The Problem with Guilds: They’re Monopolistic and Wasteful

Economists have illuminated our understanding of guilds in medieval Europe, but we still know rather little about their functions in other parts of the world, especially Africa. In the West, the approach has been to question the relevance of guilds as a platform to accentuate economic growth. In economic literature, most agree that guilds inhibited growth in medieval Europe; however, this idea is rebuked in the text Guilds, Innovation, and the European Economy, 1400–1800edited by Stephen Epstein and Maarten Prak. This volume attacks the assertion that guilds operated primarily as rent-seeking institutions responsible for halting the pace of economic growth.

Instead, the authors reply that they were instrumental in facilitating the acquisition of skills and diffusion of technology. Despite the admission that under select circumstances guilds opposed innovation, the conclusion is that this argument has been exaggerated. Yet, Sheilagh Ogilvie in her meticulously researched tome European Guilds: An Economic Analysis punctures the assumption that guilds served a laudatory function. Ogilvie portrays guilds as political institutions that instituted occupational barriers, thereby limiting some professions to guild members.

Ogilvie’s findings complement prior research arguing that guilds discriminated against women, Jews, poor men, and immigrants. Contrary to the revisionist literate depicting guilds as enablers of competition, Ogilvie points out that they regulated markets by bestowing members with exclusive rights to engage in economic production in a specified location. Such perks entailed monopoly rights over producing particular products; for instance, merchant guilds would provide members with exclusive trading rights to procure particular wares, whereas a weavers’ guild could bar nonmembers from selling fabrics to consumers and merchants.

Working in tandem with political elites, guilds were frequently insulated from competition. Monarchs appreciated that forming alliances with guilds could weaken the authority of rivals. In the case of France in the sixteenth century, the monarchy attempted to ensure that all merchants and artisans fell under one umbrella. Amalia D. Kessler in her provocative study A Revolution in Commerce: The Parisian Merchant Court and the Rise of Commercial Society in Eighteenth Century France illustrates how the monarchy employed guilds to undermine the authority of rival institutions: “In February 1674, the monarchy attempted to consolidate the power of the Chatelet—and in particular, its newly formed police power—by suppressing the nineteen seigneurial courts that continued to sit in Paris and its environs. In doing so, the monarchy sought to ensure its primacy over manufacturing and trade (arts de métiers), and thus over matters of guild regulation—matters of great interest to its newly created police.”

Not only did the monarchy rely on guilds to obtain political mileage, they were also a source of income for the crown, since membership in a guild was acquired after paying a hefty fee. Notwithstanding the cost of guilds, some believe that they were pivotal to human capital formation, though evidence compiled by economists suggests that guilds had low standards and would even grant certificates without examination. Analyzing the literature on guilds, Ogilvie debunks their perceived efficiency by noting that one disgruntled member bemoaned the paucity of quality training to such an extent that he petitioned to be released from his office, “on the grounds that the sealing takes place very badly, and when one says anything about it one incurs great enmity.”

Quite shockingly, it appears that junior members were inadequately instructed, as Ogilvie observes: “Second, the sealers lacked the requisite knowledge for detecting low-quality work. No pretense was made of appointing skilled or experienced masters as sealers. Instead, the office was a sinecure which rotated among masters every two years according to seniority, so every guild member would get a chance to enjoy the sealing fees.”

Our survey so far reveals that guilds imposed constraints on growth, but let’s see what the evidence indicates for Africa. Writing about the significance of the guild system in precolonial Yorubaland, A.O. Y Raji and T.S. Abejide list three main categories of guilds:

  • The guild of general traders (Egbe Alajapa), which traded largely in inanimate objects such as medicinal herbs, fruits, and other food items.
  • The guild of traders (Egbe Alaroobo) that specialized in different types of animate objects such as fowls, goats, etc. It is observed that members of both guilds often engaged in medium- and long-distance trading, as they moved around other towns and villages to collect their articles for sale in other larger towns or in their own town markets.
  • The specialized guilds of traders, tradesmen, or professionals. Such guilds were named after the items they traded in or after their profession. These comprised, for example, Egbe Alaso (guild of cloth dealers), Egbe Olose (guild of soap makers), Egbe Alaro (guild of dyers), Egbe Alata (guild of pepper sellers), Egbe Eleni (guild of mat makers), Egbe Onisona (guild of carvers), Egbe Alagbede (guild of smelters), etc.

Like European guilds, in Yorubaland, these institutions crafted professional standards requiring the compliance of members. Although the economy was lightly regulated, the state exercised indirect control over the management of guilds by ratifying the installment of leaders and reinforcing the authority of the guilds’ executive to exert discipline. Furthermore, guilds in Yorubaland placed a high premium on investment, and this resulted in the emergence of a contributory scheme known as Esusu. Raji and Abejide explain the inner workings of the program:

This was a sort of capital accumulation achieved through constant re-investment of profits made from commercial activities by members of the respective guilds … whereby each guild member regularly contributed a fixed amount usually every fifth, ninth or seventeenth day, corresponding to the periodic market days…. A substantial proportion of the amount received in turn by each member was often invested in commercial enterprise to enhance the economic base of the respective members of the guild.

On the other hand, unlike most European guilds that restricted membership to middle-class men, women dominated guilds in Yorubaland. Except for blacksmithing, the hunters’ guild (Egbe Ode), and the warriors’ guild (Egbe Olugun), women were immersed in most professions. Some guilds exclusively contained women as members, such as the salt guild (Egbe Oniyo), the pepper sellers’ guild (Egbe Alata), the pot dealers’ guild (Egbe Onikoko), the palm oil traders’ guild (Egbe Elepo), and the fish sellers’ guild (Egbe Eleja). Additionally, the powerful guild of kola nut dealers (Egbe Olobi) was predominantly female. Their influence in this guild underscores the seminal role played by women in organizing the considerable kola trade network between Yoruba and Hausaland.

However, a major distinction between Yoruba and European countries is that whereas in Europe, guilds and political elites partnered to secure power and economic privileges to the detriment of ordinary citizens, in Yorubaland there was a power imbalance favoring the political class at the expense of guilds. Raji and Abejide elaborate on the appropriative tendencies of political elites:

The loyalty and efficiency of the guild system also provided economic support for the traditional ruling elite in pre-colonial Yorubaland…. This took the form of regular or periodic contribution of products or items by members of a particular trade guild or profession; the presentation of goods or items with the best quality in order to be distinguished as to earn the praises of the ruling elite; and, the constant order or instruction given to the guild members to surrender a specified quantity of goods, with a further directive that those who were well established or well known in their specialized crafts or guilds were expected to surrender a greater quantity of products.

Further, the Benin Empire presents a peculiar case because in Benin, the guild system emerged to secure commodities for the monarchy. The genesis of the guilds in Benin can be traced to Ogiso Ere, the second ruler of the Ogiso dynasty. Historians posit that Ogiso Ere decided to formalize the guild system due to his desire to control the craft of iron smelting so that products could be delivered to him first in his capacity as monarch. Politically, the act made sense, because as a militaristic empire, it was in the ruler’s best interest to have jurisdiction over products that were used during war.

The success of the guild system was inextricably linked to monarchical authority. This is explained by Michael Ediagbonya, Abiodun William Duyile, and Yemi Ebenezer Aluko: “The common people in Benin were organized into occupational groups of craftsmen and professionals who supplied the Oba’s specific needs in return for monopoly rights from the Oba in their various trades. The raison d’ etre of the guild system was that each guild was formed to supply some needs of the Oba.”

In the cases of Yoruba and Benin, obviously some craftsmen would have derived wealth from the guild system. But from an economic standpoint, it is evident that in the former, the appropriative nature of political elites would have slowed growth by depriving traders of vital resources to aid capital formation, and in the latter, guilds can be construed as an extension of the Oba’s household. To protect themselves from vilification, craftsmen had an incentive to render free services to the Oba at the expense of their business. So even though, a few benefited from patronage, the dominance of the Oba in dictating preferences to guilds would have precluded them from engaging more worthwhile activities, thus registering a loss for professionals. Certainly, more research is needed for Africa, but the current evidence suggests that on average guilds have not been a boost to the economy.

This first appeared in The Mises Wire.

Articles are the author’s own opinion and do not necessarily reflect the views of the Initiative for African Trade and Prosperity or its partner organisations.

Lipton Matthews is a researcher, business analyst, and contributor to mises.org, The FederalistThe Imaginative ConservativeMerion West, and American Thinker.