Milton Friedman on the American Economy (5 of 6)
Uploaded by donotswallow on Aug 9, 2009
THE OPEN MIND
Host: Richard D. Heffner
Guest: Milton Friedman
Title: A Nobel Laureate on the American Economy VTR: 5/31/77
Below is a part of the series on an article by Milton Friedman called “Capitalism and the Jews” published in 1972.
Milton Friedman, recipient of the 1976 Nobel Memorial Prize in Economic Science, is a Senior Research Fellow at the Hoover Institution. This article is reprinted with the permission of Encounter and The Fraser Institute.
“Capitalism and the Jews” was originally presented as a lecture before the Mont Pelerin Society in 1972. It subsequently was published in England and Canada and appears here without significant revision.
Israel as a Diasporal Reaction
I was first led to this explanation of the anti-capitalist mentality of the Jews by my experience in Israel. After several months there, I came to the conclusion that the quickest way to reach a generalization in any area about values in Israel was to ask what was true of the Jews in the Diaspora and reverse it.
Jews in the Diaspora were urban dwellers engaged in commercial pursuits and almost never in agriculture; in Israel, agriculture has much higher prestige than commerce.
Jews in the Diaspora shunned every aspect of military service; Israelis value the military highly and have demonstrated extraordinary competence.
These two reversals are readily explained as the children of necessity, but let me continue.
Yiddish or Ladino was the language of the Jews in the Diaspora; both are looked down on in Israel, where Hebrew is the language.
Jews in the Diaspora stressed intellectual pursuits and rather looked down on athletics. There is tremendous emphasis on athletics in Israel.
And for what may seem like an irrelevant clincher: Jews in the Diaspora were reputed to be excellent cooks; cooking in Israel is generally terrible, in homes, hotels, and restaurants.
Can this record not be interpreted as an attempt, no doubt wholly subconscious, to demonstrate to the world that the commonly accepted stereotype of the Jews is false?
I interpret in the same way the evidence assembled by James Wilson and Edward Banfield that Jews (and “Yankees”) tend to adopt a “community-serving conception” of the public interest, and to vote against their own immediate self-interest, in larger proportions than most other groups.
I interpret also in this way the attempt by Fuchs to trace Jewish “liberalism” to Jewish values and the negative reaction of Jewish critics to Sombart’s book. If, like me, you regard competitive capitalism as the economic system that is most favorable to individual freedom, to creative accomplishments in technology and the arts, and to the widest possible opportunities for the ordinary man, then you will regard Sombart’s assignment to the Jews of a key role in the development of capitalism as high praise. You will, as I do, regard his book as philo-Semitic. On the other hand, if you are trying your level best to demonstrate that Jews are dedicated to selfless public service in a socialist state, that commerce and money-lending were activities forced on them by their unfortunate circumstances and were wholly foreign to their natural bent, then you will regard Sombart as an anti-Semite simply reinforcing the stereotype against which you are battling. In this vein, the Universal Jewish Encyclopaedia says in its article on Sombart: “He accused the Jews of having created capitalism” (my italics).
The complementary character of the final two explanations is, I trust, clear. Whence comes the value structure that puts service to the general public above concern for oneself and one’s close• family; government employment above private business; political activity above commercial activity; love of mankind in general above concern for men in particular; social responsibility above individual responsibility? Very largely from the collectivist trend of thought to which Jews contributed so much for the reasons advanced by Cohn.
Consider, for a moment, the reaction to the anti-Semitic stereotype by a nineteenth-century English Philosophical radical steeped in Benthamite utilitarianism—by a David Ricardo, James Mill, even Thomas Malthus. Could one of them ever have termed the allegation that Jews created capitalism an accusation? They would have termed it high praise. They would have regarded widespread emphasis on rational profit calculation as just what was needed to promote “the greatest good of the greatest number,” emphasis on the individual rather than the society as a corollary of belief in freedom, and so on.
I conclude then that the chief explanations for the anti-capitalist mentality of the Jews are the special circumstances of nineteenth-century Europe which linked pro-market parties with established religions and so drove Jews to the Left, and the subconscious attempts by Jews to demonstrate to themselves and the world the fallacy of the anti-Semitic stereotype. No doubt these two main forces were reinforced, and the view of the Jews altered in detail, by their historical and cultural heritage, which made them specially sensitive to injustice and specially committed to charity. They were reinforced also by whatever the forces are that predispose intellectuals towards the Left.
Whether or not this explanation is a satisfactory resolution of the paradox which was my starting point, it remains true that the ideology of the Jews has been and still is opposed to their self-interest. Except behind the iron Curtain, this conflict has been mostly potential rather than real. In the West, so long as a large measure of laissez-faire capitalism prevailed, the economic drive of the Jews to improve their lot, to move upward in the economic and social scale, was in no way hindered by the preaching of socialism as an ideal. They could enjoy the luxury of reacting against the anti-Semitic stereotype, yet benefit from the characteristics that that stereotype caricatured. On a much more subtle and sophisticated level, they were in the position of the rich parlor socialists—of all ethnic and religious backgrounds—who bask in self-righteous virtue by condemning capitalism while enjoying the luxuries paid for by their capitalist inheritance.
As the scope of government has grown, as the collectivist ideas have achieved acceptance and affected the structure of society, the conflict has become very real. I have already stressed the conflict in Israel that has led to giving a far greater role to market forces than the ideology of the early leaders envisioned. I have been struck in the United States with the emergence of the conflict in reaction to some of the proposals by Senator George McGovern. His early proposal, later rescinded, to set a top limit on inheritances produced an immediate reaction from some of those who might have been expected to be and were his strongest sup-porters. It came home to them that his measures—completely consistent with their professed ideology—would greatly hamper the upward social and economic mobility of which they had been the beneficiaries.
Perhaps the reality of the conflict will end or at least weaken the paradox that has been the subject of my talk. If so, it will be a minor silver lining in the dark cloud of encroaching collectivism. 
15. James Q. Wilson and Edward C, Banfield, “Public-Regar-dingness as a Value Premise in Voting Behavior,” American Political Science Review, LVIII, 4 (Dec., 1964), pp. 876-887; “Political Ethos Revisited,” American Political Science Review, LXV, 4 (Dec., 1971), pp. 1048-1062. The similarity between the Jews and the Yankees in some of the characteristics examined by Wilson and Banfield is some evidence, if rather weak evidence, for the influence of religion and culture in view of the connection between Puritanism and Judaism.