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44: The Rise of Capitalism and the Decline of the Guilds

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The basic medieval manufacturing organization was the traditional shop -- a master and wife, a couple of employees, and a couple of children learning the trade. The master bought his raw materials, fabricated his product, and sold it retail. The shop was residence, dormitory, workshop, ware-house, and retail store. The masters of a given trade in a particular location united into a guild. The guild served many functions:

  • Economic
    • It set standards of quality for the goods or services that its members sold.
    • It the prices to be paid for materials and labor and to be asked for finished products - Usually the maximum price that members would offer from labor and materials, and the minimum price they would accept for their product.
    • It set production quotas for its members, both to insure that the guild's production would be sufficient to meet the needs of its market and to make sure that production would not be so great as to glut its market and drive down prices.
    • The guild stood surety for loans to members. This was something like co- signing a loan, but it was in the interest of all that members of the guild should not get a bad reputation because a few of their number had defaulted on loans.
    • Members of a guild were able to pool their capital and, perhaps even more important, share their risks. For example, if a member of a merchant guild sent out a shipload of goods, there was always the danger that a shipwreck could cost him the entire value of its cargo. If eight members sent out eight shiploads and divided their goods among those ships, however, the most a shipwreck could cost any member was one-eighth of his shipment. [Incidentally, modern companies evolved from this practice, which is why they sell shares of stock to the public],
  • Educational
    • The guild established and enforced minimum educational standards for apprentices. Masters were usually expected to teach their apprentices how to read and write, enough arithmetic to keep books, and to provide decent religious instruction in addition to teaching them the rudiments of their profession.
    • Representatives of the guild regularly inspected the conditions under which apprentices and journeymen worked. The usual arrangement for apprenticeships was that the parent of a young man, aged about seven, would take their son to a master of the guild in which they hoped that the boy could be trained. They paid the master a fee (sometimes quite large) and signed an agreement that the boy would work for the master for seven years as an apprentice. The master, in turn, promised to educate and train him and, at the end of the seven years, provide him with a new suit of clothes, a kit of whatever the tools of his trade were, and enough money to begin the period of traveling and gaining experience as a journeyman (coming from the French jour, or "day," and meaning a man paid each day for his labor. Incidentally, many guilds stipulated that it members were to provide their apprentices with new clothes once a year, usually at Easter. Note that clothing stores still hold major sales just before the Easter holidays.
    • Provided a board to examine candidates for journey-man and master. The candidate for the rank of master usually created as fine an example of the guilds product as his ability allowed. If it was considered good enough, the board would recommend that he be granted the title of "Master." The example that he created was known as his "master-piece." The examination system was an important means of ensuring the competence of all of the masters of a guild. If you will remember that the first universities were actually guilds and will note that universities are quite slow to change in any fundamental aspect, you will recognize that the presentation of a thesis by a candidate for a Master's degree and his examination on that piece of work is a continuation of medieval guild practice.
  • Fraternal
    • The members contributed annually to a burial fund and were expected to attend the funeral services. These services might include, among other things, a memorial banquet held after interment.
    • The guild members also contributed to funds for the upkeep of the widows and orphans of deceased members.
    • The members collectively honored the patron saint of their trade. This sometimes took the form of subsidizing carvings, paintings, stained-glass windows and the like in the local church, or the guild might even construct their own church, as did the stevedores of 13th-century Barcelona when they built the church of Santa María del Mar. Guilds also carried the statues of their patron saints in the religious processions that were once major events in urban life (and still are in cities such as Valencia and Sevilla in Spain).
    • provided representation on the town council. Townsmen often declared their independence of whatever secular or ecclesiastical lord had claimed ownership of the city, and they built walls to defend their rights against noble-led armies. Local government was taken over by town councils composed of representatives of the city's major guilds. Remnants of this state of affairs is continued in the City of London (its innermost central section), which is governed by a Lord Mayor and his council, who sit in Guildhall. One of these Lord mayors, Dick Whittington by name, has become a favorite figure in children's stories and pantomimes.
    • bailed fellow-guildsmen from jail. This was similar to the guild's attention to the competence of its members. In the middle ages more than today, mutual trust was essential in conducting business. Membership in a respected guild known to back its members in case of need secured such trust for guild members. If one person, however, gave the guild a bad name, all members suffered the loss.
  • Civic
    • served in town militia. The free cities needed to depend upon their own citizens to defend their liberties. Artisan militia could be very effective. In the battle of Legnano in 1177, the army of the German Emperor Frederick I Barbarossa was defeated when its flank was suddenly attacked by members of the butcher's guild of Milan, armed with the tools of their trade - pole-axes, cleavers, large cutting knives, and so forth. Over time however, urban guilds - particularly in Italy gave up fighting in the field in favor of hiring mercenary armies to do their fighting for them.
    • provided local fire defense. Since members of a given guild usually banded together in a specific neighborhood, it was only natural that they should defend their homes and wares from the ever-present danger of fire. So the guild itself bought and stored the fire-fighting equipment of the day - ladders, buckets, axes, hooks, chains - and even dug neighborhood cisterns to ensure that there would be water available with which to fight a sudden fire.
    • maintained a section of the town wall. Each guild was assigned a section of the city wall, which it was to keep in good repair, on which it was to place guards, and which it was to defend in case of attack.
    • took turns at guard duty
    • supported local magistrates
    • served in local courts
    • contributed to the town treasury
    • participated in local festivals. Often enough, a guild would sponsor an event, such as a play, and some guilds had the tradition of presenting their own plays to the public. The origin of modern Western drama is intimately connected with the medieval guilds.
    • maintained charitable institutions. Some of these charitable institutions have persisted to the present day. Merchant Taylors' is one of the elite "public schools" of England, and the Goldsmiths' Library is an outstanding repository of old and rare books.
      • hospitals. Medieval society was not cruel. Christians were expected to feed the hungry, provide drink for the thirsty, clothe the naked, comfort the ill and visit the imprisoned. Economic changes in the course of the 12th century led to severe social problems, including the increased growth of the pauper class, that was too great to be solved by the Church within the means available to it. Throughout the 12th and 13th centuries, guilds and individual guild members (and their sons and daughters) took responsibility for combating these social evils. Guilds soon subsidized or even directly operated such charitable institutions as:
      • infirmaries
      • leper hospitals
      • charity cemeteries
      • poor relief
      • care for the aged
      • orphanages


The guild system non-competitive and adapted to an expanding economy. After 1250, economic expansion slowed and the guilds had to face new and competitive conditions. The reaction of the masters of many guilds were

  • to restrict admission to master's status
  • to reduce labor costs by cutting salaries of journeymen and extend the years of apprenticeship
  • to lower working conditions
  • to reduce civil contributions and charity
  • to lower purchase price for raw materials
  • to take over work of smaller guilds
  • to switch to lower quality, lower cost products
  • to establish monopoly areas.

These steps were insufficient in the long run. The guild system was designed to be cooperative rather than competitive. Any desire for efficiency and profit was balanced by the acceptance of the goal of a stable economy and concern for the common good. A significant portion of the profits of the guilds was diverted to providing social services, but the major limitation of the system was that it was based upon a number of small businesses and thus could not develop any efficiency of size. Although the guilds could pool capital, they could not permit a few individuals to accumulate enough capital to establish large and "rationally" organized enterprises.


After 1350, markets began to grow smaller, and the powerful long-distance merchants had to lower their costs in order to compete. They did so by producing their own goods, by-passing the guilds. There were two major systems of such "proto-capitalist" production.

The "putting-Out System

Merchants' agents would rent the necessary equipment to peasant families, sell them raw materials, and purchase the finished product. This process was particularly common in the production of candles, clocks, pewter ware, stockings, hats, but most particularly in weaving. This system continued to be common until the end of the 19th century, and the early parts of George Eliot's (1819-1880) novel, Silas Marner, offer a good picture of its operation at its height.

The "Factory" System

The merchants would concentrate equipment in a warehouse ("factory"), acquire raw materials from their own farms or through agents, hire workers for wages only, ignore any production quotas, and compete rather than co-operate. This system was used primarily for manufacture consisting of several steps or dealing with heavy materials. It eventually developed into the factory system characteristic of the Industrial Era and which is still prevalent in the post-Industrial age.

The manufacturing guilds fought the development of these proto-capitalist systems, but were defeated by an alliance of the merchants' and the other "great" guilds (professional groups such as doctors, druggists, lawyers, gold- and silver-smiths). Although there were class wars in many towns, the artisan guilds were unable to compete economically, and so eventually disappeared. Many guilds persisted for a long time, however, especially those in retail and small-scale service and repair. It was only with the appearance of shopping centers and "supermarkets" after World War II that butchers and bakers lost their professional status, while such groups as plumbers have managed to keep that status. The professional guilds developed into the American Medical Association, the American Bar Association, and the silver- smiths and gold-smiths became the economy's bankers.


The proto-capitalists of the later middle ages did not support civic services, so urban life deteriorated. The workers' standard of living dropped, and this reduced their ability to buy the goods they produced. The European consumer markets grew quite restricted, and this contributed to a general recession in the fifteenth century. Production was now uncontrolled, and cycles of inflation and depression became common. More production was moved to the countryside, and wealth concentrated more rapidly in ever-fewer hands.

Together with the disappearance of the manorial system in the countryside, the emergence of capitalism altered the structure of society. Peasants and middle class split into two classes, the proprietors and a proletariat, the lower levels of which merged with the pauper class. Something of the same thing was happening among the nobility, where there was an increasing gap between the squires and the magnates. The medieval structure of social classes was being replaced by the modern structure based upon economic classes.


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