The European Guilds: An Economic Analysis

The European Guilds: An Economic Analysis

by Sheilagh Ogilvie


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A comprehensive analysis of European craft guilds through eight centuries of economic history

Guilds ruled many crafts and trades from the Middle Ages to the Industrial Revolution, and have always attracted debate and controversy. They were sometimes viewed as efficient institutions that guaranteed quality and skills. But they also excluded competitors, manipulated markets, and blocked innovations. Did the benefits of guilds outweigh their costs? Analyzing thousands of guilds that dominated European economies from 1000 to 1880, The European Guilds uses vivid examples and clear economic reasoning to answer that question.

Sheilagh Ogilvie’s book features the voices of honourable guild masters, underpaid journeymen, exploited apprentices, shady officials, and outraged customers, and follows the stories of the “vile encroachers”—women, migrants, Jews, gypsies, bastards, and many others—desperate to work but hunted down by the guilds as illicit competitors. She investigates the benefits of guilds but also shines a light on their dark side. Guilds sometimes provided important services, but they also manipulated markets to profit their members. They regulated quality but prevented poor consumers from buying goods cheaply. They fostered work skills but denied apprenticeships to outsiders. They transmitted useful techniques but blocked innovations that posed a threat. Guilds existed widely not because they corrected market failures or served the common good but because they benefited two powerful groups—guild members and political elites.

Exploring guilds’ inner workings across eight centuries, The European Guilds shows how privileged institutions and exclusive networks shape the wider economy—for good or ill.

Product Details

ISBN-13: 9780691137544
Publisher: Princeton University Press
Publication date: 02/12/2019
Series: The Princeton Economic History of the Western World , #90
Pages: 672
Sales rank: 239,721
Product dimensions: 6.20(w) x 9.30(h) x 1.80(d)

About the Author

Sheilagh Ogilvie is professor of economic history at the University of Cambridge and a fellow of the British Academy. Her books include Institutions and European Trade and A Bitter Living.

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The Debate about Guilds

... [this ordinance is] for the good and profit of the craft and thecommonality of the people.

— Hosiers' guild ordinance, Paris, c. 1268

... they have enacted such ordinances ... and have conspired to maintain and defend them, contrary to the regulations made for the common good of the city.

— Judges describing the

fishmongers' guild, London, 1321

... [these privileges are] to bring utility and honour and piety not only to us, but also to the common weal.

— Hatters' guild privileges, Middle Rhine towns, 1477

... [under cover of their fraternity they act] to augment their craft at the expense of the Republic.

— Complaint against the velvetweavers' guild, Toledo, 1562

... [the guild assembly and ordinances] are most important for thepublic good and utility.

— Silk-twisters' guild ordinance, Toledo, 1627

... for private or peculiar profit is the chief foundation (tho' it always goes under the notion of a general advantage) of all those restrictions and burdens imposed on the citizens by corporations or guilds.

— Pieter de la Court, complaint against the guilds of Holland, 1662 People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

— Adam Smith, observation on urban guilds, 1776

What kind of institution makes the entire economy work better, and what kind moves resources into the hands of special-interest groups, at the expense of everyone else? In the terms people used to describe pre-modern guilds, what serves "the common weal", and what "ends in a conspiracy against the public"? This question is central to improving people's lives in rich and poor economies alike. Many factors help economies flourish, but a growing body of research suggests that one key cause is institutions – "the rules of the game in a society ... the humanly devised constraints that shape human interaction". The origins of these "humanly devised constraints" often lie centuries in the past, and most theories of economic growth make assumptions about the historical institutions that set economies on an upward path. But although institutions clearly matter, what kind of institution should a poor economy aim for?

Every institution is multi-faceted and none can be boiled down to a single, all-important characteristic — as this book will argue. But one key feature is whether an institution is "generalized" or "particularized". Generalized institutions are ones whose rules apply uniformly to everyone in society, regardless of that person's identity or group membership. The rules of the game established by such institutions apply to any economic agent impartially. In principle, a generalized institution is equally accessible to all participants, and thus facilitates and constrains everyone's transactions in the same way. An example of a generalized institution is a state in which a clear rule of law is established, or a competitive market with open entry. In the words of the Declaration of the Rights of Man, issued by France's National Constituent Assembly in 1789, "laws should be clear, exact, and alike for all citizens".

Particularized institutions, in contrast, have rules that apply differentially to different people. The rules of the game differ according to whether a person has particular characteristics. These characteristics are not related to the transaction in question. Instead, they relate to identity: gender, religion, ethnicity, social stratum, parentage, ancestry, legal privileges, or group membership. The rules and entitlements of an occupational guild, for instance, applied only to persons with membership in that guild. Non-members of the guild were treated quite differently. Guild membership in turn depended — as we shall see in this book — on many non-occupational criteria. The rules of a guild might guarantee your property rights or enforce your contracts, but only because of your particular identity, privileges, and entitlements as a member of a particular subset of economic agents, defined according to transaction-unrelated criteria.

Generalized institutions, some might claim, are idealized constructs that cannot be applied to pre-modern economies. True, no economy is regulated by perfectly generalized or perfectly particularized institutions. Instead, the two types of institution appear in different combinations in each society. But there is no technical reason why generalized institutions were impossible in pre-modern economies. Empirically, some pre-modern economies had quite generalized institutions, just as some modern ones have quite particularized ones. The county of Champagne in the thirteenth century, for instance, did not have perfectly impartial governmental institutions or perfectly impersonal markets; but it did offer a much more generalized institutional framework than most other societies at the time (and for centuries afterwards). These generalized "rules of the game" attracted hundreds of merchants from many lands, making the Champagne fairs the fulcrum of long-distance trade in western Europe from c. 1180 to c. 1300. Similarly, neither Venice and Bruges in the fourteenth century, Antwerp in the fifteenth, Amsterdam in the sixteenth and seventeenth, nor London in the seventeenth and eighteenth had perfectly impartial governments or perfectly impersonal markets; but each of them in turn offered an institutional framework that moved away from delegating power to corporate groups to providing public institutions that guaranteed the property rights and enforced the contracts of all comers. These generalized institutions made each city in turn a successful centre of trade and industry which, for a time, outperformed other urban centres. Likewise, as we shall see in the course of this book, Flanders in the fifteenth century, the Northern Netherlands between 1560 and 1670, England between 1600 and 1800, and the guild-free jurisdictional enclaves inside the cities of eighteenth-century France, did not have perfectly impartial governments or perfectly impersonal markets. But they did offer an institutional framework that curbed the particularized privileges of guild masters, creating a much more level playing field for outsiders to enter, compete, and engage in disruptive innovation. As this book will show, every society in pre-modern Europe had a different combination of "rules of the game", each offering different gradations between the particularized and the generalized.

The coexistence of particularized and generalized institutions in all economies raises the question of the relationship between the two. Do highly particularized institutions such as guilds, which enable closely knit groups to cooperate to serve their members' collective interests, facilitate or hinder the operation of more generalized institutions such as markets or states, whose rules in principle constrain and facilitate economic activity by all members of society impartially? Could a guild serve, as the Paris hosiers claimed in their 1268 privileges, both "the good and profit of the craft" and "the commonality of the people"? How does the balance between particularized and generalized institutions affect economic growth and human well-being? Pre-modern European societies, like modern ones, were often characterized by market failure and state failure, and thus by poorly functioning generalized institutions. But they also suffered from poorly functioning particularized institutions, such as the guilds this book investigates. The question is how the relationship between these two types of institution played itself out for individuals and the wider economy.

Guilds are classic exemplars of particularized institutions. A guild is an association of people engaging in the same activities and wishing to pursue shared purposes. But, as the epigraphs to this chapter show, guilds declared that they served both the interests of their members and "the commonality of the people", "the common weal", "the public good". Thus although guilds acknowledged that they were particularized institutions serving their own members, they also claimed to create generalized benefits for society as a whole. But as the other epigraphs to this chapter show, contemporaries took a darker view, arguing that guilds "conspired ... contrary to the regulations made for the common good of the city", acting "to augment their craft at the expense of the Republic", and imposing "restrictions and burdens on the citizens".

The interplay between the purposes guilds served for their members and the effects they had on the wider economy has been central to guilds ever since they first arose. It was crucial for guilds in securing their own survival. It was important for outsiders in challenging guilds' special privileges. And it was a key issue for policy makers in deciding how much to enforce or constrain guild entitlements. It is also the central question of this book. In pre-modern Europe, how did the particularized institution of the guild affect the special interests of guild members and the general interests of the economy as a whole?

Why Is This Important?

Does this really matter? Establishing the facts is important for their own sake. But do these particular facts have wider implications? Why should we care about an institution that, as we shall see, has not existed anywhere in Europe since 1883? Does it really matter what we think about European guilds? Yes — as this book will show. Guilds are important for understanding wider economic and social questions: the sources of sustained economic growth, the relationship between market and non-market institutions, the benefits and costs of social capital, the economic effects of networks, the causes of social exclusion and inequality, the economics of discrimination, and the determinants of institutions themselves.

For one thing, guilds are important for understanding the historical sources of economic growth. The first transition to sustained economic growth relied on economic transformations in the preindustrial period. During the eight centuries before European industrialization, guilds were central institutions setting the rules of the game for economic activity. Understanding how economies first achieved sustained economic growth requires analyzing how their institutions worked — for good or ill.

Guilds also shed light on how non-market institutions facilitate and constrain markets. Every market, in rich and poor economies alike, suffers from failures — situations in which a market fails to allocate resources efficiently because of public goods, information asymmetries, externalities, principal-agent problems, or lack of competition. Since markets are necessary for economies to grow, institutions that ameliorate or exacerbate market failure are central to understanding growth. Guilds, as we shall see in this book, affected markets in many ways: through entry barriers, price and supply distortions, gender discrimination, product quality, labour skills, and innovation. By changing the working of markets to serve their own members, they inevitably changed markets for everyone else. The effect of a particularized institution such as a guild on a generalized institution such as a market is central to understanding economic efficiency, distribution, and long-term growth.

Third, guilds are exemplars of institutions that generate "social capital" — the stocks of shared norms, information, sanctions, and collective action that accumulate inside closely knit groups. Social capital is supposed to enhance trust in ways that make markets and governments work better. Robert Putnam, for instance, thought the social capital created by northern Italy's medieval guild tradition was a major determinant of its modern economic success compared to the Italian south; this led him to conclude that social capital generally fosters dynamic economies and well-functioning polities. Surveys of social capital and economic development commonly refer to guilds as networks whose social capital aided European growth in the past and hold positive lessons for poor economies today. If this is true, then at least some particularized institutions might benefit not just special-interest groups but everyone in society. Social capital can be bad as well as good, however. To benefit its members, a closely knit group may use its shared norms, information, and sanctions to organize collective action that corrupts the state and distorts the market. Guilds provided institutional mechanisms for individuals to organize collectively to monitor and influence governments and markets, and this made it possible for them to curb abuses and failures in these institutions. But as we shall see, guilds also provided mechanisms to organize collusive action in markets in collaboration with governments, offering political elites favours in return for market privileges, even when this harmed the rest of society. Guilds shed light on the interactions between closely knit special-interest groups and political institutions in the run-up to industrialization and sustained economic growth.

The social capital guilds generated is closely related to a fourth key issue. Guilds were social networks — indeed, arguably the most widespread and long-lasting examples of such networks. Economists increasingly recognize that economies consist not just of individuals but of wider networks in which individuals are linked with each other in more or less intense clusters. Such networks can generate positive externalities by facilitating communication, diffusion, and cooperation that would not take place if all individuals transacted independently. But networks can also generate negative externalities via conspiracy, groupthink, and corruption. If network links can amplify good decisions by individuals, they can also amplify bad ones. Guilds had two features which made them particularly effective networks: they were closely knit, so everyone knew who was a member and who was not; and they typically generated, and often mandated, multi-stranded relationships among their members. A guild, as we shall see shortly, often favoured shared religious observance, cultural expression, sociability, and even intermarriage. Moreover, closure and multiplexity enabled guilds to generate both positive and negative externalities. This makes the guild an excellent context for exploring how social networks affect economies over a period of centuries.

Guilds also cast light on an issue of urgent concern: the determinants of inequality. A guild typically claimed to ensure equality among all its members — "the utility of both rich and poor", as the Middle Rhine bakers' guilds put it in 1436. As we shall see in Chapter 4, guilds often imposed elaborate restrictions on competition, which they justified in terms of internal equality. However, guilds also erected elaborate entry barriers and labour market regulations which reduced the opportunities and earnings of wide swathes of society, disproportionately afflicting the poorest and most marginal groups. The result was increased inequality between the small group of guild members and the large population of outsiders. This raises a key question. What sort of institution exacerbates inequality: a particularized institution such as a guild, or a generalized institution such as a market or a state?

Guilds can also shed light on economic discrimination. Economists are puzzled by discrimination. They cannot agree even on whether it is consistent with economic rationality, let alone what causes it and what policies might address it. Guilds, as we shall see, discriminated against women, poor men, Jews, Slavs, gypsies, migrants, people they defined as "dishonourable" or "untouchable", and members of minority ethnic, linguistic, and religious groups. Did this merely reflect underlying cultural values to which institutions were irrelevant? Did it serve economic efficiency since outsiders were more likely to violate trust? Or was inefficient discrimination facilitated by particular institutions? Guilds, because they engaged in systematic discrimination over a period of centuries, offer a laboratory for exploring rival theories of discrimination. This in turn has policy implications, an important issue given how discrimination affects efficiency and equity in most economies.

Finally, guilds shed light on a very basic question: the determinants of institutions themselves. A guild was an institution that directly affected economic activity not just in the occupation it claimed as its own, but in all the factor and product markets its members used. Although guilds were usually based in towns, they affected the rural economy by constraining peasant crafts and services, shaping work opportunities for country people, and regulating markets in rural raw materials: grain for bakers and brewers, meat for butchers, wool and flax for weavers, leather for tanners and shoemakers, wood for builders. Beyond the purely economic realm, guilds organized sociability, religion, cultural expression, migration, marriage, and death. Guilds thus affected, directly or indirectly, nearly every facet of economy and society. This makes it even more important to understand what caused them to arise, survive, and decline. The literature on economic institutions has long debated whether institutions are just epiphenomena of exogenous natural and geographical factors, are efficient solutions to economic problems, are expressions of cultural beliefs and values, or result from political conflicts over distribution. Guilds existed in so many societies over so many centuries that they offer a rich context for testing theories about why institutions exist at all, and thus about what underlies their effects on economic growth.


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Table of Contents

List of Figures and Plates vii

List of Tables ix

Acknowledgments xv

Chapter 1 The Debate about Guilds 1

Chapter 2 Guilds and Governments 36

Chapter 3 Entry Barriers 83

Chapter 4 Market Manipulation 172

Chapter 5 Guilds and Women 232

Chapter 6 Quality Regulation 307

Chapter 7 Human Capital Investment 354

Chapter 8 Innovation 438

Chapter 9 Guilds and Growth 511

Chapter 10 Conclusion 564

Bibliography 587

Index 637

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From the Publisher

“Sheilagh Ogilvie’s astounding and readable book demolishes the idea—as old as nineteenth-century German historical scholarship but revived recently as a blackboard possibility—that monopoly privilege is good for us. She presents the hypothesis fairly and with political and historical subtlety. And then she crushes it—overwhelmingly, definitively, scientifically—as the guild idea was once crushed by liberalism. Illiberalism has revived monopoly. Historical science raises the alarm.”—Deirdre N. McCloskey, University of Illinois at Chicago

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