Jewish History Paper

8/8/2019 Jewish History Paper

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Ahmed Abdel Latif 260306836

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The JewishInfluence on the Rise of Capitalism

In this paper I will be analyzing the influence of the Jews on the rise of capitalism. I

will be looking at their innovation in market mechanisms as more technical analysis

of their influence on capitalism, and then I will be looking at the aspects of Jewish

religion in comparison with others religions thatallowed them to become pioneers

in the formation of the capitalist structure that exists today. Mainly, I will be looking

at Sombarts book for the technical attributes to capitalism by the Jews, and for the

next part I will be looking more closely at Webers counterpart that Puritanism with

its teachings brought about the spirit of Capitalism.

To understand the Jewish influence on trade and commercialism first we have to see

the elements that allowed those stateless aliens to receive such high status inconsumerism and usury in Western Europe. Jews in Europe were ubiquitous in

wine trade, especially in Germany. Their prominence in viticultural trade gave themgateways to power, in medieval Europe. According to Soloveitchik the sums at risk

in viticultural credit were to large, the prospective profits too great and Jewish

expertise too long and well established for there persecutors to forgo it(Soloveitchick, p. 302)This influence, again according to Soloveitchik, is what made

the Jews accumulate the capital that they did and become pioneers in moneylending, if the credit extended to vititculture paved the way in Germany for the

eventual Jewish concentration in moneylending, a profession that shaped in no

small measure the fate of the Jews in the coming centuries and their image for close

to another millennium (Soloveitchick, p. 303)

There are certain fundamental elements in modern day financial markets that

enable any individual to invest or to participate in the capitalist system. First I will

look at the Jewish influence on these elements that enable global transactions to

take place. These elements are

I. Monetary System for producing bank-credit moneyII. Market exchange, and

III. Production of commoditiesFirst, the fundamental aspect of todays financial market is the credit system. It

enables the funding, expansion and reinvestment of individuals, businesses andorganizations. Standardization of credit, is the most essential part of the modern

economic system, whereby debt became impersonal, where before human beings

directly acted and reacted on each other (Sombart, p. 42), a system came to life.

This viable monetary system, enabled a new form of market exchange, wherebybuyers and sellers were bound to a market price depending on the supply and

demand of commodities. This form of standardization cannot be attributed to a

group, in our case the Jews, without making some reasonable assumptions.

Here Sombart looks at the different means by which credit was available, and linked

them to the Jews, so that he can highlight the Jewish influence on this fundamental

aspect of capitalism.


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The bill of exchange

A promissory note for a specified payment written out to a person that enabled

financiers to lend out larger sums of money, which could be bought and sold on a

market like any other asset. The proclamation of Amsterdam January 24 1651 was

the first legal recognition of the bill of exchange. Sombartargues, all bill-broking in

the Adriatic city in the 16th century was in their (the Jews) hands. (Sombart, p.

54)Sombart also links the idea that bill endorsements were present in the fairs of

Genoa, which was largely controlled by the Jews.

Securities

In their earliest form, they were certificate of membership of a company, and shareswere sold only to people with close relationships with the company, i.e. shares were

not public. Here Jewish influence, according to Sombart, was in the standardizationof what was purely a personal relationship between the holder of stock and the

company in which he participated and responsible for the change from securities

of differing amounts to those of equal value (Sombart, p. 68)Sombart here has nosolid proof for his argument except that Jews were speculators, and that their

influence as speculators pressured the change and the standardization of securities.

Banknotes

Here Sombart is concerned with the standardization of banknotes; The first

permission to establish a bank was granted to two Jews in 1400. (Sombart, p.

69)Another weak argument by Sombart, a mere speculation on his behalf, to link the

Jews to the modern financial system.Nonetheless, there is still Jewish presence

evident in the banking realms.

Public Debt Bonds

The stateless Jews at the time, were obviously not directly linked to issuing publicbonds, but to again to their standardization. Indirectly the Jews were, in all

likelihood the originators of these species of credit instrument, more specifically ofmortgage deeds (Sombart, p. 71)due to their interest in advanced money lending to

plantation owners on security of their plantations. These mortgage deeds were

bought and sold on the Stock market just like public bonds.

Second, with these elements in place, trading took a complete new form, now notonly consumer goods were the only commodities available on the market, but alsobills, securities, banknotes and bonds were available for trade as regular

commodities, whereby the market mechanisms of supply and demand determined

their price. Market exchanges existed long before the standardization process, but

their expansion and their effectiveness depended heavily on a money producing

banking system. This brings about the influence of the Jews on the market system of

exchange.


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This market system depended heavily on regulation by governments, through

property right laws and the creation of markets whereby stocks can be bought and

sold. According to Sombart,the origin of the Stock Exchange dealing most likely

began with the associating of bill brokers. (Sombart, p. 83)This business was

regarded as a Jewish specialty in cities such as Venice, Amsterdam, Frankfurt,

Hamburg, Vienna and many other towns as early as the 16th

century and evenarriving as far north as Stockholm in the early 19th century. Sombart links their

dominance and monopolization of the bill broking trade to the creation of the Stock

Market.

Third, Jewish occupations were not solely attributed to monetary exchange, butthere is evidence in Jewish participation in the production of commodities, such as

tax and customs farming, coin minting to government order, the exploitation ofmines, the operation of distilleries and the production of potash (Katz, p. 38)There

is also evidence in their participation as as army supply contractors, in textile mills,

tanneries or distilleries (Khan, p. 85)in tsarist Russia.According to Katz There wasonly one area vital to economic development in which the Jews did have a

particularly important role-namely the mobilization of monetary reserves. (Katz, p.40)This mobilization of funding and extension of credit allowed the production of

commodities to grow on a larger scale.

We can see Jewish influences on these fundamental mechanisms that act as a base

for the modern financial markets, but we can see no clear or distinct order or decree

issued by a Jew himself. At the time Jews did not have a state of their own, but

operated through various states, which gave them the versatility to move from oneplace to another and operate through the worlds financial capitals. But it also meant

that they were constrained by the laws of other states, and could only operate

within their realms. This also meant that they had no army of their own, which

meant they needed the protection of others over their trade and investments. This

came about through the creation of property rights, patents and insurancecompanies. North and Thomas argue that with the expansion of trade, the cost of

ensuring property rights became more inexpensive thus feasible for states. Thisform of security enhanced global trade. 1And although the Jews were prominent in

the worlds financial system and in trade, these privileges and mechanisms were

granted to the Jews by state. These states were not oblivious to the practicality and

1Economic growth will occur if property rights make it worthwhile to undertake socially productive Thecreating, specifying and enacting of such property rights are costly, in a degree affected bythe state of technology and organization. As the potential grows for private gains to exceed

transaction costs, efforts will be made to establish such property rights. Governments take over theprotection and enforcement of property rights because they can do so at a lower cost than private

volunteer groups- pg. 8 The Rise of the Western World North, Douglass and Thomas Robert P.

Cambridge University Press, 1973


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impacts of such elements. So they had to be backed up by some movement, or spirit,

that allowed these changes to take place.

Where does such a movement or set of teachings arise? Most scholars and educated

men at the time were religious, whether Christian or Jewish. Religion, is power,therefore some religious movement must have taken place to allow this new

realization of immense profits.One the one hand we have Max Webers connection

between Puritanism and Capitalism, and Sombarts argument that that which is

called Puritanism is in reality Judaism (Sombart, p. 192)and he even goes as far as

saying I think the Jewish religion has the same leading ideas as Capitalism, in fact it

is Capitalism (Sombart, p. 205)

For Sombart, Capitalism is all about Rationalism or Intellectualism. He believes that

mysticism in other religions such as Christianity, Hinduism and Islam, all havemystical elements that weaken people because of their reliance on these mystical

elements, unlike Jews who are rational; it banned all pictorial art from its cult

(Sombart, p. 208)Their persecution for centuries, their expulsion from the Holy

Land, and then from country after country made Jewish History one full of strife,

hard work, fear of loss, that in a sense shaped the very forms of who they are today.

Capitalism needed a strong legal foundation, where the relationship between buyer

and seller had to be based on some sort of law that provided protection for each

other. According to Sombart the same relationship that now exists between state

and business, exists between Jehoavah and his chosen people, a contract with all its

consequences and all its duties. (Sombart, p. 209)This relationship between man

and God, is what shaped the Jews to have a sense of loss and gain and a complicatedsystem of bookkeeping (Sombart, 1913, p. 208) Also another connection made by

Sombart where religion is linked to profit is the selling of the Scrolls of the Ark to

the highest bidder. This argument is weak, since every religion has charged some

sort of fee at any point in history.

This relationship between man and God demanded of the Jew that he obeys the law

and to be holy. In that sense Religion became the law for the Jews and their stronglygrounded moral and ethics. This relationship that shaped the Jewish people, made

them rational beings is the basis for economic success. Capitalism, could only

develop with that rational mindset, and the Jews through their laws and teachings

already possessed this mindset, therefore they were more capable ofunderstandings the mechanisms of Capitalism, and becoming pioneers in that field;

before capitalism could develop the natural man had to be changed out of all

recognition, and a rationalistically minded mechanism introduced in his stead.

(Sombart, p. 238)Thus the Jewish religion for the Jews increased and heightened

(Sombart, p. 238)their capitalistic mindset.


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For Weber, the protestant reformation did not mean the abolishment of religion

from everyday life, but the substitution of a new one. The reformation removed the

burden of having the church penetrating the private and the public life. It gave way

for state to overpower the Church, so that economists and politicians, not

clergymen, can make decisions. The sort of education obtained by the Protestants

was that of industrial and commercial occupations as opposed to Catholics seekinghigher education. Weber describes the Protestants with more of a profit seeking

than the Catholics either eat well or sleep well, in this case the catholic prefers to

sleep well. (Weber, p. 18)

Weber pinpoints labor as a key component to the formation of the capitalist system.

For him the connection of adaptability to capitalism with religious factors may have

come about in the days of the early development of capitalism (Weber, p. 30)He

agrees with Sombart that the development of rationalism is the standpoint from

which capitalism is generated. The rational man is necessary to capitalism (Weber,p. 39)The reformation and its doctorines were for purely religious motives

(Weber, p. 45)it did not look to introduce social reform or cultural ideals. Thereforethere is the notion here that as man becomes rational, he looks for security, and

security comes in the form of money.

In conclusion, it is evident that Weber believes that Capitalism was brough about by

a change, or a movement in the learnings and teachings of the Puritans. For

Sombart, it is the Jewish religion and the Jewish law. It is obvious that the Jews at

the time were very prominent in the moneylending business, undoubtedly the

leading men when it comes to financial matters. Sombart argues well that the Jewish

religion in a sense promotes the spirit of rationalism, and for Weber also this is a

key factor in the formation of Capitalism. They both agree that rationalism, or rather

Sombart agrees with Weber, and that these elements are both found in Puritanism

as well as Judaism. Therefore Judaism, plays a big role in the formation of the worlds

capitalist system, but we have to distinct that the Jews, although pioneers, could

have been expelled easily, rather they were welcomed by monarchs due to theirprominence in the circulation of the money supply. The reformation, and the moving

away from the catholic church were the first signs of rationalism, for Sombart, theJews always had it, and it was this element that made them play a big role in the

formation of the world today.

Bibliography

Katz, J. (1993). Tradition and Crisis Jewish Society at the end of the Middle Ages . NewYork: New York University Press.

Khan, A. Essays In Jewish Social and Economic History. Chicago: University of ChicagoPress.

Soloveitchick, H. Halakhah, Taboo and the origin of Jewish Moneylending in Germany.

New York.


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Sombart, W. (1913). The Jews and Modern Capitalism . New York: Burt Franklin.

Weber, M. (2009). The Protestant Ethic and the spirit of Capitalism . New York:

Norton and Company.

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Jewish History Paper