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

By the time the police dogs were trained to sniff out flour, nobody in town could remember how it had started. It started, like most things, with bread that seemed too expensive.

Once upon a time there was a small town with only one bakery. It was as old as the town itself and considered something of a landmark. The townspeople simply bought their daily bread there.

When election season came, a candidate stood outside the bakery and asked the passing crowd how much they had paid for their bread, promising to end monopolies like this one. Nobody knew whether the price was fair, but suddenly everyone felt it wasn't. The townspeople liked the sound of lower prices, and the baker seemed wealthy enough.

The candidate won by a landslide, and not long after, the first measure was enacted: split the bakery.¹

Splitting a bakery turned out to be harder than it sounded. How many bakeries? Too few and they would collude; too many and they wouldn't have enough customers. Where to put them: spread across town, or clustered in a bustling bakery district? Some locations would be more profitable than others naturally. Should they all sell the same pastries, or specialize, and wouldn't a specialized bakery just be a tiny monopoly of its own?

The administration settled on letting the baker keep his bakery while financing, with public funds and a new tax, four smaller ones in different neighborhoods, in accordance with the new zoning regulations. So many new jobs would be "created" that a Bakery Workers Union and a Bakers Association were also funded.

To give the newcomers a chance, the administration also capped how much bread the original bakery could sell, to cut its earnings and push customers toward the others. But the new bakeries couldn't fill the gap. Permits to expand took time, not everyone wants to become a baker overnight, and nobody was willing to get up too early to make bread. Baking also turned out to be a craft: which recipes worked, which pastries are more profitable and some are only seasonal. The old bakery had spent generations learning it; the new ones had to start from scratch.

Then the Bakery Workers Union declared the early hours exploitative, and opening hours were regulated so that no bakery would have an unfair advantage.²

Nobody in town could get morning bread anymore. Regulations produced only scarcity, and bread prices went up fast and quality got worse. So much so, that the townspeople started buying their bread in neighboring towns.

This did not sit well with the Bakers Association, who complained that foreign competition was ruining the local economy. The administration responded with a tariff on imported baked goods. This is how the "Buy Local Act" was approved.³ The tariff required a customs office, the customs office required a border patrol, and the border patrol required a department to manage it. Every new rule seemed to need a new office, and every office a bigger budget.

The tariff also created a black market. Things got so bad that baking at home was declared illegal, as a health risk and a probable front for smugglers.⁴ Police raided kitchens with dogs trained to sniff out flour, and the sight of officers breaking down doors became commonplace.

With supply capped, warm bread became a luxury. The popular bakeries sold theirs at a premium, and the Consumers Association denounced price gouging.⁶ The struggling bakeries, with their endless subsidies, sold their bread well below cost. The popular bakeries denounced that right back, as predatory pricing. To level the field, the administration fixed the price of every item and imposed strict stock controls. This is how the "Fair Prices Law" was approved.⁷

To enforce all these rules, the administration hired inspectors. They checked hours, hygiene, and permits, and took "samples" of whatever looked good. Permits for extended hours or a new display case could be had faster for a small consideration. Soon everyone in town knew which inspector to invite for coffee.⁵

A loaf now cost the same everywhere, regardless of quality or cost, and even yesterday's bread couldn't be sold cheaper. Bakers who couldn't cover their costs baked less, or baked worse. Lines for bread became part of the landscape. One baker did invent a new pastry. It sold out every morning, and within a week the inspectors came asking about his monopoly. Nobody tried a new recipe after that. Eventually people gave up and ate fruit and cheese instead, and bakeries began to close.

The town had tried licenses, tariffs, inspectors and price controls. With the bakeries closing, the verdict was unanimous: the market had failed, and the industry had to be saved. The bakeries were expropriated to form a single public company that would end corporate greed, lower prices, and save on advertising. This is how the "Law of the Sovereign and Democratic Bakery for All" was approved.⁹ The Bakers Association and the Union welcomed the bailout, which put the town's accounts deep in the red.⁸

The People's Bakery opened with an expensive party, press coverage, invited artists, and a logo featuring a baker who looked a great deal like the mayor.¹⁰ The man who had campaigned against the only bakery in town was now running it.

Things did not improve. The bakery made what the political class liked, and the cake icing came in the governing party's colors. Its budget was regularly "adjusted" to fund more pressing initiatives. Celiacs couldn't find anything they could eat, and religious families couldn't get cakes for weddings or communions, since public funds had to be spent on secular purposes. Employees were paid whether the bread was burnt or raw, and much of it was both. Anyone unhappy could wait for the next election, and hope some party cared.

Then the mayor appointed his spouse, who had never baked anything, to run the People's Bakery. When evidence emerged that contracts and jobs had gone to friends and relatives, the scandal forced the mayor to resign in disgrace.

Many began to question the efficacy of the administration's intervention in the baking industry, and the idea of deregulating and letting customers decide the winners and losers became popular.

When the next election season came, a candidate stood outside the town's only butcher shop and asked the passing crowd how much they had paid for their meat. It was, he assured them, abusive.

The end.

This is my humble homage to George Orwell's Animal Farm. It's about what happens when a government, a monopoly in its own right, regulates an industry. Every measure in the story may seem far-fetched, yet each one has happened somewhere, at some point (see the footnotes below). And that's just bread. Imagine the same approach applied to housing, finance, or artificial intelligence.