Judaism, Christianity and Capitalism

Judaism, Christianity and Capitalism

A historian has recently reminded us that the early -- 17th century -- Puritans in Massachusetts were seriously opposed to capitalism. For one thing, they disapproved of lending out money with interest. The entire finance and banking business was not allowed in Massachusetts. They also disapproved strenuously of selling goods for, as we say, "what the market will bear." We are used to selling goods at the current market price which depends on demand. If the goods you sell are scarce you can charge more. But according to the Puritans, that was extortion. When you sell as high as possible you take advantage of the needs and urgencies of the buyers. The baker who raises the price of bread in times of famine enriches himself at the expense of his hungry neighbors. When gasoline is in short supply and the oil company raises the price of gasoline for people who need to get to work, it takes advantage of the needs of their customers. So thought the Puritans.

Today, by contrast, our children learn in their introductory college economics class that prices are set by supply and demand. The Puritans were willing to admit that many merchants follow supply and demand to set their prices, but they also were quite unambiguous about their moral condemnation of that practice. But that part is not mentioned in Econ. 101.

The Puritans did not invent these condemnations of lending out money at interest or of charging as high a price as the market will bear. They based themselves on scriptural injunctions in the Old and the New Testament.

Deuteronomy 23:19 forbids lending money (or anything else, such as food) with interest to fellow Israelites, but permits lending with interest to strangers. Similar injunctions can be found elsewqhere in the Old Testament.

The New Testament also has much to say about economics. Perhaps the most famous is Matthew 19: 21-24: "If you wish to be perfect, go, sell what you have and give to the poor, and you will have treasure in heaven. . . . it will be hard for one who is rich to enter the kingdom of heaven. Again I say to you, it is easier for a camel to pass through the eye of a needle than for one who is rich to enter the kingdom of God."

Many people believe today that they have no ethical obligation to their fellow humans; all they need to do is to make as much money as possible. But the traditional Jewish and Christian thinking about the economy rests on the injunction to take care of others who are in need. “Love thy neighbor as thyself.”

This is what it says in Leviticus: “If your brother, who is living with you, falls on evil days and is unable to support himself with you, you must support him as you would a stranger or a guest, and he must continue to live with you. Do not make him work for you, do not take interest from him; fear your God, and let your brother live with you. You are not to lend him money at interest or give him food to make a profit out of it.” (Lev. 25:35-3 7).

That seems pretty unambiguous. Islam and Hinduism contain similar proscriptions against capitalist practices in their scriptures. Some evangelical Christians, notably the “New Evangelical Partnership for the Common Good” are vocal in their insistence that we are responsible for saving the natural environment. They are equally insistent that the New Testament demands from us not to take advantage or oppress others. Oppressing others includes taking advantage of their pressing needs by charging them higher prices for goods that are scarce--that is to set prices by supply and demand.

The current economic crisis brings these issues to the fore. We are in this crisis because the money makers have been in charge and have ruined the lives of millions. Those lives remain precarious because the money makers run the government. They are proud that the big banks are making money once again. They regret that many people are still our of work and many people have lost their homes. But they are not prepared to do much about it. Making money is all important. Helping your fellow women and men is strictly secondary.

This is not a question about religion, about being an observant Jew, or a church going Christian, or a practicing Muslim or Hindu. You may want to leave all religion behind you as the superstitions of a less enlightened age. But you must still confront the question:  What sort of  world do you want to live in? Do you want to live in a world where money is more important than anything else, including human lives? Would you rather chose a compassionate world where the poor and suffering  will find someone to take them in?

Greed?

A while ago when it became obvious that we are in serious economic trouble, the President and other leaders said “the economy has some problems but its fundamentals are sound.” Today they tell us that we facing recession, perhaps depression. The fundamentals are no longer sound but it is all due to the greed of individuals. The system as a whole is sound. The capitalist system, the free market do not bear any blame for the present economic crisis. It is the greed of individuals.

When they said that the economy is sound-- that was propaganda. Now they tell us that the economic system is sound. There were just some bad apples that were carried away by greed. Shall we believe them this time, or is this more propaganda?

Imagine that you own a bank. That does not mean that the bank's money is yours; you only run the bank. The bank's money belongs to the depositors or to stock holders who invested their money in your bank. You have been a banker for a long time. You believe that it is your obligation to be conservative in your investment and in the loans you make because the money you handle is, after all, not yours. It has been entrusted to you.

So when you hear about other banks giving mortgages to people with a poor credit record and insufficient income to pay for them, or if other banks make serious profit investing in financial papers that you do not completely understand and you are sure that the other banks don't either, you refuse to participate. Yes, the high profits are tempting, but you are committed to being cautious.

But one day you get a phone call from a major stock holder. He wants to complain. Your local competitor—the bank across the street from you, in fact—is making a lot more money than your bank. They have discovered a goldmine; they are investing in mortgages given to people who are poor credit risks. The competing bank also invested, and reaped significant profits, from all kinds of new fangled investment instruments. You regard both of those unsafe, in the long run, and have therefore stayed away from them. Your profit rate, due to your cautious way of investing money, is significantly lower than that of most other banks around.

Your stockholder is not only complaining about the lower rate of profit and therefore the lower dividends paid to stockholders, but he wants you to change. If you refuse, he suggests, he will try to get the board of directors to fire you, in order to hire a more aggressive banker who is willing to take more risks and earn more money for the stock holders. In short your job is on the line. If you want to keep it, you need to change your ways. Caution may be all very well in the long run, but your stockholders want more money now.

What should you do? Will you give up your job or make riskier investments? If you do the latter it is not because you are greedy, but because the competition in the banking industry forces you to do what everyone else does. If you want to remain in your job, you need to meet the stockholders' demands and give up your cautious ways.

(Today when the government has bought a portion of your bank because the risky investment you made, along with all the other bankers, went bad your bank is in serious trouble. Now you can think to yourself that you were right all along, but your bank is in trouble anyway because you yielded to the pressures of the stockholders.)

Our economic system is a competitive one. Any business must follow the practices of all competitors or go bankrupt. If you competitors in a service industry pay minimum wage to their employees, you must do the same otherwise you will be unable to compete in price. If your competitors in a manufacturing industry send their manufacturing off shore, to China, where wages are a fraction of what they are here, you too must move your manufacturing to a low wage area and take the jobs from working people at home. If you run a bank you need to be as profitable as all the other ones even if that means making investments which you regard—rightly so it turns out now—too risky.

But, you say, maybe it was not the bankers, or the mortgage companies, the hedge fund managers or other large scale investors who were greedy, but the stockholders who were calling for higher profits. But is that not precisely what they are supposed to do? People like the President talk endlessly about the great system we have where individual enterprise creates a good life for everyone. But what is “individual enterprise” but another name for trying to make as much money as possible? And what's the difference between trying to make as much money as you can and greed? The greedy never has enough. The greedy always want more. So do the capitalist entrepreneurs who want to make as much money as they can.

When the pundits tell us that it is greed that has brought us this economic crisis, they want us to think that the economic system is sound, and it is just some “bad apples” who are very different from us. But anyone who runs a business in our capitalist system must try to make as much money as she or he can. It is not individuals who are poorly brought up or other wise morally defective who are greedy, it is anyone who is in the uisiness world and wants to remain in it. Greed is not a deviation; it is built into the system.

If greed is the problem, it is a systematic feature that will be with us as long as we think about business as we do today, as the way to make as much money as possible.