\”Guild membership was therefore reserved for the privileged few. Guilds were small relative to the consumer markets they monopolized. They were also small relative to the wider labour market, whose members they largely excluded. Guilds were not all-encompassing workers\’ associations analogous to twentieth-century labor unions, but exclusive organizations for relatively well-off, middle-class men. …
The effects of guilds on economy and society have always generated controversy. Contemporaries held strong view about them, with guild members and their political allies extolling their virtues, while customers, employees, and competitors lamented their misdeeds. Many early economic thinkers praised guilds, as, for example, the French government minister Jean-Baptiste Colbert, who ordered all French crafts to form guilds, \”so as to compose by this means a group and organization of capable persons, and close the doors to the ignorant,\” and the Austrian imperial councilor Johann Joachim Becher, who argued that the authorities in past eras had wisely invented the guilds because \”competition weakens the livelihood of the community\”. Others censured guilds, as did Adam Smith when he called them \”a conspiracy against the public\”, and Ann-Robert-Jacques Turgot, when he told the King of France: \”I do not believe that one can seriously and in good faith hold that these guilds, their exclusive privileges, the barriers they impose to work, emulation, and progress in the arts, are of any utility. … The total removal of the obstacles that this system imposes on industry and on the poor and laborious sections of your subjects [is] one of the greatest steps to be taken towards the betterment, or rather the regeneration, of the realm\”. …
Modern scholars are also deeply divided on guilds. Some claim that guilds were so widespread and long-lived that they must have generated economic benefits. They might, for example, have solved information asymmetries between producers and consumers, overcome imperfections in markets for human capital, created incentive favoring innovation, put pressure on governments to be business-friendly, or generated social harmony by reducing competition, conflict, and inequality. Other scholars take a darker view. Guilds, they hold, were in a position to extract benefits for their own members by acting as cartels, exploiting consumers, rationing access to human capital investment, stifling innovation, bribing governments for favours, harming outsiders such as women, Jews, or the poor, and redistributing resources to their members at the expense of the wider community.
As this book will show, my own reading of the evidence is that a common theme underlies guilds\’ activities: guilds tended to do what was best for guild members. In some cases, what guilds did brought certain benefits to the broader public. But overall, the actions guilds took mainly had the effect of protecting and enriching their members at the expense of consumers and non-members; reducing threats from innovators, competitors, and audacious upstarts; and generating sufficient rents to pay off the political elites that enforced the guilds\’ privileges and might otherwise have interfered with them.
Occupational guilds in medieval and early modern Europe offered an effective institutional mechanism whereby two powerful groups, guild members and political elites, could collaborate in capturing a larger slice of the economic pie and redistributing it to themselves at the expense of the rest of the economy. Guilds provided an organizational mechanism for groups of businessmen to negotiate with political elites for exclusive legal privileges that allowed them to reap monopoly rents. Guild members then used their guilds to redirect a share of these rents to political elites in return for support and enforcement. In short, guilds enabled their members and political elites to negotiate a way of extracting rents in the manufacturing and commercial sectors, rents that neither party could have extracted on its own. First, I provide an overview of where and when European guilds arose, what occupations they encompassed, how large they were, and how they varied across time and space. I then examine how guild activities affected market competition, commercial security, contract enforcement, product quality, human capital, and technological innovation. The historical findings on guilds provide strong support for the view that institutions arise and survive for centuries not because they are efficient but because they serve the distributional interests of powerful groups.
Of course, the issues raised by the medieval guilds have continuing economic relevance. There are continuing efforts to reduce competition, through method ranging from occupational licensing to trade tariffs, always based on the claim that setting the stage for a certain group of producers to receive higher profits is actually in the interest of society as a whole. This broad argument is probably true in a few cases: for example, patents restrain competition for a period of time, but by allowing innovators to earn higher profits they also provide incentives for innovation.
But in many cases, including guilds, a cycle forms in which government helps certain producers receive higher profits, and then a share of those profits goes to helping government officials reach the conclusion that favoring one set of producers over consumers and other producers is a socially important goal.