performance or demand for bread It was common to see excess or surplus of bread and products that were undercooked or overcooked, unappetizing and even inedible.

This was not well seen by the people of the town, who had no other option but to wait for new elections in order to change how the "People's Bakery" would be administered, if any political party attached any importance to the matter.

Being politically administered, "People's Bakery" was not immune to corruption, lack of accountability and poor transparency.

The allocation of resources and hiring processes were influenced by political favors and nepotism and contracts were awarded to friends and family.

The mayor's spouse was appointed head of the People's Bakery, despite having no prior experience in the baking industry. This decision was widely criticized as nepotism and caused a public scandal. However, things went from bad to worse when evidence emerged of the misallocation of resources and how the hiring processes were influenced by political favors, granting advantages to relatives and friends of power.

The public outcry over this corruption case was so great that the major was eventually forced to resign in disgrace. The People's Bakery was now left in a state of disarray and many townsfolk began to question the efficacy of the government's intervention in the baking industry.

But they knew better this time. And so, they voted new leaders who promised to deregulate the bakery industry and let the free market determine the right amount of bakeries, even if it was just one, the salaries of their employees and the decorations on the cakes that consumers demanded.

The townsfolk had finally learned their lesson and realized that the only monopoly that truly harms the people is the one enforced by the government.

Little they knew this was a lesson they would have to learn every few generations, despite how determined they were now to not to make the same mistake again.

Except for "The Only Butcher Shop", which was run by a wealthy and greedy businessman, and who had a monopoly on the meat industry, at least in that town.

Someone should do something about it.

The end.