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Jews and Capitalism

Why are so many Jews discomfited by capitalism—and not merely by the caricature of capitalism as rapacious speculation and exploitative profiteering but by the very idea of organizing an economy along free-market lines?

Relevant Links
Jewish Economic Theory  Isaac Lifshitz, Azure. What in Jewish law justifies private property? The answer is based not in considerations of utility but in the value of liberty. (PDF)
Judaism Loves the Free Market  Jonathan Sacks, JInsider. The economic law of comparative advantage has enabled Jews to thrive even when the deck has been stacked against them. (Video)
Self-Hating Capitalists  Guy Sorman, City Journal. However anti-free market some Jews may be in principle, not only has the free market immensely benefited the Jewish people in general but Jews have excelled at developing free-market capitalism in the West.

The question was among many addressed at a conference on "Free Markets and Social Progress" held in Jerusalem in late May. Sponsored by the Jerusalem Institute for Market Studies, the conference took as its premise the indisputable fact that free-market countries tend to foster the kind of liberty and tolerance that have enabled Jews to thrive. Why then, are many Jews inclined toward liberal and left-wing political ideologies that denigrate the free market?

One longstanding theory holds that the sticking point lies in the historical connection between money and the aristocratic hierarchies of power that, especially in Europe, were heavily tinged with anti-Semitism. There is surely something to that—and yet Jews would probably not have survived into the modern period, let alone the post-modern period, without their own genius for making money. That genius was manifestly abetted by the breakdown of those old hierarchies, a breakdown facilitated by, precisely, the spread of modern capitalism.

Is it just a matter of bad branding on the part of capitalism's defenders? That was the thought of Russell Roberts of George Mason University, speaking at the conference. To Roberts, promoting smaller government for the sake of letting taxpayers keep more of their own money is a poor strategy. Too often, this position is perceived as unfair, boorishly self-centered, and, for Jews in particular, antithetical to the now-sacrosanct imperative of tikkun olam.

Instead of hitching the free-market idea to the wagon of low taxes and smaller government, Roberts would emphasize the way in which collective social interests are best furthered not by government regulation but through an "emergent order of cooperation" that transcends both government and market forces alike. For instance, in the U.S., unlike in Israel, government does not regulate religion, with the result that Americans enjoy a vibrant marketplace of religious ideas. In contrast, Judaism in Israel, tethered to the state, has suffered grievously.  

What does Judaism itself have to say about the free market and social and moral progress? Take the issue of charity and generosity.  Roberts believes that when left to their own devices, people will cooperate with each other in ways that go beyond commerce, doing better not only for themselves but for their fellow human beings. In other words, the liberty inherent in the free-market system actually encourages both charity and generosity.

Provocatively, the philosopher Joseph Isaac Lifshitz of the Shalem Center preferred to emphasize a distinction rooted in Jewish thought: the distinction between pure charity, which he sees as lying "outside the market," and the "generosity" that consists in helping others enter the market.  

As Lifshitz explained, Judaism accepts that in any choice between oneself and one's neighbor, putting oneself first is perfectly legitimate; indeed, the biblical commandment to "love thy neighbor" cannot be fulfilled without a healthy dose of self-interest. Lifshitz would thus have us think of investment—specifically on the micro level—as a normative good. An investor may profit, but morally what matters is setting one's "neighbor" on the path toward financial self-sufficiency.

One can expand the point to the macro level. After all, Jewish survival has historically depended not on individual charity but on communal prosperity, and precisely the kind of prosperity fostered by investment that is propelled by healthy self-interest. "It is this type of political virtue," Lifshitz maintains, "that generates political power from the bottom up." The historical experience of the American Jewish community bears out the truth of this proposition with startling clarity.  

But how can Jews (or anyone else) fail to be discomfited by the upheaval resulting from the global financial meltdown? Isn't this the ultimate indictment of the free market, and proof par excellence that society needs more economic regulation? Sam Peltzman, professor emeritus of economics at the University of Chicago, demurs. At the conference, he argued that, to the contrary, excessive efforts to regulate economic conduct actually induced behavior leading to the financial crisis.

The human proclivity for risk-taking, Peltzman pointed out, can never be wholly suppressed by bureaucratic regulation. As American and European bankers and CEOs sought means of offsetting the intended effects of regulation, they set in motion a vicious cycle, with offsetting behavior begetting more regulations, which begot more offsetting behavior. After the crash, the damage was then compounded by the U.S. government's willingness to bail out the banks and big corporations, thus rewarding rather than punishing their appalling economic decisions.

Analyzing the causes of the latest recession is obviously a complex undertaking, not to mention a matter of fierce debate among economists and others. But Peltzman's underlying point is that economic life is far too multiform and intricate to be made subject to government planning, which is at least as likely to impede as to further the cause of social progress. If this view, like others aired at the conference, still seems iconoclastic, that is at least partly because of the hold exercised on the liberal mind, including the liberal Jewish mind, by the notion that capitalism itself is a nefarious ideology designed to benefit "the rich" at the expense of everyone else.

To this, one cannot do better than respond with the historian Paul Johnson that, unlike socialism, capitalism is the farthest thing from "an ideology dreamed up by an economic philosopher." It is, instead, a way of life, one that simply evolved "from the free and uncoordinated transactions and unimpeded movements of countless unknown individuals"—and that has brought similarly countless benefits to humankind.

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SW on June 3, 2011 at 2:15 am (Reply)
Economically, is it not that " and uncoordinated transactions and unimpeded movements of countless unknown individuals" scare the heck out of those who -- as Doris Lessing observed -- like to tell everyone else what to do?
Ed Beaugard on June 3, 2011 at 6:41 am (Reply)
Many people have not been happy with capitalism, notably:

Adam Smith
John Maynard Keynes

Smith believed that the division of labor makes people 'stupid', but that it is justified in order to build up the productive forces of mankind. He was also for strong regulation by government and deplored high rates of profit, calling them 'ruinous'.
Keynes objective was to 'save free-markets from themselves' which is why he supported social-democratic forms of economic organization. He agreed that it was important to preserve 'free-markets' because they were the best guarantee of liberty.
As for this:

"Sam Peltzman, professor emeritus of economics at the University of Chicago, demurs. At the conference, he argued that, to the contrary, excessive efforts to regulate economic conduct actually induced behavior leading to the financial crisis."

I'm going to be very rude here and call this one of the stupidest things yet written about the catastrophic financial crisis that began in 2007(and is still ongoing).
Excessive efforts at regulation? of what? financial markets or firms? Was the repeal of Glass-Stegal an effort to regulate? Was the failure to regulate exotic derivatives in 2000 really an effort to regulate them?
What on earth is he talking about?
No one is going to learn very much Professor Peltzman.

Ed Beaugard
Daniel Sayani on June 3, 2011 at 8:09 am (Reply)
As a columnist with The New American, and as an Orthodox Jew, as well as a student of Ayn Rand, the Objectivists, and the Austrian Economists, it is evident to me that Jews, as an intellectual people, have been the main philosophic minds behind both free market capitalism and often times, various Marxist schools. I do believe that Judaism has always been associated with capitalism, and this continues to be a source of anti-semitism among both Muslims and the radical, traditionalist Roman Catholic paleoconservatives, who oppose the free market, attack bankers, Jews, Israel, American foreign policy in a lunatic alliance with the communist, radical left, all under the name of Hillaire Belloc/GK Chesterton-style "Distributism," which is a decidedly anti-capitalism, third-way ideology which calls for the equal and state-controlled distribution of the means of production, which reeks of the ten planks.

I think that Judaism has always promoted free market capitalism and property rights with the underlying beatific notion that people, while not inherently good, will be guided by following mitzvot which govern wealth and property, while ensuring in a voluntaristic, individualistic, and theological sense that individual devotion to Torah will have the effect of ensuring that the poor are taken care of. Reminds me of what a Catholic friend once said to me- he believed that if all people followed the 10 commandments and the Beatitudes, there'd be no need for coercive governmental authority. Sadly, people are corrupted and need government, as well as mitzvot, which are unto us a delight.
Ira Stoll on June 3, 2011 at 10:11 am (Reply)
Thanks for this article; otherwise I wouldn't have known about this conference, which sounds really interesting. I think one reason so many Jews are hostile to capitalism is that they've absorbed the hostility from the surrounding culture and religions. But to me the more interesting questions about Jews and capitalism are not why some Jews are hostile to capitalism but why so many are so good at it and so many from Jewish backgrounds are among capitalism's most articulate and prominent defenders.
alex on June 3, 2011 at 10:12 am (Reply)
what apologetic nonsense. "Free-market" capitalism, in its essence is schkutzadig, pure and simple. Proof:
do you think it is accidental that Weber's famous treatise on the subjest is called "PROTESTANTISM and the Rise of Capitalism"?
get real.
seymour on June 3, 2011 at 10:20 am (Reply)
Only an am ha-aretz would compose a piece like this and omit mentioning the definitive work on the subject, Max Weber's "Protestantism and the Rise of Capitalism." Capitalism is gentile in essence. Period.
Cathy on June 3, 2011 at 11:43 am (Reply)
One of the greatest challenges facing the US, according to many sociologists and economists, is the growing inequity between the extremely wealthy 1% of America and the rest of us. As the article suggests, the resources of the wealthy are so vast that they have demanded bank bailouts at a time of previously unacceptable levels of unemployment, and have tilted our society in many other harmful ways. I think Jews have always had compassion not merely on the oligarchs who run America, but on the workers who are getting ever more squeezed in the current economy. The rhetoric of "Free market capitalism" obscures our society's movement towards a corporate police state.
Ter on June 3, 2011 at 12:32 pm (Reply)
For years I have been trying to understand why my Jewish family members and Jews in general have been siding and voting Democrat. I just don't get it. maybe now I can begin to understand. Many thanks!
sumner on June 3, 2011 at 2:08 pm (Reply)
Daniel: you can't be both an Observant Jew and a disciple of atheist and religion-hater Ayn Rand. Choose (God or Mammon).

The comments by Seymour and Alex are correct, but don't go far enough.

Free-market capitalism is the economic avatar of the Protestant spirit - of voluntarism.

Adam Smith's "invisible Hand" is simply a secular version of the Christian notion of the Holy Spirit.

Mr. Jager's essay is a spectacular example of intellectual assimilation- starting with the blind eye turned to Weber's work. Here's why:

Liberals (including Jews) are much more willing to OBLIGATE themselves by paying more in taxes than by joining the conservative/libertarian(Protestant) cult of voluntarism. Which, when you get right down to it, is basically more of a means of showing off--"My, what a good person am I!"--than of accomplishing anything tangible.

Voluntarism, including voluntary charity, makes people feel good about themselves, but it just doesn't work very well. If it did, there would have been no need for the emergence of the welfare state in the first place. I ask readers of Jewish Ideas Daily : What has done more good for the elderly and disabled: (Protestant-style) conservative voluntaristic charity? Or Social Security and SSI and Medicare, financed by OBLIGATORY contributions- i.e., taxes?

According to Rabbi Hanina (Kid. 31a) “one who is commanded and fulfills the command is greater than one who fulfils it though not commanded (i.e., voluntarily).”

Indeed, in Judaism (and Islam), support of the poor is not a voluntaristic means of showing off, but a socially imposed OBLIGATION, i.e., a tax. That is why Jews (and Muslims) have- in my view, correctly- recognized "charity" as a social obligation and a form of justice. As a matter of fact, in Hebrew, 'justice' and 'charity' even have the same linguistic root.

Think Jewish (and Muslim) communitarianism vs. Protestant hyper-individualism. Free will offerings, bake sales and even five-day-a-week Bingo games simply do not - because they cannot -do the job of ameliorating the plight of those in need.

Free-market capitalism is the economic avatar of Protestant voluntarism (as Weber documented). Libertarianism is its political counterpart. (Libertarians are self-serving anarchists- and thus the polar opposite of Halachic Judaism - but that is another posting.) Bottom line: Jews who shill for "free-market capitalism" are the ultimate assimilationists!
SW on June 3, 2011 at 2:28 pm (Reply)
Of course, there are socially imposed obligations. The remaining question -- whether through one lens or another -- is the measure of the tax. Three percent? Thirty percent? Ninty percent? The question is not in the theory, because there are few arguing for unfettered and rampant self-serving aggrandizment. The question is merely how what percentage of the private to be defined by law as taxed into the public. Theory is fine, but the end game is always just a question of "what's the percentage." One to ninty-nine, it's quite a range.
sam on June 3, 2011 at 3:52 pm (Reply)
A central tenet of Judaism is that we are all responsible for each other.
In fact the first question that man asks god in the bible is “Am I my brother’s keeper.” The Jewish tradition answers yes. The capitalist tradition answers no. That’s the heart of the problem. Capitalism is rooted in self interest and it alleviates ones responsibility toward others. Its not surprising that Jews have often had a problem with that. What is more surprising is that right wing American (though not Israeli) religious Jews have let their religion be shaped by short sighted politics.
Bob Abrams on June 3, 2011 at 4:51 pm (Reply)
The relationship between Judaism and capitalism is not a comfortable one. The rabbid (tractate Baba Metziah) talks about a fair wage, promptly paid. Also rabbinical rulings have generally been against predatory competition.
Cynic on June 4, 2011 at 2:28 pm (Reply)
To answer your question as succinctly as possible,
it is because the Jew has always been accused of money grubbing as part of the antisemitic narrative and the capitalist has been portrayed in the same fashion.
What the Jew cannot seem to see is that most of this is projection and Britain's display of crawling to Gaddafi for oil and releasing a terrorist murderer into the bargain is a prime example.
Britain whose writers have for centuries portrayed the Jew as Shylock while its citizens are only too keen to get their hands on that luverly lucre, filthy or not.
SW on June 5, 2011 at 3:06 am (Reply)
"A central tenet of Judaism is that we are all responsible for each other." To what fiscal percentage of one's earnings? Ten percent? Fifty percent? One hundred percent?

The question is not "are we responsible?" The question is "to what extent?"

Capitalism and socialism are names for using some portion of man's productivity towards the commonweal. Capitalist theorists have never, in my reading, suggested none. Smith's "The Wealth of Nations" suggests a progressive taxation, in fact. This leaves only the question: How much?

The funny thing about the capitalism-socialism wrangle is that none of the theories and theorists answer the specific question, "how much?"

Nowhere I have read has anyone suggested "none." Quite a number have answered, "most" and "all."

How much? It's a question which irritates, because it exposes the real intent of those who would answer "most." "All" of course is slavery, is it not?

So -- how much?
Susan on June 5, 2011 at 6:42 am (Reply)
FDR saved Capitalism. Yes, I believe in Capitalism, but not in unfettered Capitalism. Capitalism needs rules. We have seen what happens when capitalism with no boundaries has done.

Sumner and Bob Abrams have already written on why Judaism does not support unfettered Capitalism.
SW on June 6, 2011 at 10:41 am (Reply)
"If I am not for myself, who will be for me? And if I am for myself, what am I?"

So -- how much?

How much for me? How much from me to others? Who decides? Do I keep eighty percent? Fifty? Ten?

Lots of words about 'ism" and theory, but the practical question remains: so -- how much?

Anybody want to take a shot at answering the number?
l wineman on June 6, 2011 at 3:54 pm (Reply)
am haaretz is a good description of the article as well as the cited lifshitz article. The inviolability of ownership of property is a basic tenet of capitalism yet in the torah but the laws of shmitah and jubillee undermine those very tenets. Why ? to teach us that ultimately the fruits of our labors are not ours but are a gift from god. And of course there are restrictions on rebeet (interest). All of these to teach us to avoid the haughtiness of unbridled capitalist and liberarian. That's just a taste. Jews are skeptical of undridled capitalism and unrestricted accumulation of wealth because jewish tradition is (even if some of those modern skeptics arent aware of all the sources). Those reading libertarianism into judaism arent reading the sources they're reading their attitudes into the sources. In fact you dont even have to go as far as shmita what would ayn rand think of a shomer shabbat yid who turned toward profits to acknowledge a higher authority ?
SW on June 7, 2011 at 1:50 am (Reply)
Lots of theory and talk of Torah and Talmudic commnetary, with the adjective "unbridled" defining capitalism far mroe often than socialsim. But there are taxes and regulations, so capitalism is rarely pure nor unbridled. I think National Socialism and Soviet Socialism might well be more "unbridled" than any recent "bridled" capitalist system.

So it still comes down to application of the theory and talk. The practical question remains: so -- how much?

Anybody yet want to try offering a real number instead of words about numbers?

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