What do Jewish law and philosophy say about the concepts of making and managing money? Jerry Z. Muller, a professor of history at the Catholic University of America has written the book on the subject. “Capitalism and the Jews” is his latest book. Muller spoke to the Goldstein in Gelt program about the Jewish people and their history with free market economy.
Question: How did you come up with the title of your book?
Answer: I know that some people have viewed the title as provocative. It actually was not intended in that way. It was simply that having written a series of interconnected essays on the various sorts of links between capitalism and the Jews, it seemed to me that the common denominator of the essays and the real topic of the book was indeed capitalism and the Jews.
Question: Give us a more clear definition of capitalism and its relevance to Jewish thought.
Answer: Capitalism is, like all concepts in the social sciences, a kind of ideal type, a model that exists to one degree or another in the real historical world. One way of thinking about it is that it’s a society that is primarily commercial. It’s a society in which people sell most of what they produce, including their labor, and they buy most of the things they need. It’s a society in which there’s private property, in which goods and services are exchanged by free individuals and in which prices and production are set by supply and demand in the market, rather than by tradition or government edict.
Question: By means of example, is it fair to say that the United States is the predominant example today of capitalism in the world, or is there another country to look at?
Answer: There are many varieties of capitalism in the world. They have various degrees of economic freedom of relationship between the market and the state. The United States is often considered the paradigmatic example, but there are hundreds of varieties of capitalism around the world, including all of contemporary Europe. In many respects, China is increasingly a capitalist society, and of course Israel has become in time a capitalist society very much as well.
Question: What is the connection between capitalism and Jewish thought?
Answer: My book actually isn’t primarily about capitalism and Jewish thought, though some of it does deal with how Jews thought about capitalism, both pro and con. More important than capitalism and Jewish thought, there’s always been a role in Jewish thought, at least from the time of the Roman period and from the time of Mishnah. There’s always been a role for commerce, and there’s lots of discussion of commerce and torts and so on in the Mishnah and Gemara. But to say that there’s a discussion of commerce doesn’t mean that Jewish thought was capitalistic in the sense of recommending or being based upon free markets and free exchange, though there’s a good deal of that in traditional Jewish thought in the sense of Mishnah, Gemara, and the subsequent development of Halakhah. But what’s been more important for the Jews than the religious content of their thought has been the historical position in which they’ve found themselves from at least the beginning of the Medieval period in Europe, roughly from 800 to 900 really to the dawn of the modern era and then beyond. That position was one of a politically powerless minority that often, in most times and places in Medieval Europe, was very much centered on certain economic roles. These were, above all, commercial roles of various sorts and the whole role of money lending, which was important in terms of the function that Jews played in Medieval European society. As a result, Jews entered the modern period, starting with the 18th century, with far more commercial involvement, commercial experience, and commercial knowhow than most of their gentile counterparts in Europe. This was especially important as you move eastward in Europe, towards Eastern Europe and Russia, where the societies were less advanced and less commercial than was the case in Western Europe and places like England and France. Especially as you move into central and above all eastern Europe, Jews often were the commercial class, and so as these societies became more capitalist in the modern period in the course of 19th and even 20th centuries, Jews with their prior experience of commerce often excelled in the economic development of those countries.
Question: Is it a rumor that the Jews really gained this experience because of the rules of the church, which prohibited church members from lending to each other, meaning that the Jews were the only ones who could do it, or is that repainting history?
Answer: That’s more than a half-truth. As European society started to become more commercial from about 1100 on, credit, the lending of money, became more important than necessary, and the lending of money at interest was prohibited by the church. As a result, in order to create a situation where Christians were not involved in that sinful activity, this activity was often relegated to those who were regarded by the church as beyond salvation, that is to say, to the Jews. There was a certain push factor there, and from the Jewish point of view, there was a certain pull factor in a couple of ways. First of all, Jews had a certain relative advantage in that they tended to have much higher levels of male literacy than the surrounding population, and this was conducive to commerce. Also, in terms of rabbinic thought at the time, they often encouraged Jews to go into commerce and moneylending rather than agriculture because they argued that while commercial and financial life were demanding, these still left you more time than agriculture did for Torah study. There were both push and pull factors that drew the Jews into commerce in general and into moneylending in particular.
Question: A lot of people blamed or pointed to the Jews as the ones controlling all the money and they got that position because of capitalism. This has led to a great deal of anti-Semitism, and perhaps extreme anti-Semitism, with the pinnacle being the Holocaust. Is there any truth to this?
Answer: As with many stereotypes, there’s a grain of truth to it that gets wildly exaggerated. In eastern Europe, but not so much in Western Europe or the United States, and to a lesser degree in Central Europe, Jews in the 19th and 20th centuries were often disproportionately involved with commercial activity in general and financial activity in particular. Rarely was it the case that they actually controlled commerce or finance, but they were disproportionately represented. It’s the nature of capitalism, as Joseph Schumpeter put it. It’s a process of creative destruction, that is to say there are new institutions being created all the time, new forms of marketing, new products, new way of producing things, and all that innovation has its downside. When you create a new way of producing or marketing things, it means that the people who produced things in the old way or marketed them in the old way, find their standard of living or even their very means of living in decline. Capitalism also has a certain amount of instability built into it. Often enough, when that instability took hold, or when people experienced economic crisis or even just downward social mobility, they were looking for someone to blame for it and disproportionately represented and disproportionately salient. So there often was a connection between anti-capitalism and anti-Semitism.
I think that on the whole, there’s much less of that now than there was in the past. There was this tendency to blame the capitalist crisis on the Jews, and you still find the phenomenon and of course it is striking that Jews are overrepresented in American finance. Jews have been over represented among economists and among distinguished economists, including the ones who have headed the federal reserve in the United States.
Question: You wouldn’t argue that this is the fairest connection, but rather that’s the way it goes. Jews have been involved in money for the hundreds of years. They worked their way up and seem to have a knack for it.
Answer: I think they have a few characteristics that tended to make them excel at market activity. One was the fact that I alluded to already – that they simply had more experience of it and that is often passed down to one degree or another within families or within communities. The whole notion of buying low and selling high, the whole notion of being on the lookout for economic opportunity, for places where there are markets that are underserved, or where there is some kind of demand that isn’t being met. Of course, the fact that Jews were often excluded in the past either by law or by social prejudice from many areas of established economic life tended to make them more on the lookout for new economic opportunities. This helps to explain why in so many times and places, in modern European and American history of the new world, Jews were often disproportionately involved in capitalist activity.
Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt podcast, an international investment show with a dynamic group of guests. These include Nobel Prize winners, best-selling authors, Israeli corporate chiefs, lawyers and accountants. Israeli business news and currency updates are featured as well. Goldstein on Gelt airs every Monday from 7:00 pm – 8:00 pm Israel time on Israel National Radio. For podcast archives click here.
