Acton Institute Powerblog

Italy, competition and the problem of guilds

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Last Saturday’s New York Times contains an entertaining, edifying but ultimately sad tale on what ails the Italian economy.

Entitled “Is Italy Too Italian?“, the Global Business article seeks to explain why Italy often tops “the informal list of Nations That Worry Europe” economically. Part of the problem may be the reluctance to use modern industrial techniques that can reduce costs of production – can you afford to pay $4,000 for a suit??? – or the large public debt run up by its profligate government, but the more important issue is the utter lack of growth and hence opportunity in the Italian economy.

Our friends at Istituto Bruno Leoni have documented the excruciating details of the situation. I’ll save you the trouble and let you know that both the New York Times and IBL make it clear that the Italians are being done in by the impediments to the free-market economy, deriving in many cases from a fear of open, honest competition in the marketplace.

Nowhere is this fear more evident than in the system of guilds that still dominates many sectors of the Italian economy. Guilds, in effect, are associations meant protect certain industries from competition in the name of cooperation/collusion among the suppliers of a good or service. And the recovery of guilds is often at the heart of a school of thought known as distributism that seeks a “third way” between capitalism and socialism.

(Thomas Woods explained the problem in his Acton monograph Beyond Distributism and I summarized the case in my recent Acton University lecture on the same subject.)

It is most unfortunate that some conservative religious-minded people have fallen for the “charms” of distributism, many of which are romantic longings for a more self-sufficient, localized economy made up of many (“well-distributed”) small-property owners, as opposed to large monopolistic, corporate holders of property.

Of course no one with any religious sensibilities really wants to (or can for that matter) defend capitalism, let alone the status quo, unconditionally. At its best, distributism can remind us that we are not economic automatons, that we shouldn’t become “wage-slaves”, and that as free, morally-responsible persons, we can and must choose how we ought to live. But it should also be obvious that a return to the guilds, with its limitations on free competition, is no way to correct the excesses of 21st-century capitalism. Just ask the Italians….

Kishore Jayabalan Kishore Jayabalan is director of Istituto Acton, the Acton Institute's Rome office. Formerly, he worked for the Vatican's Pontifical Council for Justice and Peace as the lead policy analyst on sustainable development and arms control. Kishore Jayabalan earned a B.A. in political science and economics from the University of Michigan, Ann Arbor. In college, he was executive editor of The Michigan Review and an economic policy intern for the U.S. Chamber of Commerce. He worked as an international economist for the Bureau of Labor Statistics in Washington, D.C. and then graduated with an M.A. in political science from the University of Toronto. While in Toronto, Kishore interned in the university's Newman Centre, which led to his appointment to the Permanent Observer Mission of the Holy See to the United Nations in New York. Two years later, he returned to Rome to work for the Pontifical Council for Justice and Peace as the Holy See's lead policy analyst on sustainable development and arms control. As director of Istituto Acton, Kishore organizes the institute's educational and outreach efforts in Rome and throughout Europe.


  • Roger McKinney

    The status quo is not capitalism. It is 2 parts socialism, one part mercantilism and 1 part capitalism.

  • Roger, I wasn’t so concerned about calling this or that system capitalist, especially since the guild system predates capitalism and socialism. I was trying to point out that a return to the guild system to restrict competition is no way to “humanize” the market economy. What happens to those outside the guild who want to enter the workforce?

  • I have to say I disagree. Distributism, at its best (to borrow your phrase) just seeks to break up the concentrated power built up in state-aided artificial corporations, dispersing it among individuals, and naturally forming partnerships such as those based on kin or friendship. This is the reverse of corporatism. The limited liability laws created by the state are far more ruthlessly corporatist than another imagined by Belloc or Chesterton. If people wish to go into partnership, fine. But it is state fiat that usually intervenes at this point, inflating the power of shareholders, shielding them from the risks and responsibilities of ownership and tilting the scales against the independent businessman who risks everything in his labour and has to bear the full consequences.

    Groups that resemble medieval guilds may appear sponataneously in this context. However, that does not ncessarily mean corporatism imposed on society by a leviathan state á la Fascist Italy. It would be a bottom-up voluntary movement. Now, it is true that some distributists give undue power to the state, without recognising that this simply props up the cycle of concentrated central power. It is equally true that all too many notional libertarians are apologists for big business, confusing the freedom of the individual human being with the interests of the corporation. This is really what Kevin Carson is getting at when he refers to ‘vulgar libertarians’.

    Lastly, I’m quite keen to know your views on Wilhelm Roepke who is the economist of choice for an awful lot of distributists. He was perfectly candid about the influence on his thought made by Belloc and Chesterton and he has been praised by some prominent Acton figures such as Samuel Gregg and John Couretas.

  • Distributism presumes to know the “proper” distribution of property and, according to Belloc if not to Chesterton as well, is willing to use state power to achieve this end.

    Because it uses the state to distribute property, I don’t see how distributism avoids turning into a form of corporatism. Governments always begin their power grabs by starting small. Why not let buyers and sellers determine the proper size and price of property?

    I have no problem with partnerships forming freely so long as they do not engage in anti-competitive practices. Guilds can appear spontaneously, but they will eventually seek some kind of regulation or law to keep out competitors or new suppliers who don’t agree with the practices of the guild. This is just a form of monopoly or cartel power exercised by existing suppliers.

    I am not very familiar with Roepke’s work on distributism and so I don’t have any particular views on it. Sam Gregg tells me Roepke was ambivalent and inconsistent on the issue, but became more critical of distributism because it would lead to an increase in state power.

    As much as I admire Chesterton and Belloc, they are simply wrong on economics.

  • ceemac

    Wound up here via a link on the blog kruse kronicle. Posted a similar comment there

    I know this was just a short blog post. But I think you too casually (and maybe even arrogantly) dismiss the emotional appeal of Distributism.

    I have never really read Chesterton, Belloc, Wendell Berry, or the Southern Agrarians. Just about them. But I am a Southerner. I’ll assume enough said. I think I get the appeal of those folks. The longing to have deep and lasting connections to a people and a place. The longing to have obligations to that people and place that transcend the whims and wishes of any single individual. I get it. Some days I even agree with it. A lot!!!!

    You are not going to win the argument an argument with a Distrib/Localist/Agrarian on economic grounds alone.

    Seems to me that your arguments would be more effective if he honored the longings that may make those other systems appealing and sought to demonstrate how capitalism just might be more likely than any other systems to meet those longings.

  • The main point of the original blog post (and the NYT article) was to show how the Italian economy is harmed by the guild system because guilds such as those of taxi drivers and public notaries can block any serious attempts to reform their industries. A secondary point was that distributists need to recognize the real economic as well as human costs of this seemingly benign form of “cooperation” among suppliers.

    I understand the emotional and even moral appeal of distributism because no one can be reasonably convinced by its economic arguments. Longings for belonging and a love of one’s home are clearly among the most powerful human attachments and passions.

    But, once again, restricting competition in today’s world is no way to respect these attachments and it may even weaken them. What if distributist economic policies make it more likely that those who want to run their businesses outside of the guild leave their homes in search of new opportunities?

  • Leonard W. Grotenrath Jr.

    Mr. Jaybalan makes a number of assertions concerning distributism that reveal too little exposure on his part to contemporary distributist arguments. But more importantly, he apparently has no inkling of the varied enterprises around the world that are operating successfully according to distributist principles (e.g., Mondragon Cooperative Association).

    Furthermore, neither Chesterton nor Belloc were economists, nor did they claim especial expertise in that area. What they were were realists who could see how capitalism and the instability and inequities that result from it lead to socialism, and hence rejected both. As an aside, let it be noted that the Actonite fear of State aggrandizement, which seems to be the main focus of their critique of distributism, somehow never extends to the historically verifiable role that capitalism has played in augmenting the growth of the state and its extension into so many areas that both Actonites and distibutists regard as the proper domain of intermediate associations (wherein true liberty is engendered).

    Perhaps if the good folks at Acton would cease vilifying distributism, or the straw man caricature of it that seems to be the constant object of their increasingly strident animadversions, a healthy dialogue could be undertaken. Not with dead men (Chesterbelloc) who cannot respond, but with contemporary advocates who are more than ready to demonstrate from real-world experience the efficacy of the distributist model.

    Readers who might be open to learning more about what distributism in the modern context looks like, I recommend John Medaille’s just published book, “Towards a Truly Free Market”.

    With respect,
    Leonard Wood Grotenrath Jr.

  • I was addressing the topic of guilds and I know what Chesterton and Belloc had to say about them. They are in fact dead and cannot reply, so perhaps Mr. Grotenrath can offer his opinions about guilds in their stead. Is a return to the guild system a part of contemporary distributist thought or not?

  • Neal Lang

    “The main point of the original blog post (and the NYT article) was to show how the Italian economy is harmed by the guild system because guilds such as those of taxi drivers and public notaries can block any serious attempts to reform their industries.”

    Hmmm! Just how much different is the Italian “guild” approach to the State sanctioned Lawyers and Doctors “guild” here in the US?

  • Neal Lang

    “Perhaps if the good folks at Acton would cease vilifying distributism, or the straw man caricature of it that seems to be the constant object of their increasingly strident animadversions, a healthy dialogue could be undertaken. Not with dead men (Chesterbelloc) who cannot respond, but with contemporary advocates who are more than ready to demonstrate from real-world experience the efficacy of the distributist model. ”

    According the two greatest original thinkers on distributism, G. K. Chesterton and Hilaire Belloc, distributism is a theory whereby the ownership of the means of production should be spread as widely as possible among the general populace, rather than being centralized under the control of the state (state socialism) or a few large businesses or wealthy private individuals (plutarchic capitalism). Chesterton sums this concept up with his statement: “Too much capitalism does not mean too many capitalists, but too few capitalists.”

    The idea of distributism is fine in the abstract where local, specialized enterprises are of the size that capital requirements can be adequately meet by local entrepreneurs and partnerships, and even in larger corporate structure where share capital can can be upon in sufficient amounts to allow the acquisition of the property, machinery, material, skilled labor, etc. necessary to make the company both competitive and profitable. Unfortunately, this capitalization model is not possible in certain industries where economies of size mean competitive and efficiency advantages. Case in point the automobile industry, which in its infancy saw auto makers in many small towns across Indiana and the Midwest. When the auto maker model changed into automobile manufacturing, these local enterprises could no longer compete with high volume, mass production of automation like Ford Motors. Gradually these small scale auto makers were either put out business or absorbed by the major auto companies. The reason was the efficiency of volume and the necessary high capitalization it entails.

    Other examples include local retailers who are locally owned and capitalized but must compete with national and multi-national giants, such as Walmart. While most people would prefer to deal with local merchants, the “penalty in price” they must pay in higher costs in order to do so is not worth the effort. In effect, in order to have the “distributive model” in these situation, the local consumers become non-earning investors in the less efficient, more expensive local vendor’s company, where the difference in paying higher prices is their “investment.”

  • I return again to the central issue of how the state assists big business and the centralisation of the economy through the privileges it confers on corporations, enabling them to beat down competition. These privileges include limited liability (in other words, immunity from honouring one’s debts), perpetual life, and the right to issue stock, bonds, and other debt instruments. All of these give corporations huge advantages in raising finance that the independent businessman simply does not have

    I am particularly disturbed by the insinuation that big business represents our natural, unavoidable destiny. The corollary of this that small business, indeed anything which smacks of the local and the personal, has become as ridiculous as alchemy and must now be thrown into the dustbin of history

  • Neal Lang is absolutely correct to identify the doctors’ and lawyers’ guilds in the US as problems. It should be no surprise that both the American Medical Association and the American Bar Association also lobby the government and are especially close to the Democratic Party. They are of course entitled to engage in such activities but it only goes prove the point that guilds by their nature seek to protect the interests of their members, even if that means that the rest of society is worse off.

    No one is arguing that big business is an natural, unavoidable destiny. It’s more of a matter of economies of scale in certain industries – diseconomies of scale also exist (see banking and “too big to fail”). In fact, entrepreneurial small business is where wealth and jobs are created. The guild system just makes it harder to start new businesses and inherently favors the status quo. If you favor small business, you should also oppose guilds.

  • Leonard, thank you for the kind comment. It seems to me Kishore knows of Distributism mainly through Woods.