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Anti-Semites claim that Jews are habitually greedy, or even that they stand at the center of a global conspiracy – a caricature later applied to Chinese in the person of Sax Rohmer’s fictional Fu Manchu. But the fact is that Jews historically have been good at money. The Chinese make a great deal of this ability. The English journalist Clarissa Sebag-Montefiore noted this interest in The New York Times:
“Most Chinese will think Jews are smart, clever or good at making money, and that they have achieved a great deal,” Professor Xu Xin, director of the Institute of Jewish Studies at Nanjing University (one of over half a dozen centers in
China dedicated to studying Judaism) told me …
“Revelations of Jewish People’s Wisdom,” an account on China’s largest microblog site, Sina Weibo, has nearly one-and-a-half-million fans. Its revelations include: “Make a fortune under adverse circumstances.” This logic – that the Jews are admired for their success despite their small numbers and historical oppression – has also led to a burgeoning industry of self-help books that use Jewish culture and the Talmud to preach business tips.
This sort of praise makes Jews uncomfortable, given the ugly history of European Jew-hatred. It shouldn’t. Chinese admiration of Jewish business skills carries no stigma. On the contrary: it begs an explanation.
Jews have a talent for finance, and several reasons are cited for it. During the Middle Ages Jews lent money when the Church forbade usury. Jews were outsiders, often forbidden to own land, who had to develop other means of making a living. In his 2010 book Capitalism and the Jews, Jerry Z. Muller observes that Jews had a towering advantage in international trade during the Middle Ages because they had international law: a judgment issued by a rabbinical court in Yemen would be valid for Jewish merchants on the Rhine.
Something more fundamental,though, explains Jewish success in finance. Like overseas Chinese in Asia or Greeks and Armenians in the old Levant, Jewish immigrants developed trading skills that became embedded in their culture and countless jokes (ask a Jewish first-grader to add two and two, and he’ll reply, “Is that buying or selling?”). But there is nothing uniquely Jewish about this. The same jokes are told about Greeks and Armenians.
Jews distinguished themselves in finance in an entirely different way during the Industrial Revolution. They played a central role in the new government debt markets that followed on the Napoleonic Wars and made a modern economy possible. Bankers like the Rothschild, Mendelssohn, Bleichroeder, Warburg and Seligman families pioneered the new capital markets. Bonds issued by European governments provided a secure long-term store of value, and set a precedent for financing the great projects of the era: railways, canals, and other infrastructure basic to modern industrial society. This was not the mercantile economy of the preceding two centuries, where the basic unit of capital was the bill of exchange in trade, but an industrial economy that required long-term investment to achieve lasting gains in productivity.
Something other than mere trading skills was required for an investment-driven economy, and that was long-term credit, a concept that derives from the Latin credere, “to believe.” It is not an exchange of one peasant’s eggs for another peasant’s barley, or Mexican silver for Chinese silk, but rather a commitment of the savings of whole populations to grand ventures that would pay interest because they drove growth.
Capital markets, moreover, create a kind of democracy. If the whole of society relies on the public debt as a store of value, the value all the savings of society is gauged directly or indirectly against the benchmark of public debt. But that also puts power in the hands of the market: the market has the power to tell the government whether it is doing well or badly, by selling or buying the public debt. It is not simply that the government creates a market that provides convenience and advantages to the people: it becomes dependent on the people’s faith in its policies. When that faith is shaken, as in southern Europe two years ago, and confidence flees the government debt market, the result can be catastrophic. Free capital markets require governments to win the faith of the people.
Capital markets require belief in the viability of investments, trust among counterparties, and faith in the future. It is fitting that Jews created capital markets, because the Jews invented faith. The secret of Jewish success in public finance is to be found in the Jewish encounter with the divine. The gods of the pagan world did not require faith. The gods simply were there, as much as the natural world which they personified. The “god-infested world” (Gilson) of the pagans was simply the natural world as it presented itself to man, with all its arbitrariness and cruelty. To the extent that gods demanded loyalty, it was in their capacity as the patrons of a particular policy protected by that god, for example, Athena in the case of Athens.
Nowhere in the pagan world, though, do we encounter a God who could instruct Abraham to leave his homeland and his father’s house, and betake himself to a place which God would later show him. Never do we meet a God who offers his laws (the Torah) to a people, as YHWH did at Mount Sinai, and ask that people’s free assent to accept these laws. In no other instance do we hear of a single, universal creator God who enters into a covenant of mutual obligations with humans. That is the origin of faith, emunah in Hebrew, meaning loyalty as well as belief. The Jewish concept of emunah implies not only that we conceive something to be true, but that we also must be steadfast in acting according to that truth.
That is the Jewish genius: to be able to inspire faith (or what is usually called “confidence” in markets) to make possible long-term investments in capital markets involving millions of participants. The investors in a bond or stock issue are not linked by ties of family or personal loyalty, but rather by contract, law and custom. Their obligations extend beyond the ancient loyalties of family and clan. That may seem obvious on first reflection. But most countries in the world lack functioning capital markets, because faith is absent. The public does not trust the government to enforce contracts, or the management of a company not to steal money. That is emphatically true in China, which is struggling to create modern capital markets rather than depend on state banks and shadow financing. In backward countries, trust is inconceivable outside the narrow circle of blood relations. Firms remain small because trust is restricted to family members.
That is what Chinese can learn from Jews about business. The Jews have no special aptitude for trading. But we have a special gift for promoting the rule of law and public and private institutions which promote credit, that is, faith in future outcomes and the fair treatment of market participants. In the absence of faith, there never will be enough lawyers to enforce contracts, or policemen to arrest embezzlers, or watchdogs to extirpate government corruption. Something more fundamental is required: a sense that the law is sacred, and if any of us breaks the public trust, all of us are damaged. Our rabbis of antiquity said, “All of Israel stands surety for each other.”
Adam Smith’s invisible hand isn’t enough. Capital markets require more than the interaction of self-interested individuals: they require a common sense of the sanctity of covenant, of mutual obligations between government and people, and between one individual and the next. That is why the United States of America is the most successful nation in economic history. It was founded by devout Christians who hoped to construct a new nation in emulation of ancient Israel.
Jews are no longer particularly prominent in banking, to be sure. Israelis are more interested in the frontiers of technology than in financial markets. The paranoid perception of a Jewish banking conspiracy has faded because so few of the old Jewish banking houses are still in business. The ones that remain, like Rothschild, have little influence. But the Jewish idea that contributed to modern banking remains as powerful as it was in the past. That should be of special interest to the Chinese.
Spengler is channeled by David P. Goldman. He is Senior Fellow at the London Center for Policy Research and Associate Fellow at the Middle East ForumHis book How Civilizations Die (and why Islam is Dying, Too) was published by Regnery Press in September 2011. A volume of his essays on culture, religion and economics, It’s Not the End of the World – It’s Just the End of You, also appeared that fall, from Van Praag Press.