Capitalist Monopolies vs. Distributist Guilds

Mr Cooney refutes criticisms of the guild system.

From Practical Distributism

By David W. Cooney 

This article was originally published by

The Distributist Review

on 11 April, 2011

When distributists advocate the institution of local guilds to eliminate monopoly, some supporters of maintaining the monopolistic status quo claim that doing this would result in lower quality, fewer options for the consumer and higher prices. One reader claimed that the real reason distributists want to re-establish the guilds is to eliminate competition, thereby allowing less qualified people to stay in business even though the above would be the result. These detractors point to real historical examples to support their claims about the results of implementing guilds, examples like regulatory capture and state enforced labeling requirements that blocked the importation of goods.

These can sound like solid arguments against our position, but they all suffer from one fatal flaw; they are actually examples of how Capitalism creates a situation where big-business powers can manipulate state authority. For example, one reader linked to an article on regulatory capture and asserted that this would happen even more under Distributism. The article provides examples from several countries, and every one is an example of how big business (a capitalist phenomenon) uses economic and political power to get government regulatory agencies to implement state-wide policies for their own benefit. The problem with associating this with Distributism is that, because Distributism would replace big businesses with smaller businesses and decentralize regulatory authority as explained below, distributist guilds would not be able to effectively implement such schemes.

The challenge which this reader and others have presented is for distributists to explain why we believe the economic situation would be different if Distributism were to be implemented. Can we muster arguments to show why Distributism would not result in lower quality, regulatory capture, high prices and fewer options as claimed by these detractors? Let’s examine each claim in turn.

Would the Guild System Result in Less Qualified People Producing Lower Quality Products?

 

The main argument about quality is that the guilds will be able to establish protectionist regulations that will allow less qualified people to stay in business even though the quality of their work is lower. However, the guild system advocated by distributists is modeled after the medieval guilds. Historically, medieval guilds were known for the high quality of their work and I see no reason why it would not be the same today. The medieval guilds ensured quality with the apprentice–journeyman–master structure wherein the craft guilds maintained their high standards and trained those who wished to enter the craft. Merchant guilds imposed strict business standards to try and protect the consumer (and therefore their businesses) from unethical practices. The only real difference between these systems and what we have today is the authoritative agency granting the license to do business; the guild effectively replaces most functions of the city/county/state regulatory agencies with a single local authority directly answerable to the local community.

Would this guild system force the local customer to accept low-quality goods? While the distributist guild system would prevent remote producers from opening local shops and selling directly to the local community, local merchants would be free to import and sell remotely produced products. What if a guild attempts to thwart this by establishing restrictive regulations to block local merchants from selling those products? There are two problems with this idea. The first problem is that one guild cannot regulate another. The second is that, even if they could impose such a regulation, it would only be enforceable within the local community.

Distributism prefers the locally produced product, but it does not require it even in the face of poor quality or unjust behavior on the part of the local producer. If the locally produced products are of low quality, the local merchants would seize the opportunity to increase their own sales by importing better quality products from other areas.

Regulatory capture only works when the regulations can be imposed on a large enough area to make obtaining alternatives so difficult that it’s not worth the effort. Because the scope and range of authority of the guilds would be limited to the local community, citizens will likely consider it worth the trip to the next town to buy a better product. Remember that distributist guilds would be comprised of local small businesses. Protectionist regulations would end up hurting members of other local guilds and the local community in general. Small business cannot afford to upset the local community on whose custom they depend to maintain their livelihood. Therefore, the only real option under Distributism would be for the local guild members to produce high quality products.

Would the Guild System Result in Price-Fixing or Higher Prices?

 

Price fixing is a practice used by cartels comprised of big businesses exerting control over a market. It only works if they collectively have a monopoly in a large enough area to make the fixing of prices effective. As is the case with protectionist regulations, the inability of a guild to fix prices beyond its local community would effectively prevent them from engaging in this practice. Additionally, the fact that you have to have a larger number of willing participants could make it more difficult to accomplish. The real point here is that price-fixing cannot be used as an argument to stay with Capitalism over Distributism because it is easier for a few big businesses to fix prices under capitalism than it is for groups of small businesses to do so under Distributism. Even if multiple guilds attempted to team up to fix prices, government would still be able to correct this abuse as it currently can under Capitalsim.

One of the factors that determines price is the labor cost of production. Because distributism would effectively curtail certain options currently used by capitalist monopolies – like firing local workers to employ workers in other countries for slave wages in slave conditions – it is true that prices on some products could be higher. However, this will be curbed by the increase in local producers. Additionally, the implementation of subsidiarity will tend to reduce the tax burden as local communities implement less costly means to substitute for the current level of wasteful big-government programs. Distributism would also eliminate the hidden costs of the current practice of heavily subsidizing certain production that keep prices artificially low. In reality, we still pay the higher price, but we do so indirectly because it is hidden in taxes.

Would the Guild System Result in Fewer Options?

 

Under our existing capitalist monopolies, huge businesses buy out or undersell the local competition. The need for their product or service can no longer be met by local providers which means that buyers effectively have little choice other than those the monopoly chooses to offer. In my own area, a very large local dairy stopped milk production because they could not compete with the high volume farms from other states. The big chain stores that once carried the local product switched to the cheaper product trucked in from out-of-state. Capitalism not only reduced our options in regard to locally produced milk, but put many local people out of work. This is how capitalism works, and it can have wide-spread consequences. The same thing has happened in manufacturing and even to some aspects of the service industries in cities throughout the country.

Under Distributism, huge chain stores and franchises could not qualify for the local guilds; they would be replaced by smaller locally owned and managed stores which would have an incentive to support local farmers. The need for more local farms to provide for the needs of local cities would result in more farmers. The increase in local farmers and the lack of centralized corporate control over the business would mean more variety and more options. The same principle applies to manufacturing.

Conclusion

 

The overall result of monopolistic capitalism has been less competition, less variety, lower quality, the loss of local jobs and less power for the people to do anything about it. When big business leaders lead an economy to the brink of economic disaster, the government deems them “too big to fail” and bails them out at the expense of the general public. Monopolistic capitalism has resulted in the shift of economic power and influence away from the average citizen and big businesses use that power to gain advantages not available to citizens or smaller businesses. How exactly has this protected the consumer?

The guilds envisioned by distributists consist of small local businesses. Small businesses cannot afford to make enemies of the local community upon whose custom they depend because it is easy for their customers to go outside the community to get better quality or prices. This means the local producers must either produce good quality products at competitive prices or go out of business. Therefore, the small businesses of the local guild under distributism are simply not able to establish the same kind of protection schemes as have been done by big business interests and monopolies under Capitalism. This would tend to prevent local guilds from being too restrictive in their regulations, from having low standards for quality, and from having unjust prices, would it not? Since wide-spread monopolies cannot be formed, there will be producers and service providers wherever there is a market to support them. The result would be the opposite of what our detractors suggest. Research and development could be collectively funded by the guilds for the benefit of all members instead of exclusively funded by single businesses as is done under Capitalism. Distributist guilds would provide more competition, more variety, better quality, and more true economic power for the people.