Capitalism and the Jews, by Jerry Z. Muller (Princeton, 272 pp., $24.95)

In a 1972 lecture, “Capitalism and the Jews,” Nobel laureate Milton Friedman presented a paradox: Jews “owe an enormous debt to free enterprise and competitive capitalism,” he said, 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.” According to historian Jerry Muller, Friedman’s paradox may make for a great headline, but it cannot be substantiated. Only the first premise is true—there is little doubt that capitalism has benefited Jews. And as Muller shows, there is equally little doubt that Jews have excelled at developing capitalism in the West.

In his new collection of essays, Muller concurs with Friedman in explaining how free markets counteract anti-Semitic prejudice by putting it at a competitive disadvantage. A law firm that hires only lawyers of the dominant ethnic group will lose clients to a firm that hires the best lawyers, regardless of origin. As economist Thomas Sowell has demonstrated, discrimination is most likely to occur under conditions of monopoly; in a more competitive market, prejudice becomes disadvantageous.

Jews have thus benefited from capitalism, which explains why their liberation in Europe and America occurred in direct relation to the progress of the market. Muller adeptly shows how in the nineteenth century, Jews were oppressed where capitalism didn’t exist, such as in Russia and the Ottoman Empire. But they could escape oppression in Western Europe, where the free market was replacing public and private monopolies. Still more welcoming was America, to which Jews migrated in large numbers because it was simultaneously the land of free-market opportunity and freer of anti-Semitism than Europe.

Why have certain ethnic minorities benefited more from capitalism than others? Muller tries to avoid generalization, but he can’t escape the fact of Jewish success within the capitalist system. Muller argues that Jews were well-positioned to succeed at capitalism; they’d shown a preference for market-oriented occupations going back to the Middle Ages. Along with most historians, Muller traces Jews’ “commercial propensities” to the legal and political environment of medieval Europe: Jews had no choice but to become moneylenders or peddlers, as landowning was usually denied to them. They retained these pursuits into the modern period, and added a taste for the liberal professions (law and medicine) that depended on advanced education. Jewish religious education, too, played a role. The Talmud, unlike the Christian tradition, encourages commerce. Muller quotes the praise of commerce by Talmudic authorities in Lithuania—well-known among practicing Jews, though not among secular Jews or non-Jews—and he argues that commerce gave the Jews more free time to read the Talmud than other trades could. It is thus no surprise that in the 38 years the Nobel Prize for economics has been awarded, it has gone to an economist of Jewish origin 22 times.

But what about Friedman’s contention that Jews were ideologically opposed to capitalism? Were Karl Marx and Leon Trotsky Jews only by coincidence? Muller sees two cultural reasons why Jews were so active in the beginnings of European socialism. For many, socialism represented a break with the past, an escape from the world of the ghetto into a world of post-ethnic comradeship. Also, some Jewish socialists sought, in the Jewish tradition, to reconfigure socialism into secular messianism. Marx, for instance, saw Communism both as the Brotherhood of Man overcoming the ghetto and as the underpinning of a workable messianic age.

Still, Friedman was wrong to confuse the high visibility of Jewish socialists with their number, which was actually modest. In 1920, Winston Churchill, no anti-Semite, made the same mistake when he described the Bolshevik revolution as “the schemes of international Jews.” True, many Russian Communists were of Jewish origin—but “most of the Communists were not Jews,” writes Muller, and “most of the Jews were not communists.” In the 1920s, 95 percent of the Russian Communist Party’s members were non-Jews.

Moreover, since the Enlightenment, many more Jews have promoted democracy and free markets than socialism. It’s true, Muller concedes, that “leading socialist intellectuals were of Jewish origin—but then, so were leading proponents of capitalism.” Since Ronald Reagan’s conservative revolution in the United States, Jewish intellectuals have been leading voices for market-oriented policies: Gary Becker, Richard Posner, Irving Kristol, and others, including Friedman himself. In England, Margaret Thatcher’s leading advisors were Keith Joseph and Leon Brittan, both Jewish. Because Jews are overrepresented in intellectual professions, they tend to be prominent as ideological spokesmen of almost every political tendency.

Instead of the Friedman paradox, one is tempted to raise another, more compelling one, which Muller alludes to: Jews have been simultaneously ardent propagators of socialism and the targeted victims of socialism. Trotsky was the organizer of the Bolshevik Revolution, and anti-Semitism became a pillar of the Stalinist regime in Russia and Eastern Europe. In 1918, the chief rabbi of Moscow is said to have told Trotsky (born Bronstein): “The Trotskys made the revolutions, and the Bronsteins pay for it.” In Russia, this history keeps repeating itself. Today, many Russians are persuaded that the Bolshevik Revolution was a Jewish plot, and because many of the new tycoons are Jewish, capitalism is accused of being a Jewish plot as well. Around and around we go.


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