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.

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