California’s Regulatory State Has Come To Resemble Medieval Guilds

The same oppressive regulations that caused people to escape Europe for America are now creating an exodus from blue states

By Scott Beyer of The Independent Institute. 

"The more rules a government puts on the people who live under it, the more of them flee. One big example of this was the guild system that existed in medieval Europe. These trade associations that were enforced by authorities restricted economic freedom, prosperity, and even the basic ability for people to live their lives. So people fled to foreign lands where this was less the case. But we in America are repeating the same mistakes, primarily at state level, with Democratic-controlled ones like California losing people to less-regulated ones like Texas and Florida.

In Medieval Europe, there were associations known as guilds that dominated manufacturing and trade. They were enforced through a combo of government law (coming from kings, lords, etc.), and private mafia cartels. The guilds were established to ensure high-quality production and stabilize economic activity. In many ways they created the concepts of trademarking and branding that we’re now familiar with.

But like all cartels, they destroyed the competition and dynamism that grows economies in an effort to protect their own interests. Anyone who wanted to become a tradesman, such as a blacksmith, not only had to undergo extensive training, but pay regular guild fees. They also imposed wage and price controls, preventing market feedback mechanisms that would encourage more activity during situations such as famines.

As Cambridge University historian Shelaigh Ogilvie notes, guilds enforced monopolies with the backing of authorities. Consumers and non-guild merchants were punished by fine, business closure, or even arrest. Guilds also discriminated on religious, racial, and gender lines – Jews, women, and members of some Protestant sects were among the groups restricted from membership.

The guild system gradually ended, particularly as rural merchants began to undercut them and some jurisdictions moved to outlaw them.

European history, though, is indeed dominated by groups that migrated due to being locked out by these protectionist institutions. The examples most familiar to Americans are those which spurred the exodus to this country—Germans who fled their homeland for Pennsylvania; protestant Scotch-Irish who roamed Appalachia; and British puritans who settled the Northeast.  But it was intracontinental as well, with different oppressed minorities, such as the Jews and French Huguenots, escaping to more tolerant parts of Europe.

We see guild-like behavior today, most acutely in the developing world. I’ve already covered for this site the work of Hernando de Soto, who has written about the complex licensing systems in Latin America and Africa. It makes these societies poorer, as people must run their businesses illegally in the shadows, paying bribes to prevent officials from cracking down on them.

Strong economic freedom has been key to America’s appeal since its founding. But the growth of the regulatory state from the Progressive Era on shifted something in our character, and state and municipal regulations in particular have come to resemble a softer form of this despotic guild mentality.

Our occupational licensing regimes are quite literally guilds – even if that word is seldom used. Depending on the state, licensing is needed for construction, cosmetology, landscape architecture, cab driving, and other relatively low-skill trades. The result is market concentration, as firms or unions which can best navigate the maze crowd out competitors.

Milton Friedman identified this drift towards guild-like regulation in the early 1960s, saying “there has been a retrogression, an increasing tendency for particular occupations to be restricted to individuals licensed to practice them by the state … [impacting] egg graders and guide dog trainers, pest controllers and yacht salesmen, tree surgeons and well diggers, tile layers and potato growers.”

In California today, 75 out of 102 “lower-income occupations” require a license, according to the Institute for Justice, and on average professional training takes 487 days longer than the national average.

But the problem in California extends beyond occupational licensing and into a larger regulatory scope that exceeds what was likely found in medieval Europe or today’s Third World. Take three recent stories from the news. In the first, comedian Bill Maher publicly complained to Governor Gavin Newsom’s face on TV about needing to pay for two inspections just to upgrade his roof. Maher echoed many homeowners who have found it difficult to rebuild or improve their homes following the wildfires. In the second story, a former producer for The Simpsons had to tear down the treehouse in his yard—a structure that was beloved in the community and attracted visitors—because the city deemed it non-compliant and threatened him for years with criminal charges. The third story, which is not recent and concerns a much bigger issue, is California’s high speed rail. State environmental review has put the project years behind schedule and tripled its cost estimate.

The sense from all these stories is that the state, on matters large and small, is putting its boot down on any ability to progress economically.

And indeed, people are fleeing. From 2020 to 2022, over 500,000 Golden State residents moved out, and net population growth has been flat. New York, with a similar governing philosophy, also lost hundreds of thousands of residents and projections see further out-migration. The fastest-growing states by population continue to be economically freer ones in the West and South.

States like California that tolerate this regulatory overreach repeat the same mistakes made centuries ago by medieval authorities who empowered guilds. Even if they haven’t voted—historically, anyway—for deregulatory policies, residents there are voting with their feet to places that lack these powers."