Jews and Capitalism

By Elliot Jager
Friday, June 3, 2011

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?

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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