Friday, June 03, 2011

Jews and Capitalism

Why are some Jews uncomfortable with capitalism? Not merely the cliché of capitalism as rapacious speculation and exploitative profiteering, but the mere idea of organizing the economy along free-market lines. While Jewish poverty is still with us chances are most Jews are more embarrassed by Jewish wealth. Perhaps the connection between power and money is the problem. Wealth is certainly one more excuse for anti-Semitism. Yet Jews would probably not have survived into the post-modern era without their genius for making money.

Free market countries tend to foster the kind of liberty and tolerance that have enabled Jews to thrive. Yet many Jews are inclined against political ideologies that champion the free market. A conference sponsored by the Jerusalem Institute for Market Studies on "Free Markets and Social Progress" held in Jerusalem on May 29 sought to come to grips with, among other things, this apparent discomfiture with capitalism.

Perhaps it’s a matter of branding. Promoting smaller government in order that voters can keep more of their own money is unappealing because it's perceived as boorishly self-centered, unfair, and for Jews the antithesis of tikkun olam, Russell Roberts of George Mason University argued. He sees hanging the free market idea on low taxes and small government in isolation as a mistake. Instead, people need to understand that the collective interest is manifested not in government but in a "subtle emergent order of cooperation" that transcends even market forces. For instance, in America – unlike Israel – government does not regulate religion with the result that America has a vibrant market place of religious ideas. In contrast, Judaism in Israel has been buffeted by being tethered to the state.

For Roberts the value of smaller government is that allows for informal bottom-up collective decision making that "just happens." Citing The Theory of Moral Sentiments by Adam Smith, Roberts argued that it is not the pursuit of wealth that makes people happy – "being loved and being lovely does."

People want to do good because they want to be liked. Capitalism understands that humans are self interested though they need not be selfish. Smaller government won't make people rich but it could make them freer and empower them to do better for themselves and their fellow human beings. Roberts believes that when left to their own devices people won't just give charity they'll cooperate with each other in ways that go beyond commerce. Therefore, those who fret over small government actually show a distain for the ability of ordinary citizens to make their own moral decisions.

What does Judaism have to say about the place of charity and generosity in the free market? Most scholars would say that the liberty inherent in the free market system encourages both these values. Provocatively, philosopher Joseph Isaac Lifshitz of the Shalem Center prefers to emphasize a distinction rooted in Jewish thought between purely altruistic charity, which he sees as laying "outside the market" in contrast to helping others enter the market which he terms "generosity."

Judaism accepts that in any choice between an individual and their neighbor putting the self first is perfectly all right. In fact, there can be no genuine fulfillment of the Biblical command to "love thy neighbor" without a healthy dose of self-interest. Lifshitz would like us to think of investment – specifically on the micro-level – as a normative good. An investor may profit but what matters morally is setting their fellow man on the path toward financial self-sufficiency.

Jewish survival, moreover, has depended not on individual charity but on communal prosperity, precisely the kind fostered by investment that is propelled not by self-abnegation but by healthy self-interest. "It is this type of political virtue that generates political power from bottom up," Lifshitz maintains. The higher moral good, then, is the "generosity" of investment rather than charity.

But how can Jews – or anyone else for that matter – 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 doesn't think so. He told the conference, counter-intuitively, that efforts to regulate economic conduct actually induced the very behavior that contributed to the financial crisis.

Bankers and CEOs, he said, will invariably behave in ways that offset the intended effects of any regulation. Such "offsetting behavior" begets more regulations, which beget even more offsetting behavior. The human proclivity for risk-taking can't be suppressed by bureaucratic regulations. Put plainly, economic life is far too complex to regulate. Moreover, the U.S. government's willingness to bailout banks and big corporations serves to reward rather than deter appalling economic decisions. Only the sobering prospect that bad business decisions will have bad consequences for those who make them can deter reckless risk-taking.

The views aired at the conference might seem iconoclastic only because they receive scant exposure in the media. To the extent that we give economics any thought at all, most of us adhere to conventional thinking. Jews like others prefer to adopt fashionable views on politics and economics rather than gravitate toward positions that have little resonance in the liberal newspapers we read, the public radio we listen to and the kind of television we watch.

Finally, historian Paul Johnson has pointed out, nomenclature may be another aspect of the problem. "Capitalism is an unfortunate name" for what is "not an ideology dreamed up by an economic philosopher" but a way of life that simply evolved "from the free and uncoordinated transactions and unimpeded movements of countless unknown individuals."


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