2. What is a guild?

A guild is an association of people who share certain interests and wish to pursue common purposes. Historically, most guilds organized themselves around economic interests (Ogilvie, Reference Ogilvie2014b, Reference Ogilvie2019). A guild had legal privileges giving its members the exclusive right to practice a particular occupation in a particular town or region, control entry to the guild, govern the activities of members, and regulate markets for their inputs and outputs – and thus also to modify the activities of people who were not members of the guild.

Guilds varied hugely across occupations, sectors, societies, and eras. One key distinction was between merchant and craft guilds. Merchant guilds were organized mainly by wealthy wholesalers with interests in trade and finance (Ogilvie, Reference Ogilvie2011: 19–38). Craft guilds, by contrast, were organized mainly by craftsmen and retailers providing goods and services directly to customers (Ogilvie, Reference Ogilvie2019: 9–11). Craft guilds were more numerous, their members less affluent, and their interests more local, sparking the late-medieval ‘guild struggles’ between craftsmen and merchants analyzed below. ‘Umbrella guilds’ combining merchants and craftsmen in a particular line of business – e.g. wool or silk textiles – existed widely in societies such as Italy, where the consequent reduction in guilds' internal cohesiveness shaped their inclusiveness in distinctive ways.

Guilds were widespread across Europe for nearly 900 years, from the late 10th to the late 19th century. Merchant guilds appear in the documentary sources for European societies from c. 1000 onwards, followed slightly later by craft guilds. Between c. 1100 and c. 1500, most moderately remunerative crafts and services in European towns – and some rural regions – were organized into guilds. After 1500, guilds gradually weakened in the northwest corner of Europe, especially England and the Dutch Republic (for detailed discussion of multiple measures of guild strength, see Ogilvie Reference Ogilvie2019: 512–559). But in central, eastern-central, Nordic, and Iberian Europe, guilds got stronger after 1500 by collaborating with absolutist rulers and expanding into new sectors such as export-oriented proto-industry. France abolished its guilds in 1791, and exported guild abolition during the Napoleonic period to some German territories, Flanders, the Northern Netherlands, Switzerland, and northern Italy. But in many other German territories, the Austrian Habsburg lands, Iberia, and Scandinavia, guilds survived well into the 19th century. The last European guilds were not abolished until 1883 (Ogilvie, Reference Ogilvie2019: 533–536).

3. Was the guild an inclusive replacement for the clan?

Guilds in Europe are sometimes seen as inclusive because, it is argued, they provided an alternative to ‘clans’ or extended families which predominated in non-European societies such as China (De la Croix et al., Reference De la Croix, Doepke and Mokyr2018; Greif and Tabellini, Reference Greif and Tabellini2010, Reference Greif and Tabellini2017). In terms of the typology established above, guilds displayed greater ‘community inclusiveness’ than clans, because they included a larger number of people in their operations, giving more individuals entitlements to operate businesses by admitting them as apprentices and masters.

This theory, however, is not well supported by historical evidence. While the strength of extended family networks exists on a continuum, and Europe lacked ‘clans’ in the Chinese sense (Shiue, Reference Shiue2017), Italy, Iberia, southern France, Poland, Slovakia, Hungary, Romania, Greece, and the Balkans all had strong extended family systems in which kinship was economically important (Dennison and Ogilvie, Reference Dennison and Ogilvie2014; Dennison and Ogilvie, Reference Dennison and Ogilvie2016; Hajnal, Reference Hajnal, Wall, Robin and Laslett1983). Most of these societies also had strong guilds (Ogilvie, Reference Ogilvie2019: 555–559). Guilds thus did not substitute for strong extended families, but co-existed with them.

In nuclear- and extended-family zones of Europe alike, guilds favored kin of existing guild members (Ogilvie, Reference Ogilvie2019: 111–116). Some gave precedence to members' relatives in deciding whom to admit to apprenticeship, journeymanship, or mastership. Others exempted members' relatives from admission requirements such as apprenticeship or examination, and most charged members' relatives lower admission fees. In a sample of 245 guilds in eight European societies between 1233 and 1850, sons of existing masters paid admission fees that were just 43% of those charged to other local applicants (Ogilvie, Reference Ogilvie2019: 111–112). The 60 guilds in the sample that were located in ‘clan’ societies (Bulgaria, Italy, Spain) charged masters' sons just 25% of the fees paid by other locals, while the 185 guilds in nuclear-family societies (England, northern France, Germany, the Dutch Republic, and the Southern Netherlands) charged masters' sons 49% of the normal local fee.Footnote ² In setting entry barriers, it seems, guilds did not substitute for clans but collaborated with them.

Unsurprisingly, a non-trivial share of guild members were relatives of existing members. In a sample of 499 guilds in 11 European societies from 1375 to 1860, 37% were sons of existing guild members (Ogilvie, Reference Ogilvie2019: 111–114). In a smaller sample of 15 guilds in seven societies between 1500 and 1850, 55% were either sons or other male relatives of existing guild members (Ogilvie, Reference Ogilvie2019: 115). Guilds judiciously recruited non-relatives of existing members, both to fill niches vacated by high urban mortality and to collect the high fees charged to outsiders. Even so, they maintained higher ‘legacy’ admissions than modern Ivy League universities, widely castigated as non-inclusive institutions perpetuating privilege in present-day America (Blumberg, Reference Blumberg2017).

That European guilds admitted some non-relatives of existing members might suggest that they were at least more inclusive than Chinese clans. But too little is known of Chinese economic history to make this statement with certainty. We lack quantitative evidence on occupational entry barriers erected by Chinese clans. At least some Chinese crafts and trades admitted entrants unrelated to existing practitioners (Burgess, Reference Burgess1930: 75; Morse, Reference Morse1909: 168). But few figures are available. On the one hand, Gamble (Reference Gamble1921: 168) found that not a single Peking craft or trade limited admission by kinship or place of origin and even central and south Chinese crafts were exclusive only if they ‘demand some particular skill, have special trade secrets, or whose work is especially remunerative’. Burgess (Burgess, Reference Burgess1928: 84, 124, 129) found that just one of the 42 Peking guilds he analyzed, that of the porters, restricted admission to sons and brothers of guild members. On the other hand, Moll-Murata (Reference Moll-Murata, Prak and Van Zanden2013: 234) found that the Jingdezhen potters' guild, established in 1674 by a migrant group, subsequently included just ‘24 surnames’. But Europe also had migrant groups which formed guilds that restricted access by kinship. The Viennese chimney-sweeps' guild was established in 1644 by nine masters from the Ticino and the Grisons, and for the next two centuries limited admission to members of just 14 families (Ehmer, Reference Ehmer and Crossick1997: 184). The Viennese chimney-sweeps' kin-based admission was extreme by European standards, as we know from the wider literature. But whether Jingdezhen or Peking were extreme or typical by Chinese standards cannot be known without more research.

We also lack evidence on how non-inclusive Chinese clans were. Chinese clans could be quite amorphous, tracing their origins to an apical ancestor who lived centuries in the past or was completely fictional (Burgess, Reference Burgess1928: 71). Some encompassed thousands of individuals who were not close relatives. A clan of this sort was at least as inclusive as a European guild, whose membership numbered at most a few hundred (Ogilvie, Reference Ogilvie2019: 13).

The historical findings thus do not support the idea that guilds manifested greater community inclusiveness than clans. European guilds discriminated in favor of members' relatives, and did so even more in clan-based than nuclear-family-based societies. Available studies show that, at least in Peking, most Chinese occupations did not limit entry by kinship. We lack evidence to conclude that Chinese clans were less inclusive than European guilds.

4. Did guilds include a majority of the population?

A second hypothesis is that guilds were inclusive institutions because a majority of people were guild members (Prak, Reference Prak2018; Prak et al., Reference Prak, Crowston, De Munck, Kissane, Minns, Schalk and Wallis2020; Richardson, Reference Richardson2004; Stasavage, Reference Stasavage2017). The evidence casts doubt on this idea.

A guild required membership from anyone who wanted to practice ‘its’ occupation, and then limited admission (Ogilvie, Reference Ogilvie2019: 83–171). Guilds excluded many groups on identity grounds: almost all women and Jews; men without town citizenship rights; ethnic, religious, and linguistic minorities; those with serf, slave, or bastard ancestors. Guilds erected economic barriers, excluding practitioners of other occupations, those with insufficient property, migrants who could not get citizenship rights, and anyone who could not afford the many fees and charges. Many guilds, as we have seen, favored relatives of existing members. Some excluded sons of ‘untouchables’ such as skinners, tanners, bailiffs, executioners, millers, or linen-weavers (Stuart, Reference Stuart1999). Many imposed catch-all clauses requiring good reputation, honorable status, or acceptability to existing members. In these ways, guilds were the opposite of inclusive.

Not all dimensions of guilds exclusiveness can be fully quantified, but available evidence shows that guilds excluded large swathes of the population. Half the population was excluded by definition. Almost no guilds – well below 1% – admitted females to mastership (Ogilvie, Reference Ogilvie2019: 236). Most let women practice guilded occupations only under a male member's license; even masters' wives and widows were only allowed to work subject to numerous conditions and restrictions. Females outside guild masters' households were barred completely. As far as women were concerned, guilds were not inclusive (Ogilvie, Reference Ogilvie2019: 232–306).

The vast majority of men were also excluded, because they lived outside towns. A few guilds had rural members, but the great majority were exclusively urban (Ogilvie, Reference Ogilvie2019: 91–93). The share of the European population living in towns of over 5,000 inhabitants was 6–8% in 1000, 10% in 1300, 11.4% in 1700, and 12.4% in 1800 (Malanima, Reference Malanima, Broadberry and O'Rourke2010). So around 90% of European males were excluded from guilds because they were country-dwellers.

Even if you were an urban male, to join a guild you had to buy or inherit town citizenship rights. Towns did admit outsiders, for the same reasons guilds did – to fill niches vacated by high urban mortality and reap hefty fees from immigrants. Montbéliard charged a citizenship fee higher than a full year's journeyman's wages in 1603, rising to eight years in 1748 (Ogilvie, Reference Ogilvie2019: 98). Many towns also required citizenship applicants to prove legitimate birth, majority religion, acceptable language and ethnicity, freedom from serfdom, minimum wealth, honorable parentage, and good reputation. Between 1584 and 1614, Berne rejected over 40% of citizenship applications, discriminating markedly against poorer candidates (Ogilvie, Reference Ogilvie2019: 98). Such barriers meant that less than 39% of urban householders in pre-modern Europe held town citizenship (Ogilvie, Reference Ogilvie2019: 99). Urban citizenship was usually necessary – though not sufficient – for guild membership.

Guilds themselves charged non-trivial admission fees. In a sample of 1,102 guilds in seven European societies between 1233 and 1809, the average mastership fee was equivalent to 276 days' wages for a laborer – over a year's earnings at full employment (Ogilvie, Reference Ogilvie2019: 122). Most guilds also levied money for masterpieces, examinations, entry feasts, gifts, bribes, fraternity fees, and other miscellaneous charges. In 16th-century Ghent, these added 25–60% to the cost of admission, and in 17th-century Paris, they were equivalent to 750 days' wages for a journeyman grocer (Ogilvie, Reference Ogilvie2019: 125). Guilds were thus ‘inclusive’ only for those with a financial cushion.

Even if someone was male, urban, a town citizen, and reasonably well-off, a guild might reject him on grounds of religion, language, skin color, age, marital status, sexual history, serf or slave ancestry, illegitimate birth, premarital conception, or ‘dishonorable’ parentage (Stuart, Reference Stuart1999). Many guilds made admission dependent on the liking of existing guild members – a probationary period, a reputation certificate, personal sponsorship, collective vote, or ill-defined ‘favor’. This was a binding constraint, as recognized by Wolfgang Vincentz who in 1553 prolonged his journeyman travels a second time because he did not know ‘who among the Breslau masters would on this occasion be unfavourable towards me’ (Ogilvie, Reference Ogilvie2019: 132). If all other entry barriers failed, a guild could usually devise a way of keeping someone out.

The quantitative outcome reflects these barriers. Across 47 towns in nine European countries between 1300 and 1800, guild masters comprised just 36% of household heads and 8% of inhabitants (Ogilvie, Reference Ogilvie2019: 14–15). In comparatively liberal cities such as early modern London, Nördlingen, Aachen, Augsburg, and Danzig, guild masters accounted for 50–80% of householders and 11–18% of inhabitants. But in exclusive ones such as Vienna, Bayonne, Bordeaux, Montpellier, Nantes, Florence, Padua, Rome, Turin, Amsterdam, and Malmö, they comprised just 10–30% of householders and 2–7% of inhabitants.

Guilds thus excluded most people from their activities. Even among the 10% of the European population who lived in towns, only just over one-third of households included a guild member. Guilds were neither able nor willing to offer economic and political inclusion to a majority of the population. Their ‘community inclusiveness’ was high in some cases, but quite modest on average.

5. Did guilds increase corporative inclusiveness in pre-modern polities?

It might still be argued that guilds were more inclusive than the alternatives. They typically displayed modest ‘community inclusiveness’, but might have enhanced ‘corporative inclusiveness’ by enfranchising hitherto politically excluded groups. Thus merchant guilds might increase corporative inclusiveness by diluting noble domination of town government, and craft guilds expand it further by diluting merchant domination.

The evidence supports this idea for some times and places. In the 10th to 12th centuries, the emergence of merchant guilds broke open the monopoly of royal, noble, church, and patrician groups over town governments, widening political participation to wholesalers and financiers – at least those with guild membership (Angelucci et al., 2017; Stasavage, Reference Stasavage2014). Then, in the 13th- to 15th-century ‘guild wars’, craft guilds in some towns broke the political dominance of merchants and old elites, securing representation for small-business owners – if they were guild members (Kluge, Reference Kluge2007; Van Bavel, Reference Van Bavel2010).

Where this happened, guilds could beget political regimes of greater corporative inclusiveness. But this did not engender greater societal inclusiveness. Once formed, merchant guilds often used their political sway to exclude craftsmen. After the ‘guild wars’, craft guilds used political influence to exclude and repress weaker guilds, wage-workers, women, Jews, peasants, and other potential competitors. Guilds themselves were increasingly dominated by oligarchies and hereditary privilege. Guilds used their corporative inclusiveness to open access for their own members but close access for others (Blockmans, Reference Blockmans, Schulz and Müller-Luckner1999: 58; Farr, Reference Farr2000: 170–181; Lantschner, Reference Lantschner2015: 576; Ogilvie, Reference Ogilvie2019: 38–41; Van Steensel, Reference Van Steensel, Jullien and Pauly2016: 42–46).

These findings on guilds yield important insights. First, inclusiveness is not a zero-one variable: it exists on a spectrum. Although merchant guilds created greater corporative inclusiveness than feudal regimes, and craft guilds than mercantile ones, urban guild regimes still excluded most of society. Merchant guilds used their inclusion in politics to exclude craftsmen, and craft guilds used it to exclude groups below them. Many institutions act inclusively on some dimensions but exclusively on others. Even when guilds were less exclusive than alternatives, they were far from fully inclusive.

Second, we must distinguish partial from general inclusiveness. The growing power of guilds had two countervailing effects. It transferred political representation from traditional elites to guild members, increasing corporative inclusiveness. But it gave guilds power to reduce inclusiveness for wide swathes of society – peasants, women, laborers, Jews. The net effect was to reduce societal inclusiveness. Guilds' partial-equilibrium effect was to increase inclusiveness for their members, holding other factors constant. But their general-equilibrium effect was to reduce inclusiveness in society as a whole.

Third, an increase in community and corporative inclusiveness could reduce societal inclusiveness. Community and corporative inclusiveness made guilds more effective in securing their interests. But guild interests were served by excluding entrants. Nobles and patricians had little interest in preventing women, migrants, laborers, and minorities from practicing crafts and trades. This indifference created interstices within which marginal groups could earn a living. But guilded merchants and craftsmen viewed such groups as dangerous competitors, and used their own community and corporative inclusiveness to reduce societal inclusiveness for broader social strata (Ogilvie, Reference Ogilvie2019: 83–171, 232–306).

Institutions characterized by community and corporative inclusiveness have a bright side: they expand opportunities for the people they include and represent. But they also have a dark side: their very community and corporative inclusiveness gives them potent tools to limit opportunities in society more widely.

6. Inclusiveness versus extractiveness: what do guilds tell us?

What of the antithesis between inclusiveness and extractiveness? Inclusive means accommodating rather than blocking participation by people, while extractive means expropriating rather than creating resources. Theoretically, therefore, high inclusiveness among persons does not rule out high extractiveness toward resources. Empirically, many guilds that fostered inclusiveness with regard to their members also fostered extractiveness with regard to resources. Indeed, community and corporative inclusiveness could encourage and intensify extractive behavior.

In pre-modern Europe, both less inclusive institutions (such as the princely state, the manorial system, or the ecclesiastical hierarchy) and more inclusive ones (such as guilds of merchants or craftsmen) behaved extractively (Johnson and Koyama, Reference Johnson and Koyama2019; Ogilvie, Reference Ogilvie1997, Reference Ogilvie, Brewer and Hellmuth1999, Reference Ogilvie and Blanning2000; Ogilvie and Carus, Reference Ogilvie, Carus, Durlauf and Aghion2014). Rulers, nobles, and churchmen used their institutional powers to extract resources from the economy and redistribute them to their own beneficiaries. Guildsmen did the same. Crown, nobility and church extracted resources by levying taxes, tithes, tolls, conscripts, and coerced labor. Guilds did so by limiting entry and manipulating markets.

Guild entry barriers were inherently extractive. In a non-guilded occupation, producers competed. A lower-cost producer could freely enter, capturing some customers by charging lower prices. This compelled existing producers to lower their prices to stay in business. A guild entry barrier enabled entrenched producers to exclude the entrant or make her pay for admission. This raised her production costs, reduced her ability to compete, and enabled guild members to charge customers higher prices. Entry barriers also increased internal cohesiveness, facilitating ‘tacit collusion’ among guild members on prices and output (Ivaldi et al., Reference Ivaldi, Jullien, Rey, Seabright and Tirole2003: 12–18; Ogilvie, Reference Ogilvie2019: 519–527). Community inclusiveness thus facilitated guilds' extractiveness.

Entry barriers enabled guilds to behave extractively by manipulating markets (La Force, Reference La Force1965; Lipson, Reference Lipson1915; Mickwitz, Reference Mickwitz1936; Ogilvie, Reference Ogilvie2019: 172–231; Unwin, Reference Unwin1908). Most guilds limited supplies, since scarcity raised prices without open price-fixing. So guilds set output quotas, limited working time, and restricted each workshop's raw materials, equipment, and workforce. Available evidence suggests that a successful guild could limit output to 33–67% of the technically feasible level, creating sufficient scarcity to raise prices (Ogilvie, Reference Ogilvie2019: 220–224).

Prices certainly rose when guilds enjoyed market power and fell when they lost it (Ogilvie, Reference Ogilvie2019: 220–222). In 14th-century London, the fishmongers' guild imposed prices 54% higher than non-guilded competitors. In 1618, Coburg cartwrights and plough-smiths were forced to join guilds: cart and plough prices immediately increased. In 18th-century Bordeaux, guild-free enclaves expanded; this lowered prices throughout the city. In 1828, the Swiss canton of Freyburg described how, since the abolition of 38 years earlier, industrial activity ‘has not only noticeably proliferated, but also made appreciable progress in performance and products, and prices have become more moderate and cheaper’. A compilation of all available quantitative observations comparing guild with non-guild prices suggests that guilds increased prices 47% above the competitive rate (Ogilvie, Reference Ogilvie2019: 220–224). These guild price rises are on the high end of the spectrum compared to modern cartels (Connor, Reference Connor2014; Ivaldi et al., Reference Ivaldi, Jenny and Khimich2017), almost certainly because guilds were legally entitled to act cartelistically – an outgrowth of their corporative inclusion in politics.

Guilds also behaved extractively in markets for inputs. Many depressed prices for raw materials by imposing price ceilings, claiming prior rights to purchase, and banning sales to outsiders (Ammannati, Reference Ammannati, Davids and De Munck2014; Kluge, Reference Kluge2007; La Force, Reference La Force1965; Mickwitz, Reference Mickwitz1936; Ogilvie, Reference Ogilvie2019; Poni, Reference Poni and Woolf1991). Almost all guilds intervened in labor markets to reduce the wages their members had to pay employees (Caracausi, Reference Caracausi2011; Horn, Reference Horn2015; Kaplan, Reference Kaplan, Kaplan and Koepp1986; Kisch, Reference Kisch1989; La Force, Reference La Force1965; Ogilvie, Reference Ogilvie2019). Guilds forbade masters to compete for workers, capped those workers' wages, and made it hard for employees to change jobs. One German guild even forbade its members to offer workers hot drinks in the evening, as it would compel other masters to offer the same (Ogilvie, Reference Ogilvie2019: 190). Some guilds went so far as to allocate journeymen to masters centrally, preventing them from shopping around. This was common in France, where in 1731 a Bristol tailor who was swept up in a journeymen's riot against the practice remarked in astonishment that ‘in England there was no guild labour-allocation officer, the journeymen being free to take employment with the master whom they find most appropriate’ (Ogilvie, Reference Ogilvie2019: 191). Guilds used their political influence – a by-product of corporative inclusiveness – to break strikes and punish workers who demanded better conditions.

Guilds also behaved extractively by engaging in rent-seeking. In exchange for entitlements to restrict entry and manipulate markets, guilds offered favors to political elites. A compilation of 732 observations of 16 European economies from the 11th to the 19th century shows guilds obtaining economic privileges by offering political elites cash payments, a share in guild revenues, ad hoc fiscal donations, regular taxes, low-interest loans, help in tax collection, regulatory assistance, military contributions, and political backing (Ogilvie, Reference Ogilvie2019: 46–69). Such rent-seeking was costly. In one analysis of 43 guilds in seven medieval and early modern European economies, the average guild's annual pecuniary expenditures on lobbying amounted to 1,759 days' wages for a guild master. To this must be added the non-pecuniary services guilds offered rulers and the time guilds spent petitioning, negotiating, litigating, and demonstrating (Ogilvie, Reference Ogilvie2019: 70–77).

Such behavior was extractive in two ways. First, it extracted resources from other groups to transfer to guild members. By excluding non-members from producing and limiting the entry of new members, guilds compelled would-be entrants to shift to activities where they were less productive and earned lower incomes. By limiting competition in input markets, guilds extracted income from employees and upstream producers and transferred it to guild members. By limiting supplies and increasing prices, guilds extracted income from customers and redistributed it to guild members. These extractive activities reduced the welfare of non-guild members, as revealed by the complaints, conflict, and behavioral distortions they evoked among customers, workers, suppliers, and competitors (for detailed quantitative and qualitative analysis, see Ogilvie, Reference Ogilvie2019: chs. 3–5).

Second, guilds extracted resources from the economy as a whole. When a guild artificially fixed prices or limited output to procure cartel profits, some quantity of output that customers valued more than it would cost to produce was no longer produced and exchanged. By acting as a cartel, a guild reduced aggregate production and consumption in the economy. Additionally, guild rent-seeking absorbed inputs without increasing production or consumption, reducing the resources available to the economy (for detailed quantitative estimates of the minimal cost of guild rent-seeking, see Ogilvie, Reference Ogilvie2019: ch. 2).

Analyzing guilds shows concretely how inclusive institutions could harm economic growth. A guild's community and corporative inclusiveness created incentives for its members to allocate their efforts to cartelistic economic behavior and rent-seeking political behavior. It motivated non-guild-members to allocate efforts to evading guild cartels and lobbying against guild privileges. Guilds motivated people to redistribute existing resources, not produce new ones. They were extractive because they created incentives to allocate resources to zero-sum rather than positive-sum activities.

Were guilds extractive because they were not inclusive enough? The answer is no. Guilds show clearly that high community and corporative inclusiveness could co-exist with high extractiveness. On average, as we saw above, guilds' community inclusiveness was modest, since they included only 36% of urban householders. But guilds in some places, such as Nördlingen, Rome, Cuenca, Coventry, or Augsburg, displayed higher community inclusiveness, incorporating 60–80% of householders. In such towns, guilds also often displayed corporative inclusiveness via political representation. Yet they nonetheless behaved extractively. Each guild, even the most inclusive, erected entry barriers against members of other guilds, set artificially high prices, restricted output, depressed workers' wages, blocked disruptive innovations, and engaged in rent-seeking. Each guild acted as a mini-cartel, transferring resources from others to its own members and inflicting deadweight losses on the economy by raising prices and limiting supplies. Even the most inclusive guilds engaged in lobbying, lawsuits, prosecutions, and violent action against encroachments by other guilds, workers who demanded higher wages, and black-market competitors. Such rent-seeking consumed resources unproductively, reducing the amount produced, consumed, and exchanged in the economy. Nothing prevented a highly inclusive guild system from also being highly extractive.

But perhaps guilds at least reduced the overall quantity of extraction? Not at all. The emergence of guild extractiveness in late-medieval Europe did not displace the extractiveness of rulers, nobles, churchmen, or merchants. Rather, guilds added another layer of extractive activities on top of those already pursued by other extractive institutions. A shift to greater community and corporative inclusiveness, as guild history shows, does not imply a move to lower extractiveness.

The evidence on guilds holds an even bleaker lesson. Community and corporative inclusiveness not only co-existed with extractiveness but often reinforced it. Precisely guilds' community and corporative inclusiveness could make them more effective in behaving extractively, by increasing their economies of scale in monitoring and enforcement, their social legitimacy, and their political influence.

Moreover, the reason guilds existed so widely for so many centuries, despite the harm they caused, was that they often collaborated with rulers, nobles, lords of the church, and urban patriciates. These elites were the beneficiaries of institutions – the princely state, the feudal system, the established church, the privileged town – which, though not wholly non-inclusive, were less inclusive than guilds. Guilds provided an organizational mechanism for groups of businessmen to lobby political elites for market privileges that profited guild members. Guilds then redirected a share of the profits to political elites in the form of gifts, bribes, taxes, favorable loans, regulatory cooperation, military services, and political support. Neither guilds nor political elites could have extracted so many resources from the economy without each other's collaboration.

The relationship between guilds and governments varied across Europe and increasingly diverged after 1500. In the Low Countries and England, political authorities gradually ceased to enforce guild privileges. But in ‘corporatist-absolutist’ states such as Spain, Austria, Scandinavia, and many German territories, political elites increasingly profited from their particularistic bargain with guilds long past 1800 (Ogilvie, Reference Ogilvie2014b, Reference Ogilvie2019). Across vast swathes of pre-modern Europe, therefore, the more inclusive institution of the guild collaborated with the less inclusive institutions that dominated politics, to extract resources for their own beneficiaries, at the expense of everyone else (Johnson and Koyama, Reference Johnson and Koyama2019; Ogilvie, Reference Ogilvie, Brewer and Hellmuth1999, Reference Ogilvie2019).

The mutually reinforcing exchange of favors between guilds and political elites in pre-modern European societies prefigured a pattern widespread in modern developing economies. Political elites grant entry barriers and market privileges to groups of existing producers. This enhances these groups' community and corporative inclusiveness, but also grants them market power, helping them extract cartel profits from consumers. Part of these profits are then shared with political elites in return for official enforcement of market privileges. Payments from privileged businessmen increase government and elite revenues, but distort resource allocation and stifle growth. Developing economies, historical or modern, can find themselves lastingly burdened with institutions that use community and corporative inclusiveness to facilitate extraction by businessmen and politicians, who therefore cooperate to keep such institutions in being (Auriol and Warlters, Reference Auriol and Warlters2005). Institutions characterized by community and corporative inclusiveness can systematically collaborate with institutions that are profoundly non-inclusive, reinforcing the extractive capacities of both. As guilds show, we cannot understand the delicate balance of power between state and society without scrutinizing intermediating institutions that combine strong community and corporative inclusiveness with powerful extractiveness (Acemoglu and Robinson, Reference Acemoglu and Robinson2019; Ogilvie, Reference Ogilvie2019).

7. Do inclusive institutions lead to inclusive economic growth?

Highly inclusive guilds, we have seen, often engaged in activities that can only be described as highly extractive. They expropriated resources from other social groups to redistribute to their own members; they imposed deadweight losses on the whole economy via their cartelistic activities; and they consumed resources in rent-seeking. The historical evidence on guilds suggests that the extractive behavior often pursued by these inclusive institutions also stifled economic growth.

Guild strength varied widely across European societies according to multiple measures, including guilds' numbers, internal cohesion, relations with merchants, political privileges, town–country relations, and competition from jurisdictional enclaves (Ogilvie, Reference Ogilvie2019: 512–554). Taking all these dimensions into account, the strongest guilds were found in Germany, Iberia, Scandinavia, and Austria-Hungary. Guilds of intermediate strength were found in Switzerland, France, and the German Rhineland. Italy also lay in this intermediate zone, partly because its export-oriented textile manufactures formed multi-occupational ‘umbrella guilds’, whose inclusiveness (and extractiveness) were sapped by internal divisions. On nearly all measures, the weakest guilds were found in the Southern Netherlands (modern Belgium), the Dutch Republic, and England (Ogilvie, Reference Ogilvie2019: 555–559).

When guild strength is mapped against economic performance, it displays an inverse relationship (Ogilvie, Reference Ogilvie2019: 559–563). Strong guilds were found in poor and stagnant economies, weak guilds in rich and dynamic ones. The best estimates of per capita GDP between c. 1300 and c. 1850 show higher levels and faster growth in societies with the weakest guilds: Flanders, Holland, and England. Lower per capita GDP and slower growth were found in societies with the strongest guilds: Germany, Austria, Iberia, Scandinavia.

A similar inverse relationship prevailed between guild strength and population growth. Across 85 cities in the Low Countries, Switzerland, France, Germany, and northern Italy between 1000 and 1800, unsuccessful guild revolts did not effect on demographic growth, controlling for other town characteristics, while successful revolts giving guilds representation on town councils resulted in lower population growth (Stasavage, Reference Stasavage2017). Among 282 cities in German-speaking Europe between 800 and 1800, likewise, population grew more slowly in those with greater council representation for guilds, and the negative effect of guilds intensified over time (Wahl, Reference Wahl2019).

Of course, association does not imply causation. Many factors affect both guilds and growth. Cross-city analyses can control for some confounding factors, but more aggregative comparisons across regions or countries struggle to do so adequately. Guilds were not the only institution to harm growth. Central Europe, Iberia, and Scandinavia suffered from other extractive institutions: militaristic states, rapacious landlords, monopolistic merchants, coercive towns, predatory churchmen, and stagnant village communes (Ogilvie, Reference Ogilvie, Brewer and Hellmuth1999, Reference Ogilvie and Blanning2000; Ogilvie and Carus, Reference Ogilvie, Carus, Durlauf and Aghion2014). Guilds were just one component of a broader institutional framework in which political elites granted privileges to powerful groups who used them to extract benefits, harming the whole economy. Guilds mainly regulated manufacturing and trade, whereas agriculture accounted for the vast majority of the pre-modern economy, so feudal landlords and peasant communes mattered more. But although many institutions impaired economic performance, there is much evidence – as we have seen – that guilds were one of them. Community and corporative inclusiveness could facilitate extraction and stifle innovation.

Even if guilds harmed economic performance, perhaps they favored equality, and thus gave rise to ‘inclusive growth’, in the sense that any benefits of development reached the entire population, including its most vulnerable members? Guilds certainly aspired to maintain equality internally. Many guilds forbade their members to keep more than one workshop, employ more than a specified number of workers, produce above a particular output quota, work longer hours, sub-contract to others, or advertise their wares. Guilds often prohibited innovations that might enable one member to entice customers away from his fellows.

Such rules may indeed have reduced inequality inside some guilds. On the other hand, micro-studies of specific guilds show powerful groups gaining control of corporate decision-making and using guild rules to benefit themselves, intensifying internal inequality (Cerutti, Reference Cerutti2012; Ogilvie, Reference Ogilvie1997; Poni, Reference Poni1989). Many guilds were dominated by rich oligarchies.

Moreover, in achieving inclusive growth, equality in society as a whole matters far more than equality inside occupations. As we have seen, guilds excluded wide swathes of would-be producers, especially women, minorities, migrants, and the poor, limiting guild membership to just over one urban household head in three. Guilds also enabled their members to overcharge customers and underpay employees. This inevitably widened the gap between the privileged guild masters and the larger population of outsiders, customers, and workers, which included the most vulnerable members of society (Ogilvie, Reference Ogilvie1997, Reference Ogilvie2004, Reference Ogilvie2019).

Quantitative analyses of the relationship between societal equality and guilds are still in their infancy. But a pioneering study of 297 German towns between 1300 and 1850 found that, controlling for other urban characteristics, stronger guilds were associated with higher inequality (Schaff, Reference Schaff2018). This is not surprising, given the politically sanctioned market power that guilds created for their members. A study of eight OECD countries in the early 21st century found that market power, by driving up prices of goods and services, increases the wealth of the richest 10% of households by 10–24%; this implies that public action to reduce market power, by enhancing enforcement of competition law and reducing politically sanctioned entry barriers, can substantially reduce inequality (Ennis and Kim, Reference Ennis and Kim2017).

Where pre-modern European guilds were strong enough to enforce their market power, they almost certainly increased societal inequality, because the benefits to guild members were outweighed by the harm to the less well-off. These findings on guilds yield a further analytical lesson for understanding inclusiveness. Institutions characterized by greater community and corporative inclusiveness can actually sap ‘inclusive growth’. This is because such institutions extract profits for their members at the expense of outsiders and the wider economy. They prevent the benefits of economic development from reaching the entire population and often deny them to the most vulnerable.

8. What do we mean by inclusive societies?

A final lesson from the historical institution of the guild is that we need to be clear about what we mean by inclusive societies. Is the goal inclusive economic growth, inclusive economic institutions, or inclusive political participation?

Inclusive economic growth sounds like an unalloyed good. Who could object to achieving economic development whose benefits extend to the whole population, including its most vulnerable members? But this alluring goal raises tough questions. Does inclusive growth imply aiming to achieve complete economic equality? In some ethical systems, equality is an objective in itself. But we also need economic growth, in order to generate the resources needed to alleviate poverty and improve opportunity for the most vulnerable, and we know equality interacts with growth. Higher equality improves people's capacities to do things that fuel growth – work, save, educate, and innovate. But higher inequality creates incentives for aspirational groups to work, save, educate, and innovate – generating growth for redistribution. In principle, some rise in inequality may be desirable if it motivates economic activity that increases incomes for everyone in society, including the most vulnerable. What magnitude of trade-off are we willing to tolerate between growth and equality? Who decides on the desired combination of growth and equality? And, having decided upon the desired level of each, how do we achieve it?

Inclusive economic institutions are sometimes proposed as the best way to achieve inclusive growth. But this concept also raises questions. What is it about inclusive institutions that might be good for economic growth? Community and corporative inclusiveness, as we have seen, can increase an institution's capacity for extractiveness, harming economic growth. Institutions must be characterized by societal inclusiveness, enabling all individuals in society to participate fully in economic and political decision-making. This has led some scholars to define inclusive economic institutions as consisting in open-access, competitive markets with no barriers to entry (Acemoglu and Robinson, Reference Acemoglu and Robinson2012; North et al., Reference North, Wallis and Weingast2009). History suggests, however, that although competitive markets are required for economies to grow, impartial public-order institutions are necessary for such markets to function (Acemoglu and Robinson, Reference Acemoglu and Robinson2019; Johnson and Koyama, Reference Johnson and Koyama2019; Ogilvie and Carus, Reference Ogilvie, Carus, Durlauf and Aghion2014). Markets need supportive institutions to guarantee property rights, enforce contracts, and solve other market failures such as monopolies, public goods, externalities, agency problems, and information asymmetries. What kind of non-market institutions are best for supporting markets?

Inclusive political institutions might seem the answer. But what characterizes politically inclusive institutions? One widely held idea, as we have seen, is that they consist of corporative and communitarian institutions such as guilds and communities (Greif, Reference Greif2006; Putnam et al., Reference Putnam, Leonardi and Nanetti1993; Rajan, Reference Rajan2019). The problem with such institutions, as shown by the historical evidence on guilds, is that they have a dark side. They may encourage beneficial collective action, albeit less than is often assumed in the case of guilds and village communes (Dennison and Ogilvie, Reference Dennison and Ogilvie2007; Ogilvie, Reference Ogilvie1997, Reference Ogilvie, Brewer and Hellmuth1999, Reference Ogilvie2019: chs. 6–8). But communitarian and corporative institutions may also facilitate collective action that is both exclusive and extractive (Olson, Reference Olson1971, Reference Olson1982; Tullock, Reference Tullock1975). This emerges clearly from the entry barriers, market manipulation, and rent-seeking practiced by guilds (Ogilvie, Reference Ogilvie1997, Reference Ogilvie, Brewer and Hellmuth1999, Reference Ogilvie2019).

A widely emphasized alternative is to focus on societal rather than community or corporative inclusiveness, and define inclusive political institutions as democratic ones. In principle, democratic institutions operate in such a way that all individuals in society can participate fully in political decision-making. But democracy suffers from practical difficulties which lead straight back to the question of inclusiveness. Transaction costs mean that individual voters find it expensive to inform themselves about issues and difficult to organize to achieve their ends. Consequently, democracy almost always operates by individuals delegating decisions to parties and interest-groups (Olson, Reference Olson1971, Reference Olson1982; Tullock, Reference Tullock1975).

But well-organized interest-groups exhibit two forms of behavior which can harm societal inclusiveness and economic growth – as the history of guilds shows. First, they have the incentive and capacity to engage in rent-seeking, leading to behavior that is extractive, in the sense that it redistributes existing resources rather than creating new ones (Olson, Reference Olson1971). Second, such interest-groups have incentives that cause them to resist disruptive innovations (Ogilvie, Reference Ogilvie and Cavaciocchi2014a, Reference Ogilvie2014b, Reference Ogilvie2019). Yet the social capacity to undertake disruptive innovations in both technology and institutions is necessary for economies to grow, for growth to reach the most vulnerable, and for societies to adapt to external challenges such as resource depletion, environmental damage, or climate change.

A major source of resistance to institutional innovation is the lack of what has been called a ‘political Coase theorem’ (Acemoglu, Reference Acemoglu2003; Ogilvie, Reference Ogilvie2007). Institutional innovations, even if they benefit society as a whole, typically threaten at least some individuals and groups. Why does society not agree on what institutions would be best for economic growth, and then bargain over how the benefits should be distributed? The answer is that a group that might obtains more power via some institutional reform cannot make a credible commitment to bind its own future actions towards groups that lose from reform. The absence of a political Coase theorem means that institutional changes that would make the entire economy better off can easily be blocked by the inability of potential gainers from reform to promise credibly to reimburse the losers after institutional reform deprives the latter of power and resources.

Historically, inclusive political institutions have often found it difficult to undertake institutional reform. This is precisely because many inclusive political institutions represent the views of groups threatened with losses as a result of reform, and hence respond to these groups' interests, even when these do not serve the common weal. Less inclusive political institutions, by contrast, have a greater capacity to break a deadlock among entrenched interests and dictate a solution to the lack of a political Coase theorem. The abolition of serfdom in Prussia and Russia, for instance, was only achieved to the extent that the absolutist state – a profoundly non-inclusive political institution – made up for the lack of a political Coase theorem by mediating and enforcing a commitment for the gainers (serfs) to compensate the losers (landlords) (Ogilvie, Reference Ogilvie and Cavaciocchi2014a; Ogilvie and Carus, Reference Ogilvie, Carus, Durlauf and Aghion2014). The abolition of the French guilds in 1791, likewise, involved the Revolutionary state promising to compensate guildsmen for the loss of their valuable masterships, maintain entry barriers by requiring new producers to buy state licenses, and forbid collective action by newly emancipated journeymen (Pontet, Reference Pontet and Crossick1997). In other cases of guild abolition, as when Prussia declared ‘freedom of occupations’ in 1806/1811, despotic states solved the absence of a political Coase theorem by steamrollering over community and corporate inclusiveness. The non-inclusive Prussian state found it much easier to undertake guild abolition than the inclusive states of the German south, where governments included guild representatives and were politically incapable of abolishing guilds until the 1860s (Ogilvie, Reference Ogilvie1997, Reference Ogilvie2019).

Inclusive economic growth, history suggests, requires political institutions capable of doing two things. First, they must support open-access, competitive markets by guaranteeing property rights, enforcing contracts, and solving market failures. Second, they must address the lack of a political Coase theorem, enabling the institutional framework to reform itself and adapt to change. History suggests that a central challenge for future research is to analyze how we foster political institutions that perform both these services well. Sadly, there are painful trade-offs involved. Historically, inclusive economic growth has not always been well served by inclusive political institutions.