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Does Jewish Law Favor Capitalism or Socialism?

A lot of the political discourse in American and in Europe revolves around economic models. The bold faced names in the discussion are capitalism and socialism. To be fair, no matter what, the United States will have a hybrid version because we will never get to a place where the system is completely capitalistic without taxation and social programs for the poor nor will we ever have a system of 100% taxation and governmental distribution of wealth.

In America, we are somewhere in the middle. Which is why I find it humorous when people call President Obama a socialist or Romney is touted as a true capitalist. It makes for good sound bites but the truth is that they are fairly close to one another economically. They might be on opposite extremes on the center. But they are not on opposite extremes of the spectrum the way Ayn Rand and Karl Marx are.

One fun argument is what the Bible has to say about these contemporary economic systems. Pretty much any view can be shoehorned into some passage from the Bible. So it is not a strong argument when one invokes scripture seeing as it so open to interpretation. (See: WWJD?)

However, Jewish Law does not follow the literal translation of scripture. Instead, Jewish Law follows the interpretations and codifications of the rabbis of the Mishnaic period and the analysis and expansion of those laws during the Talmudic period. These are “The Rabbis” that are referred to when people say things like “the rabbis said…”. In Hebrew they are known by their Hebrew acronym, Chazal.

The thing with Chazal is that they actually enacted specific legislation and we know the specific rules that they enforced. They are written in black and white in the Talmud. At Kavvanah Blog Rabbi Isidore Epstein’s introductory essay to the Talmud was posted and among many other fascinating issues, the essay addresses this particular point.

Rabbi Epstein enumerates dozens of regulatory laws in the Talmud. These are laws that were enacted and enforced by Chazal in a governmental capacity. Anyone who has studied the Talmud is familiar with many of these laws. But to see them rattled off one by one and analyzed through the lens of a 20th century scholar is very eye opening.

Here are some examples of Jewish Laws:

  • Guarantee of public trees from which anyone could pluck
  • Highly regulated weights and measures
  • Agencies that regulated quality control of food and other goods
  • Common rights on real property that was owned
  • Price control over the sale of chattel
  • Rights for workers, including going beyond the letter of the law for their benefit
  • Protection of tenants
  • Competitive practices when there was no need for additional
  • Charity taxes that were distributed to the poor

This short list does not do it justice. I think it impossible to read the essay and not draw the conclusion that Chazal endorsed a pretty severe form of socialism. That is not to say that they would endorse the same system for the United States of America in 2012. But it is to say, that the most traditional form of economic policy in orthodox Judaism is pretty close to socialism.

I do note that there were protective policies in place that were designed to prevent over-reliance on the social benefits of Rabbinic Judaism and some policies were skewed more to the side of capitalism. However, it is almost impossible to find ideas like caveat emptor or “the marketplace will decide what is fair or moral” in their system of commerce.

At the very least, the essay shows that many aspects of a social economy were considered moral and preferable to Chazal.

The essay is a must-read for its economic theory as well as its broader implications that are discussed more fully on Kavvanah. I cannot recommend reading the essay enough.

Links: Kavvanah, and the full essay is here: Come and Hear


34 Comments
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  • http://profiles.google.com/holyhyrax Holy Hyrax

    Well we all know where you lean ;-)

    >Highly regulated weights and measures.

    This is an issue of fraud. How are capitalist/conservatives against actual fraud protection?

    Also, as a conservative, I, personally have never heard the phrase that the marketplace will decide what is moral. 

    • http://finkorswim.com E. Fink

      Well we all know where you lean ;-)

      Really? I didn’t assert any of my own opinions.

      This is an issue of fraud. How are capitalist/conservatives against actual fraud protection?

      Caveat emptor means that the buyer must beware. If no one is careful then dishonest people will prosper. It is up to the MARKETS to regulate themselves.

      Also, as a conservative, I, personally have never heard the phrase that the marketplace will decide what is moral.

      You haven’t? I hear it all the time. Maybe I hang around with “real-er” conservatives…

      • http://profiles.google.com/holyhyrax Holy Hyrax

        >It is up to the MARKETS to regulate themselves.
        Is that something Ayn Rand would push for? Conservatives pro-capitalissts don’t, specifically in the context of letting actual fraud being legal and non-regulated and let the marketplace sort it out. 

        >You haven’t? I hear it all the time. Maybe I hang around with “real-er” conservatives…

        I think perhaps you may be mistaken when conservatives say that subjective fairness should not be legislated vs saying that the market will alway decide what is moral. How does that even make sense. Is Ashley Madison moral? No, but there is a marketplace for it. 

      • Eliezer Abrahamson

        Caveat emptor never permits actual fraud (as in false weights and measures). 
        Capitalism strongly emphasizes the role of government precisely with regard to protecting property rights, including enforcing laws against theft and fraud.

        • http://finkorswim.com E. Fink

          That is not pure capitalism. If the government is regulating then the markets are not pure. What you are describing is what we have in America, not what Ayn Rand would prefer.

          • Eliezer Abrahamson

            I don’t know where you are getting your definition of capitalism from. Even Ayn Rand, who is hardly the final authority on capitalism, does not take such an approach. All capitalist thinkers, including Ayn Rand, acknowledge the need for government to protect property rights and enforce contracts. Enforcing laws against fraud, such as false weights and measures, is an essential part of this function.

            • http://finkorswim.com E. Fink

              Adam Smith Lasseiz Faire economics relies on the market to correct itself. There is no need or place for governmental regulation in that model.

              • http://twitter.com/g13flat9th Mr. anon

                Adam Smith was also for “healthy” taxes. Adam Smith would think it foolish to have the mega rich paying little to no taxes.

          • Eliezer Abrahamson

            For some reason, I’m not able to reply directly to what you wrote in reply to my earlier comment.
            You wrote:
            “Adam Smith Lasseiz Faire economics relies on the market to correct itself. There is no need or place for governmental regulation in that model.”

            Capitalism relies upon a free market to correct itself with regard to pricing, not to correct for the ill-effects of criminal behavior. Because it is free, competition and other factors combine to generate the best price for a commodity or service (“best” being the price that most accurately represents the availability of that commodity relative to demand). The key is FREE market. Coercion, meaning any time I use force or the threat of force to deprive another person of the free control of his property, undermines the freedom of the market, and thereby reduces its ability to correct itself. All forms of criminal acquisition of property, including fraud and the failure to uphold a contract, are, at the core, forms of coercion (in that, without government, the only way for a victim of such a crime to gain possession of his property would be through force).

            It is precisely for this purpose that government is necessary, according to ALL capitalist thinkers. Ayn Rand describes this in her essay, “The Nature of Government.” Adam Smith saw an even broader role for government, even within the parameters of a free economy.

            • http://finkorswim.com E. Fink

              The reading I have done on Adam Smith suggested that he would oppose any governmental interference. You need to explain WHY the government should get involved. If markets are working properly a few people will get cheated by the bad guy and then the market will adjust and no one else will use his services. Why bother with stupid regulation?

          • http://www.facebook.com/people/Charlie-Hall/683997138 Charlie Hall

            Adam Smith was not an anti-government fanatic. In fact, he supported government roles in many areas:

            Adam Smith has sometimes been caricatured as someone who saw no role for government in economic life. In fact, he believed that government had an important role to play. Like most modern believers in free markets, Smith believed that the government should enforce contracts and grant patents and copyrights to encourage inventions and new ideas. He also thought that the government should provide public works, such as roads and bridges, that, he assumed, would not be worthwhile for individuals to provide. Interestingly, though, he wanted the users of such public works to pay in proportion to their use.

            One definite difference between Smith and most modern believers in free markets is that Smith favored retaliatory tariffs. Retaliation to bring down high tariff rates in other countries, he thought, would work. “The recovery of a great foreign market,” he wrote “will generally more than compensate the transitory inconvenience of paying dearer during a short time for some sorts of goods.”

            http://www.econlib.org/library/Enc/bios/Smith.htmlIn addition, Smith had no problem in principle with the very generous Poor Laws that existed in the UK and America at that time. He did very strongly object to their provisions that restrained the geographic mobility of the poor. 

  • http://profiles.google.com/holyhyrax Holy Hyrax

    Interesting quote from the Kavannah link:

    “The essay takes a dim view toward private property, except for the minimum needed for social stability.He favors common or communal held property.”

    OY!

    • http://finkorswim.com E. Fink

      Sorry. But its true. That’s what Jewish Law says.

      • http://profiles.google.com/holyhyrax Holy Hyrax

        Thank God we don’t live according to Jewish law then. I can’t imagine our people (even religious ones) ever wanted to live according to that.

      • J Price

        I am still reading the original article, but it’s not clear to me why you think that it’s true.  Fundamentally, halacha respects the individual’s rights to his property and the individual is muchzak in his land.  It is specifically land which the gemera seems hell-bent on excluding from the regulations of commerce (see the exemption of onaah and possible ribis for karkah).  Not clear to me why you think this is (a) a minimum standard or (b) implies a want for communally held land.  On the contrary, allowing karkah to be essentially unregulated regarding pricing allows for monopolies within the real-estate sector (even during the times of the gemera and after, when the rules of shemitas karkah are effectively disbanded).

        • Charlie Hall

          Communal authorities can confiscate private property without compensation. And during the shmittah year, you lose all rights to the produce of your agricultural property. Furthermore, you are prohibited from keeping anyone off your property if they are looking for leket, peah, or shich’chah. 

          • J Price

            What you mention are, essentially, not from Chazal – those are min haTorah.  Chazal, most of whom lived outside of E”Y could have elected to apply those laws in chu”l but did not.  That says something about Chazal’s worldview…right?

          • http://www.facebook.com/people/Charlie-Hall/683997138 Charlie Hall

            J Price,

            Some of the restrictions DO apply outside E”Y. For example, you can’t open a new business too close to a similar existing business — I am aware of three cases in New York in recent years where a new business was sanctioned by a beit din for unfairly affecting an existing business! And of course onaah, which you mention, is a huge restriction on the free market, applying everywhere. Some day I will have to learn how Jews can invest in limited liability corporations. Limited liability is something the Torah never heard of!

          • J Price

            Regarding your most recent comment: Yes, I agree fully that Chazal created a regulated commercial environment.  That’s not Socialism!  My original point (which, I believe, is still valid) is that Chazal did little (anything?) to expand the scope of communal property or limit the right to personal property. In fact, as I stated earlier, with respect to that issue, Chazal did NOT expand it’s impact at all.  Regarding Hasagat Gevul — that has nothing to do with annexing private property so I don’t understand why it’s relevent (what did I miss)?

  • DG

    Bear in mind that Chazal had moral authority, whereas governments and secular courts can only deal with laws. Although legislatures enact laws to enforce some degree of morality, judges should not be deciding what I can and cannot do based on their own values, which are likely to differ from mine (and from the Torah’s). Yes, their interpretation of the law is based on their values, but this is a human weakness, whereas Chazal’s ability to go beyond the letter of the law was a strength.

  • http://www.facebook.com/profile.php?id=6013153 Shlomo Abraham

    How man

  • Anonymous

    Chazal, more specifically the laws codified by Chazal, were never used to rule a country. Their laws were solely religious laws for dispersed communities that accepted those laws. Therefore it isn’t particularly relevant to a discussion about how to run an economy, much less a modern economy.

    • http://finkorswim.com E. Fink

      Whether Chazal’s law accepted or enforced en masse is irrelevant. They held these laws to be the best system of economics based on their understanding of the Torah. It was NOT just a religious code, it was also a civil code.
      And yes, as I said, this does not translate into 2012 economics. It does however, rebut the presumption of some, that the only moral code / the true Judeo-Christian view is capitalism.

      • Anonymous

        based on their understanding of the Torah.

        I disagree. It was based on their understanding of Torah and based on their circumstances, and based on the beliefs of their time, and based on their general psychology, and based on the science of their times, and based on the prevailing economics of their times, and based on a lot of other things. In short, they were human.

        the true Judeo-Christian view is capitalism.

        The “true” Judaic/Christian code is neither capitalism nor socialism. The codes only specified laws relevant to their times (for example, the Church controlled quite a bit of property and political power for centuries, as did our Kohanim) in the context of those times.

        • Charlie Hall

          Most of the civil code is straight from the Torah. 

    • http://www.facebook.com/people/Charlie-Hall/683997138 Charlie Hall

      So you think that the Torah is irrelevant to modern society? Chas v’shalom!!! 

  • Aron2375

    Eliyahu,

    You always come up with really interesting topics. I enjoy visiting your blog.

    Keep it up

    • http://finkorswim.com E. Fink

      Thanks! I really appreciate that.

  • Charlie Hall

    It isn’t socialism, because there is nothing I’ve seen in Chazal that suggests that the government should own most of the productive assets of society. But it nevertheless is a FAR more highly regulated economic system than anything we see anywhere in the world today. And much of what we take for granted in the modern world of business is not acceptable to the Torah. For example, there is no concept of limited liability, and the authorities can take your property without compensation. 

    Ayn Rand was not a Torah Jew!

    • J Price

      I find it interesting regarding “authorities can take your property without compensation”.  It’s certainly true that principles such as hefker beit din hefker exist in halacha, my (ignorant?) sense is that these are used as mechanism for B”D to run. Are there examples in the gemara when Chazal used it to just aprogate the normal rights of a property owner?  (My sense is that it is used by B”D when they need to enforce another law…and it’s just the mechanism, not the motivation, but I could be mistaken on fact here.)

  • zach

    The big one IMO is the system of tithing to support the poor and the priestly / levitical classes. Indeed the Shulchan Aruch states that the Beis Din can determine what a man is able to give and can administer lashings until he does. They can seize his possessions, and even hold his property as a guarantee of payment.

    Nothing capitalistic about that!

    • http://www.facebook.com/people/Charlie-Hall/683997138 Charlie Hall

      The gemara in Shekalim also states that the Beit Din is required to collect taxes for public works. And Ben Gamla required taxes to support schools (which would appear to be a d’rabbanon). 

  • Anonymous

    Great topic. I dont have time to read through the comments. I heard from Rabbi Y Berkowits years ago that there is a beautiful commentary on this subject in pirkei ovos where it speaks about “what is mine is yours ect…” the different categories there refer to socialism vs capitalism. I will look it up on shabbos.

  • Anon

    Jewish or halachic socialism has either Rabbis or observant Jews acting as regulators. How can we, then, extrapolate to secular regulators (especially regarding government agencies–unelected, politically appointed figures)? Giving secular goverment more power to regulate could in fact diminish the scope of Jewish social initiatives. See also Al Armendariz, former EPA official, who likened EPA regulatory enforcement to imperial roman crucifixion.