“Capitalism and the Jews” (1972-1985) Nicolas Vallois1 Cléo Chassonnery-Zaïgouche2
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A history of Milton Friedman’s provocative “Capitalism and the Jews” (1972-1985) Nicolas Vallois1 Cléo Chassonnery-Zaïgouche2 Very first draft, please do not quote without the authors’ permission. Introduction In a 1971 letter to Ralph Harris, Friedman exposed briefly the subject of his forthcoming Presidential Lecture at the Mont Pèlerin Society (MPS) at the Montreux meeting in Switzerland (1973). I have long been interested in, and have given a number of unwritten and unpublished lectures on, “Capitalism and the Jews”—the theme being that a) no people owe so much to capitalism; b) none have done so much to destroy it by writing and political actions.3 The speech circulated as a reprint (Friedman, 1972) and Capitalism and the Jews (hereafter C&J) was eventually published in three different forms in the 1980s: in a 1984 exemplary of The Encounter, the literary and political review of Irving Kristol (Friedman, 1984); in a 1985 collective book edited among others by Kenneth Boulding and Walter Block after a Symposium held by the Fraser Institute on “Morality and the market” (Friedman, 1985); a last publication in The Freeman, a review published by The Foundation for Economic Education. Written in the early 1970s, no substantial changes occurred during the ten years of times to publication. C&J is focused on the following paradox: in the post-war decade, political collectivism in practice has backed up, however, as an idea, it has been increasingly advocated. Jewish support for liberal ideas is analyzed as an example of such a paradox: “first, the Jews owe an enormous debt to free enterprise and competitive capitalism; second, for at least the past 1 CRIISEA, University of Picardie Jules Verne. Corresponding author, email: [email protected] 2 Centre Walras-Pareto, University of Lausanne. 3 Friedman to Ralph Harris 29/09/71, Box 87 Folder 1, MFA. 1 century the Jews have been consistently opposed to capitalism and have done much on an ideological level to undermine it” (Friedman, 1985, p.403). His essay is focuses mainly on this paradox he identified. Our objective is to analyze what role this oft repeated paradox played in Friedman’s thought. At first, its constant combination with anecdotes and jokes, especially during oral presentation, with the crude argument in favor of free market convey the sense of a rhetorical example: free market caused Jewish economic success, not government intervention; Hence, government should not intervene, especially concerning minorities. In fact, Friedman did some research to back up his claims and send numerous letters to ask advices and comments from friends and scholars with expertise on Jewish history and sociology. Beyond the classical theme of the religious origins of capitalism, Friedman’s short text combine an attempt to theorize the relation between markets and the economic status of minorities and an intellectual reaction to the 1960s decade of American liberalism. While part of the researched topic of antisemitism in the history of economic thought, our focus is rather on Friedman’s reflexive point of view with the objective to enlighten the way he articulates C&J to its vision of economic and political theory. Besides the several versions of C&J, our main sources are Friedman’s archives (essentially correspondence on C&J) and Friedman’s account on market and discrimination in other context. Section 1 describes how Friedman came to write C&J and what’s the arguments and sources he uses. Section 2 analyzes C&J both the political and intellectual context of the early 1970s, when C&J gets written, in relation to main discussions in economics on discrimination. A crucial element to understand how the Jews example functions in Friedman’s thought is how he analyzes Kennedy and then Johnson administration’ anti-discrimination laws and then, Affirmative Action programs led by the Nixon Administration. Section 3 is focused on the context of publication in the 1980s in relation to the renewal of neoconservative thought, especially within Jewish intellectual circles. 1. The making of “Capitalism & the Jews” 1.1. Capitalism and the Jews: a recurrent theme in Friedman’s works 2 Let’s first describe briefly the arguments of C&J. Friedman starts by analyzing each one of the two propositions of his paradox separately. He first argues that the Jews have “benefited” from capitalism and free competition—these two expressions being used as synonyms— because the system is “colour-blind”: “where there is free competition, only performance counts”. “Monopolistic systems” on the contrary open the possibility of discrimination according to arbitrary criteria such as the “colour of skin, religion, national origin or what not” (p.404). This claim is substantiated by a personal anecdote about Friedman’s participation in a banking conference and by various references to Jewish history. According to Friedman, Jews have been most prosperous throughout the history of the Diaspora in the most capitalistic places and times (such as the Netherlands in the sixteenth and seventeenth centuries, Germany in the late nineteenth and early twentieth century) whereas it is “no accident that Nazi Germany and Soviet Russia, the two most totalitarian societies in the past two thousand years […] also offers the most extreme examples of official and effective anti-Semitism” (p.405). In more recent times, Jews flourished most in sectors that have the freest entry such as law, accountancy, the movie industry and are under-represented in state-regulated sectors such as large industry or banking. A last justification comes from Israel, a country that benefited largely from the aid of capitalist countries, particularly the US (compared to the Soviet aid to Egypt) and also developed mainly from private initiative rather than collectivist politics. The second proposition about the “anti-capitalist mentality of the Jews” is justified by a few examples of Jewish anti-capitalist thinkers (Marx, Trotsky, Marcuse) and more generally by Jewish political behavior (the preference of Jews for liberalism in the US, and their over- representation in revolutionary movements). Justification for this proposition is shorter than for the first one (only two short paragraphs), but Friedman substantiates his claims here about Jewish political behavior by references to works in sociology (Glazer, 1961; Fuchs, 1956). Friedman then seeks to solve the paradox. He first rejects the explanation proposed by the sociologist Lawrence Fuchs that this leftist mentality among Jews would be the direct consequence of Jewish religion and culture. According to Friedman, the opposition of the Jews to capitalism is only two centuries long, whereas Judaism as a religion that has existed for more than two millennia (p.407-408). Friedman then analyzes Werner Sombart’s alternative thesis that Judaism actually created capitalism (pp.408-409), published in his controversial book The Jews and Modern Capitalism (Sombart, 1913). As we shall see later in greater details, Sombart’s work is now commonly interpreted as anti-Semitic. Friedman 3 recognizes that Sombart’s book has “a highly unfavorable reception among both economic historians in general and Jewish intellectuals in particular” but “there is nothing in the book itself to justify any charge of anti-Semitism”. Friedman simply adds that he interprets “the book as philo-Semitic” (p.409). Yet it does not explain the paradox: if the Jews have created capitalism, why the “anti- capitalist mentality”? Friedman then considers two more balanced views, which he concedes, have only a limited validity to explain the paradox. The first one is Nathan Glazer’s claim in The social basis of American communism that the Jews’ over-representation among intellectuals explain also their over-representation among anti-capitalists, since intellectuals would be relatively more inclined to anti-capitalist tendencies (Glazer, 1961). Thought more credible than Fuchs’ for Friedman, his “impression” is that Jewish intellectuals are significantly more anti-capitalist than other intellectuals (p.410). He found another explanation in from Werner Cohn’s unpublished PhD dissertation (Cohn, 1956).4 According to Cohn, secularization and emancipation of the Jews has been a major component in the program of leftist parties since the early political revolutions in Europe. This would explain why that these parties have always been a “natural choice” for the Jews, contrary to right- wing parties. Yet Friedman notes that the explanation does not work in the US, in which Protestant and Puritan elites have always been pro-Semitic. Friedman here quotes Sombart to support his claim: “Puritanism is Judaism” (p.412). According to Friedman, the fundamental explanation of the paradox comes from “the Jewish reaction to the Jewish stereotype” (p.413). Jews have always suffered from the anti-Semitic stereotype of themselves as “money-grabbing, selfish and heartless”. Hence, they would have criticized capitalism and the free-market and lauded the State and political process instead, in order to convince themselves and anti-Semites that they were actually generous, concerned with the public interest and ideals. Friedman supports this claim with a set of alleged oppositions between Jews in Israel and in the Diaspora; the former trying to do exactly the opposite of the latter in order to differentiate themselves from the stereotypes about Jews (in the Diaspora). In the conclusion, Friedman notes that this anti-capitalist “ideology of the Jews” has always been opposed to their self-interest. Yet in the West the conflict is more potential than real: they 4 In the 1984 version of the text, footnote 6 (p.76) states that the dissertation was defended at the “New School for Soviet Research” (sic) rather than at the New York-based New School for Social Research. 4 could preach “socialism as an ideal” and still benefits from capitalism as long as free-market system still operates. Hence the Jews are “in the position of the rich parlor socialists […] who bask in self-righteous virtue by condemning capitalism while enjoying the luxuries paid for by their capitalist inheritance” (p.416).