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Institutions and European Trade: Merchant Guilds, 1000-1800
Published by EH.NET (December 2011)
Sheilagh Ogilvie, Institutions and European Trade: Merchant Guilds, 1000-1800. Cambridge: Cambridge University Press, 2011. vi + 493 pp. $38 (paperback), ISBN: 978-0-521-74792-9.
Reviewed for EH.NET by Donald J. Harreld, Department of History, Brigham Young University.
Why did merchant guilds exist for such a long time in Europe? This is an obvious question to ask of an institution that persisted for hundreds of years, but one for which it turns out there is not an easy answer. Most scholars who have studied merchant guilds have insisted that merchant guilds must have existed, and persisted, because they were efficient institutions; inefficient institutions, on the other hand, are doomed to be short lived.
Ogilvie begins her book by asking one overriding and very penetrating question: were merchant guilds efficient institutions that benefitted the entire economy? For Ogilvie, this is the heart of the matter. Because merchant guilds do not exhibit all of the characteristics of efficient institutions, she asks us to consider why they arose, why they survived for such a long time, and why they ultimately declined. Merchant guilds regulated trade, they operated as monopolies, they distorted markets, fixed prices, and restricted entrance into the guild. Does this, she wonders, sound like an efficient institution? For Ogilvie, the only way to answer these questions is to look at everything merchant guilds did -- both positive and negative -- in order to understand how and if they were beneficial to economic development. She is asking us to back away from the assumption that merchant guilds were efficient institutions. This will not be easy for the many scholars of merchant guilds who have hitched their wagon to the efficiency theory. This book presents us with a “radical reassessment of both merchant guilds in economic history and institutions in economic theory” (p. 5).
What was a merchant guild? This is, indeed, the title of the book’s second chapter as well as a very good question. Scholars well versed in the history of merchant guilds could skim this chapter, but it provides a foundation for those newer to the topic. Merchant guilds were associations of wholesale traders. They could be either an association of local merchants, or an association of merchants from one geographical area who formed colonies abroad for long-distance trade (what Ogilvie calls, alien merchant guilds). These merchant guilds obtained certain privileges from a ruler that gave its members “exclusive rights to practice certain commercial activities” (p. 20). Merchant guilds were institutions that enjoyed monopoly rights (the exclusive right to trade, right to decide membership, and a right to regulate their trade). Although of ancient origin, they experienced a hey-day in the high and late Middle Ages. Alien merchant guilds date to the early twelfth century, appearing first in the eastern Mediterranean and later in the Italian cities. By the end of the thirteenth century, alien merchant guilds had spread to all of Europe’s major trading centers. Merchant guilds began to decline in the sixteenth century, first in the Low Countries and England, but persisted elsewhere in Europe until the eighteenth century. Ogilvie points out that the merchant companies of the early modern period shared characteristics with earlier merchant guilds.
But Ogilvie is not presenting a simple narrative history of the merchant guild in this book. She is actively engaging -- and challenging -- the literature, the bulk of which she suggests has only unconvincingly argued that while monopolistic in theory, merchant guilds were in practice non-monopolistic. Ogilvie’s reading of the evidence suggests that merchant guilds, both local and alien, not only negotiated monopoly privileges from rulers, they actively and enthusiastically sought to enforce these monopoly privileges. Indeed, for Ogilvie, merchant guilds were not at all the efficient institutions many scholars have made them out to be.
But, again, if they were not efficient, why did merchant guilds persist? Ogilvie suggests that the answer is found not in questions of efficiency, but in distribution. According to her, “an institution that keeps the economic pie small but distributes large slices to powerful groups can be sustained for centuries by its powerful beneficiaries” (p. 160). So merchant guilds did not necessarily increase the size of the economic pie, but they did allow merchants and rulers to take the biggest slices themselves. Of course, benefits were not uniform across merchant guilds because each guild negotiated individually with rulers so that both would obtain the best “bundle” of benefits. Although merchants and rulers benefitted from these arrangements, the wider economy was actually affected negatively. According to Ogilvie, “commercial monopolies reduced the volume of exchange and diminished gains from trade” (p. 163).
The book includes chapters that examine a variety of propositions scholars have put forward about why merchants guilds existed and what functions they performed that prompted scholars to characterize them as efficient: commercial security, contract enforcement, principal-agent problems, information exchange, and price volatility. In all cases, Ogilvie rehearses the “standard” interpretations and systematically challenges them all, showing that merchant guilds were only one of many mechanisms (and probably the least efficient) in place that could potentially solve these problems for medieval and early modern merchants.
So if merchant guilds were not the efficient institutions they have so often been made out to be, how can we explain their longevity? Of course, Ogilvie has already provided an answer. It is found “in the distributional services guilds offered to two powerful groups” (p. 417). They affected the ruler’s ability to “extract extra revenues” from the population, and, for merchants, the ability to “extract profit from trade” (p. 417-18). Ogilvie clearly rejects throughout this book the notion that merchant guilds were able to solve commercial problems in a way that benefitted the entire economy. Indeed, merchant guilds, according to Ogilvie, benefitted their own members at the expense of the wider economy.
Ogilvie’s conclusion has profound implications for the study of economic institutions, and that is what makes this an important book -- one might even call it a game-changer. For Ogilvie, institutions cannot be adequately explained in terms of efficiency; indeed, the entirety of an institution’s actions as well as all of its economic effects needs to be considered. She admits that taking such an all-encompassing approach will make our analyses more complicated, but the result will be a much better understanding of the ways institutions “behave and develop” (p. 426).
Donald J. Harreld is Associate Professor and Chair of the History Department at Brigham Young University. Harreld is the author of High Germans in the Low Countries: German Merchants and Commerce in Golden Age Antwerp (Leiden, 2004), and several articles that examine social and economic history including: “Foreign Merchants and International Trade Networks in the Sixteenth-Century Low Countries,” Journal of European Economic History, Vol. 39/1 (2010) and “An Education in Commerce: Transmitting Business Information in Early Modern Europe” in Information Flows: New Approaches in the Historical Study of Business Information (Helsinki, 2007). His current research projects include a book-length study of early seventeenth-century Dutch commercial voyages, and broader research into early modern commercial networks.
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