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Capitalism and the Jews

No, you have not just stumbled on a neo-Nazi website by mistake. This topic has long been radioactive for obvious reasons, but some scholars are finally getting over it, as shown by a great book by Jerry Z. Muller by the same title (Princeton U. Press, 2010). The obvious patterns of interest:

(1)                           Some capitalists are Jews

(2)                           Some anti-capitalists are anti-Semites

Both facts have been caricatured. It does not follow from (1) that all Jews are capitalist exploiters, and it does not follow from (2) that all anti-capitalists are anti-Semites.

Jews were prominent in capitalist history in particular as financiers and traders (“middlemen”). Famous banking examples are the Rothschilds in Europe and the Guggenheims in New York. In Hungary in the 1920s, 85 percent of bank directors and owners were Jewish. Famous Jewish traders in America were the Filenes (yes, THAT department store) and Levi Strauss (a trader before he stumbled across that whole denim thing).

Trade and finance are what is known as “contract-intensive” sectors. Unlike cash-and-carry transactions, transactions in these sectors need to separate delivery and payment. The huge need for a mechanism to enforce contracts is because one party can always abscond with the money or goods. One informal mechanism to enforce contracts is doing transactions within a tightly knit ethnic group with high trust between its members, backed up by the threat of expulsion from the group if you cheat. A previous post discussed how many ethnic minorities form business networks.

The Jews just happened to form the largest networks in the two most critical sectors for the emergence of European capitalism – trade and finance. Unfortunately, these two sectors have also been the ones that attract the most hatred from those opposed to capitalism, who can only see unproductive middlemen, speculators, and financial tricksters.

Actually, this is how European Jews wound up in those sectors in the first place, since European Christians traditionally banned “usury” in finance and “speculation” in trading goods. They also often banned the Jews from landowning and agriculture. So the outsiders, the Jews, were forced into trade and finance. When the Industrial Revolution conferred wealth on people good at trade and finance , there was the tragic anti-Semitic backlash against Jews for operating in sectors they had been forced into by previous waves of anti-Semitism.

Hatred of trade and finance is still very much alive today, in both non-racist and anti-Semitic varieties. For the latter, take Osama bin Laden’s Letter to America in November 2002:

You are the nation that permits Usury, which has been forbidden by all the religions. Yet you build your economy and investments on Usury. As a result of this…the Jews have taken control of your economy…and now control all aspects of your life.

To keep reiterating over and over, it would be fallacious and unfair to equate any criticism of Finance (some of them very well-deserved) with anti-Semitism or Osama bin Laden. Indeed, another striking phenomenon that Muller discusses is that some Jews have also played prominent parts in anti-capitalism, beginning with the partly-Jewish Marx through Trotsky (the Nazis absurdly blamed the Jews for Both Capitalism and Communism), Israel’s strong socialist traditions, and continuing through some of today’s most prominent anti-globalization writers. I won’t try to analyze Jewish anti-capitalism here (read Muller).

Yet for those who ARE anti-Semitic, anti-capitalist, and anti-Western all at the same time today, anti-Semitism is providing a lot of the rocket fuel for the anti-capitalism and anti-Westernism. As Ian Buruma and others have pointed out, some anti-Western movements around the world today are drawing upon anti-capitalist and anti-Semitic ideas that originated in the West itself.

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8 Comments

  1. Sam Gardner wrote:

    quoting xkcd: correlation does not equal causation

    Posted April 5, 2010 at 1:02 am | Permalink
  2. Blake Goud wrote:

    Thank you for an informative post. There is indeed substantive historical evidence to support your argument. In addition to what you state (where usury is prohibited for Jews, Christians and Muslims), there was a loophole that allowed Jews to lend with interest to Gentiles. Since then, the rules of all faiths prohibiting interest have generally not been adhered to although within the past 35 years, Islamic finance has begun to provide a way for (primarily although not exclusively) Muslims to adapt the financial system to be structured based on trade like cost-plus sales, leases and joint ventures (the Qur’an distinguishes trade from usury (riba) but does not define in detail what each entails other than that they appear similar to one another).

    I had the privilege of speaking at the Usury-Free Association of North America (UFANA) at the recent conference in Toronto, Canada and while Islamic finance is the most developed “usury-free” financial system, there are many areas where people of all the Abrahamic faiths can cooperate on creating a more just financial system. My interest in Islamic finance (about which I have written extensively since 2006) has been driven in part based on my Unitarian Universalist faith, which emphasizes both social and economic justice, both of which I believe are shared with the Islamic ideals for financial services.

    Posted April 5, 2010 at 1:04 am | Permalink
  3. zulusafari wrote:

    I’ve been aware of the correlation between anti-capitalist and anti-western for some time, but had been a bit ignorant of the anti-Semite connection. Thanks for connecting those dots for me.

    It’s no surprise ‘our’ (West) people or Israel would have been blamed by the ‘enemy’ for both sides of the coin, as it were, both Capitalism and Socialism at the same time. It seems non-western countries & leadership spin anything, as ridiculous as it seems to our ears, sadly their audience is often ignorant.

    Posted April 5, 2010 at 3:04 am | Permalink
  4. Boulolo wrote:

    Yes, but how do we explain Jewish achievement relative to other groups in non “contract intensive” sectors: science, philosophy, classical music and so on?

    Posted April 5, 2010 at 11:27 am | Permalink
  5. William Easterly wrote:

    @captainccs on Twitter raises example of Jesus, says there was no capitalism for Jesus to be pro or con. But what about the money-changers that he attacked? Was Jesus the first in the tradition of the anti-capitalist Jew?

    Posted April 5, 2010 at 11:50 am | Permalink
  6. William Easterly wrote:

    Boulolo, it could fit the story, because after development of modern contract institutions, the Jews’ comparative advantage in trade and finance was lost. 1st generation of Jews who got rich from finance then pushed their children to do what rich parents always push — the professions, the arts, and other prestigious fields… of course, this is just casual story-telling, could use more rigorous research.

    Posted April 5, 2010 at 11:56 am | Permalink
  7. William Easterly wrote:

    shocking anti-Semitic cartoons in Arab world RT @Tobias_B Pic: http://bit.ly/bCiyoz

    Posted April 5, 2010 at 12:56 pm | Permalink
  8. David wrote:

    Jesus also said that if you have two tunics, to give away the one.

    I wonder if Jesus would turn over the tables of the aid agencies at an aid conference? If he would call us a brood of vipers.

    Posted April 6, 2010 at 4:14 pm | Permalink

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