Here are some highlights from this Jerry Z. Muller book:
* Capitalism has been the most important force in shaping the fate of the Jews in the modern world. Of course, one could plausibly argue that it has been the most important force in shaping the fate of everyone in the modern world. But Jews have had a special relationship with capitalism, for they have been particularly good at it.
* In recent decades, economists have added the concept of “human capital” to their kitbag, by which they mean the characteristics that make for economic success. But they prefer to think of it in terms of measurable criteria such as years of schooling. To the extent that human capital involves character traits and varieties of know-how that are not provided by formal education, it becomes methodologically elusive. Much of the reality of economic history, and of the Jewish role within it, is bound to elude those who proceed on the tacit premise that “if you can’t count it, it doesn’t count.” For liberals, the reality of differential group achievement under conditions of legal equality is something of a scandal, an affront to egalitarian assumptions. For it casts a shadow of doubt on the shibboleth of “equality of opportunity.” If it turns out that the ability to take advantage of opportunity is deeply influenced by cultural traits transmitted in the private realm of the family and the cultural community, then inequality of outcome cannot be attributed merely to legal discrimination, nor can it be eliminated by formal, public institutions, such as schools. For nationalists, the fact that modern nationalism had fateful consequences for the Jews precisely because the Jews were so good at capitalism was itself a source of embarrassment. In the late nineteenth and twentieth centuries, many nationalist movements sought to restrict Jewish citizenship and legal equality out of the perception (partly founded) that Jews excelled at capitalist activity compared to their non Jewish countrymen. For many nationalists, in countries from prerevolutionary Russia, to Poland, Hungary, and Germany, the “real” nation was defined in good part over-and-against the Jews. When economic life was conceived of as a zero-sum game, in which the gains of some could only come at the expense of others, the gains of the Jews were made responsible for the psychic or material pains of the “authentic” members of the nation. The extent to which the fellow feeling between gentry, artisans, peasants, and industrial workers was forged in a shared and cultivated antipathy to the Jewish “other” is a part of national history that nationalists would rather forget.
* Jews were associated with trade and with the lending of money long before the rise of a recognizably modern capitalism in the seventeenth century. That association would have ongoing effects. It helps to account for the fact of disproportionate Jewish success under conditions of modern capitalism. In addition, the way in which modern, non-Jewish intellectuals thought about capitalism was often related to how they thought about Jews. Those evaluations in turn affected the ways in which Jews thought about themselves, about their economic role and their position in society. Jewish intellectuals such as Moses Mendelssohn were well aware of this connection, and linked their case for civil equality for the Jews with arguments about the positive function of the economic activities in which Jews were engaged. Yet the disproportionate economic success of the Jews made them a lightning rod for the discontent and resentment that was almost everywhere a product of what Joseph Schumpeter called the “creative destruction” that was part and parcel of capitalist dynamism. By that he meant the displacement of older forms of production, consumption, and styles of life by new forms, created by capitalist innovation. Added to this source of animus was the fact that the development of capitalism went hand in hand with the rise of the modern nation state, which, in much of the Old World, took the form of an ethnic nationalism that defined Jews as outside the national community. That led to new, more modern forms of anti-Jewish animus, rooted less in religious difference than in the resentment of Jewish economic success. And that in turn led a small but salient minority of Jews to embrace Communism, the most radical form of anticapitalism. That embrace had fateful consequences of its own. And finally, it led a growing portion of Jewry to conclude that in an age of capitalism and nationalism, Jews needed a nation-state of their own. Thus the interlocking themes of the four essays that make up this book, which traverse the boundary between general and Jewish history, and between intellectual, economic, and political history. They aim to show the relevance of the experience of the Jews to the larger themes of modern European history: of the development of capitalism, Communism, nationalism, and fascism.
Jews thus had a cultural significance, a radioactive charge, that was not characteristic of merchant minorities elsewhere. It was the confluence of their religious status as tolerated but despised outsiders, together with their economic role as merchant minority, that was so fraught. The association of the Jews with the lending of money at interest was only possible because they were beyond the community of the saved. And the association of money with a theologically stigmatized minority cast an aura of suspicion around money and moneymaking. Had there been no Jews in Europe, the spread of capitalism would still have led to anticapitalist movements as well as to nationalist ones. But the Jews’ premodern commercial experience, together with their emphasis on literacy, predisposed them to do disproportionately well in modern capitalist societies, where success increasingly depended on commercial acumen and book-learning. Anticapitalist thought would stigmatize capitalism by borrowing the conceptual categories of Christian anti-Semitism and the traditional condemnation of usury, of making money with money. The attempt of European states to modernize—which meant becoming literate, capitalist societies—gave rise to ethnic nationalism, which once again conceived of the Jews as outsiders.
* In the face of their increasing exclusion from the ethnically defined community of the nation, Jews responded in three ways. They migrated to countries in which nationalism was defined liberally, rather than by religious or ethnic criteria. That meant, above all, emigrating westward from Russia, where the great bulk of world Jewry was located as of 1880—westward to Austria-Hungary, to Germany, to France and to Britain, and above all, to the United States, until it closed its doors to further mass immigration in 1924. In liberal countries—even in incipiently liberal countries, like the late Habsburg Empire—Jews tended to embrace liberalism, and a program of integration into the dominant culture. While some hoped for complete assimilation and amalgamation, by and large Jews sought to acculturate to the host society without complete assimilation.3 But the border between liberal forms of nationalism and illiberal, ethnic forms was a shifting one, and Jews repeatedly discovered that liberalizing and welcoming political cultures could turn illiberal and hostile. That is what happened in Hungary, Austria, Germany, France, and even, though in a more diluted manner, in the United States. The second response of Jews was therefore to embrace socialist movements that promised to end invidious distinctions based on origin. Most socialists attributed the hold of antiSemitism to capitalism itself, so that eliminating capitalism was understood as a formula for eliminating anti-Semitism. The most radical and uncompromising of these movements was Communism. The third major response, by Jews who remained committed to some form of Jewish continuity, was Zionism.
* Jews and capitalism have long been linked in the European mind. Ever since the Middle Ages, Jews were associated in the Christian West with the handling of money. It is no wonder, then, that the intellectual evaluation of an economy in which money played a central role was often intertwined with attitudes toward Jewry. Jews in Christian Europe were permitted by the church to engage in the stigmatized activity of lending money at interest precisely because they were regarded as outside the community of shared values. For a variety of intellectuals in modern Europe, Jews served as a kind of metaphor-turned flesh for capitalism.
* To our ears, the term usury is likely to sound archaic—a long-discarded conceptual relic of the ancient and medieval past. And so it sounded to many eighteenth-century ears as well. From John Calvin in the sixteenth century through Francis Bacon in the early seventeenth, lending at interest came to be increasingly portrayed as legitimate and necessary, if in need of restriction. John Locke inveighed against the possibility and desirability of setting a legal limit on the rate of interest in Some Considerations of the Consequences of the Lowering of Interest, and Raising the Value of Money of 1691. By the time we reach the age of David Hume, Adam Smith, and Jeremy Bentham in the eighteenth century, the legitimacy of lending at interest is taken entirely for granted…
* For Montesquieu, commerce had positive effects on culture and character. He famously asserted that “commerce combats destructive prejudices, and it is almost a general rule that wherever there are gentle manners (moeurs douces), there is commerce, and that wherever there is commerce, there are gentle manners. Therefore, one should not be surprised if our mores are less fierce than they were formerly. Commerce has spread knowledge of the mores of all nations everywhere; they are compared to each other, and from this comparison arise great advantages.”2 Montesquieu drew a direct line between the stigmatization of usury and economic backwardness. He regarded the decline of commerce in the Middle Ages as one of the great misfortunes of European history. And he attributed that misfortune to the interpretation of usury by medieval Catholics theologians. “We owe all the misfortunes that accompanied the destruction of commerce to the speculations of the schoolmen,” he wrote.
* Montesquieu attributed the rise of civilization and good government in modern Europe to the Jews. For by creating bills of exchange, Jews managed to make their valuables intangible, putting their wealth beyond the oppressive hand of princes. Deprived of the ability to gain income by squeezing the Jews who in turn had squeezed the populace, princes were forced by circumstances to govern more prudently, since only good government would bring prosperity. That in turn set the stage for the rebirth of European commerce, and with it the beginning of the decline of prejudice and the rise of a more gentle, less ferocious way of life.
* In Catholic countries, usury was condemned the long shadow of usury in both canon and civil law until well into the eighteenth century, and remained an object of obloquy even later… By the mid-nineteenth century, the Vatican advised faithful Catholics who retained qualms about lending at the legal rate of interest not to worry about its effect upon their souls, but left the theoretical basis for this change of heart undecided.
Yet whether the lending of money at interest was illegal in theory and subverted in practice (as in Catholic countries), or legal in theory and practice up to some limit (as in Protestant countries), the odium of the traditional connotations of usury and its connection to Jewry lingered. In the popular mind, usury was not confined to lending at interest: it was a term of opprobrium applied to any mercantile transaction regarded as unseemly or inequitable.
Underlying the condemnation of merchants and moneylenders was the assumption that only those whose labor produced sweat really worked and produced.
* Nowhere was the intellectual exploration of the origins, nature, and moral significance of capitalism pursued with greater intensity than in Germany at the turn of the twentieth century. At its highest levels, it took the form of a three-way debate between Georg Simmel (1858–1918), Max Weber (1864–1920), and Werner Sombart (1863–1941). The role of Jews and of fi nance were central to the debate, either explicitly or implicitly. Much of the stimulus for the debate came from Simmel’s remarkable work The Philosophy of Money, published in 1900. A religious outsider by familial origin but a religious insider by upbringing (his ancestors were Jewish, but his parents had converted to Lutheranism), a member of the upper middle class living at the cultural and commercial crossroads of German life, fl uent in French and cosmopolitan in orientation, Simmel was keenly sensitive to the burgeoning possibilities of modern life.48 Simmel explored the psychological effects of living in an economy in which more and more areas of life could be measured in money. Such an economy created a mind-set that was more abstract, because the means of exchange were themselves becoming ever more abstract. Exchange had begun as barter, the very tangible giving of one thing for another… With the development of credit, money becomes more abstract still, little more than a bookkeeping notation.49 Through constant exposure to an abstract means of exchange, individuals under capitalism are habituated to thinking about the world in a more abstract manner. They also become more calculating and more used to weighing factors in making decisions. Where one is dependent on the market for almost everything from food to entertainment to medicine, decisions about how to live become decisions about what to buy; choices about how to live better become choices of how much of one thing to trade off for another. Because each of these decisions requires calculations of more or less—if I pay more for item X, I’ll have less left over for item Y—people in a money economy become acclimated to thinking in numerical terms. This numerical, calculating style of thought spills over into more and more personal decisions. Life becomes more cool and calculated, less impulsive and emotional.50 Life in a modern, money economy, Simmel stressed, is characterized by ever greater distances between means and ends. Determining how to attain our ends is a matter of intellect: of calculation, weighing, comparing the various possible means to reach our goals most efficiently. Thus intellect, concerned with the weighing of means, comes to play an ever greater role.
* For competition was not a relationship between those who competed only, it was a struggle for the affection—or money—of a third party. To compete successfully, Simmel noted, the competitor must devote himself to discovering the desires of that third party. As a result, competition often “achieves what usually only love can do: the divination of the innermost wishes of the other, even before he himself becomes aware of them. Antagonistic
the long shadow of usury tension with his competitor sharpens the businessman’s sensitivity to the tendencies of the public, even to the point of clairvoyance, regarding future changes in the public’s tastes, fashions, interests.” And the competition for customers and consumers had a highly democratic aspect as well. “Modern competition,” Simmel observed, “is often described as the fight of all against all, but at the same time it is the fi ght of all for all.” Thus, he concluded, competition forms “a web of a thousand social threads: through concentrating the consciousness on the will and feeling and thinking of fellowmen, through the adaptation of producers to consumers, through the discovery of ever more refined possibilities of gaining their favor and patronage.”51 In The Philosophy of Money and in his other works, Simmel explained that the development of the market economy made for new possibilities of individuality. Simmel suggested that the limited-liability corporation was a model for many characteristic forms of association under advanced capitalism, in which individuals cooperate with a limited portion of their lives for common but limited purposes. Compared to the precapitalist past, in which individuals lived most of their lives in a single, circumscribed community, modern life was based upon looser more temporary associations, founded to pursue specifi c economic, cultural, or political interests, and demanding of the individual only a small part of himself, sometimes only a monetary contribution in the form of dues. As a result, the modern individual can belong to a greater range of groups, but groups that are looser and less encompassing. Thus Simmel concluded that “money establishes incomparably more connections among people than ever existed in the days of the feudal associations so beloved by romantics.”52 In contrast to earlier forms of association, modern groups allow for participation without absorption. They make it possible for the individual to develop a variety of interests and to become involved in a wider range of activities than would otherwise be possible, yet to do so without surrendering the totality of his time, income, or identity to any particular association, from the family to the state.53 For Simmel, the eclipse of “community” was not a source of nostalgic lament: it presented new possibilities, along with potential pitfalls. He highlighted the development of a new form of individuality promoted by the market economy, an individuality based on choice from among the many cultural spheres and social circles created by the capitalist market.
* In a lecture first delivered in 1972 entitled “Capitalism and the Jews,” Milton Friedman, the distinguished libertarian economist and defender of the free market, presented what he regarded as a paradox: the Jews “owe an enormous debt to free enterprise and competitive capitalism,” but “for at least the past century the Jews have been consistently opposed to capitalism and have done much on an ideological level to undermine it.”1 Friedman argued that the element of capitalism that has most benefited the Jews is free competition. Free competition counteracts the forces of anti-Semitic prejudice. For under conditions of free competition, ethnic or religious discrimination puts the discriminator at a competitive disadvantage. The customer who buys from the baker that shares his race, or ideology, or religion, rather than from the baker who produces the best bread at the cheapest price, pays a premium. The law firm that hires only lawyers of the traditionally dominant ethnic group eventually finds itself losing more cases and more clients to firms who hire the best and brightest lawyers, regardless of origin. The use of such discriminatory criteria, Friedman argued, is most likely to occur under conditions of monopoly, governmental or private, where the quest for comparative economic advantage is less acute. In a more competitive market, by contrast, prejudice becomes more disadvantageous. Hiring the less qualified, or buying from the less efficient producer because buyer and seller share some cultural trait, will eventually lead to bankruptcy.
* The notion of revealed preferences is that we discover what people want not from what individuals say but from what they do.
* Jewish immigrants [to the United States] came with even less capital than most turn-of-the-century immigrants; they went into an industry with the worst working conditions and with low wages. Yet a substantial number of first-generation immigrants moved from the ranks of workers to entrepreneurs, first in the clothing trades, and then beyond. By the second generation, they had moved into other forms of retailing, and then into real estate and the professions.9 As laborers, Jews were active in trade unions, but they did not think of themselves as part of a transgenerational working class: on the contrary, they wanted something different, for themselves if possible, and certainly for their children. During the era from 1880 through the 1920s, when a high percentage of Jewish immigrants in America were employed in the needle trades, one of the most striking phenomena was their high rate of mobility from hourly and piecework into management and entrepreneurship.10 Compared to most immigrant groups, and indeed to most native Americans, they had an abundance of commercial skills, drawn either from their own experience in commerce or from sustained contact with businessmen.11
In many regions of the United States, Jews began as peddlers, the lowest rung on the entrepreneurial ladder, and then moved up to shop-owning and other forms of retailing, before they too made the transition to real estate and the professions.12 In thinking about Jewish economic success across generations, an important factor was that Jews were not inclined to maintain the economic status quo in a particular inherited craft, but rather to find market opportunities in a changing dynamic economy. For economic success depends not only on a sensitivity to where economic possibilities are opening up, but also on the willingness to abandon a declining economic sector. Jewish economic success across generations was predicated on a readiness to leave the clothing business behind as its potential decreased.13 Thus, by the early decades of the twentieth century, Jews had returned to the disproportionate involvement in trade and commerce that had been their pattern from the High Middle Ages through the early nineteenth century.
* Compared to Christianity, Judaism was more favorably disposed toward commerce.
* Talmudic law—which educated Jews continued to study and refine through the ages— was replete with debates about economic matters, including contracts, torts, and prices. Unlike Christianity, Judaism considered poverty as anything but ennobling. “Nothing is harder to bear than poverty,” says the Talmud, “because he who is crushed by poverty is like to one to whom all the troubles of the world cling and upon whom all the curses of Deuteronomy have descended. If all other troubles were placed on one side and poverty on the other, poverty would outweigh them all.”19 The more favorable Jewish valuation of commerce, compared to Christianity, was due in part to the more favorable Jewish attitude toward the natural passions, which involved a greater emphasis on family and marriage as well. As opposed to the Augustinian view of original sin as the basis of concupiscence (sexual lust), the Talmud, in a famous passage, speaks of “the evil inclination,” the yetzer hara as the basis of both family and commerce.20 Commerce, then, like marriage, was natural and providential.
* As the Catholic theologian Michael Novak has rightly noted, “Jewish thought has had a candid orientation toward private property, commercial activity, markets, and profits, whereas Catholic thought—articulated from an early period chiefly among priests and monks—has persistently tried to direct the attention of its adherents beyond the activities and interests of this world to the next.”
* If Jews did not glorify poverty, neither did they sanctify the attainment of wealth or value physical labor for its own sake. The great halachists (rabbinical authorities) called on men to devote as little time as possible to their occupation, in order to devote more time to study. They therefore preferred commerce to crafts, on the grounds that it was less timeconsuming.23 The suspicion of merchants and commerce so prominent in the Christian tradition was lacking among Jews.24
