Ahmed Abdel Latif The JewishInfluence on the Rise of Capitalism

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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 Sombart s book for the technical attributes to capitalism by the Jews, and for the next part I will be looking more closely at Weber s 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 in consumerism and usury in Western Europe. Jews in Europe were ubiquitous in wine trade, especially in Germany. Their prominence in viticultural trade gave them gateways 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 money lending, 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 money II. Market exchange, and III. Production of commodities First, the fundamental aspect of today s financial market is the credit system. It enables the funding, expansion and reinvestment of individuals, businesses and organizations. 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, whereby buyers 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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(Sombart. (Sombart. This brings about the influence of the Jews on the market system of exchange. 54)Sombart also links the idea that bill endorsements were present in the fairs of Genoa. according to Sombart. to link the Jews to the modern financial system.e. Public Debt Bonds The stateless Jews at the time. but to again to their standardization. Here Jewish influence. i. Market exchanges existed long before the standardization process. trading took a complete new form.Ahmed Abdel Latif The bill of exchange 260306836 A promissory note for a specified payment written out to a person that enabled financiers to lend out larger sums of money. Sombartargues. but their expansion and their effectiveness depended heavily on a money producing banking system. Indirectly the Jews were. 68)Sombart here has no solid proof for his argument except that Jews were speculators. These mortgage deeds were bought and sold on the Stock market just like public bonds. shares were not public. and shares were sold only to people with close relationships with the company. 2 . 69)Another weak argument by Sombart. Second. they were certificate of membership of a company. all bill-broking in the Adriatic city in the 16th century was in their (the Jews) hands. Securities In their earliest form. p. p. more specifically of mortgage deeds (Sombart. which was largely controlled by the Jews. p. there is still Jewish presence evident in the banking realms. The first permission to establish a bank was granted to two Jews in 1400. whereby the market mechanisms of supply and demand determined their price. was in the standardization of 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. in all likelihood the originators of these species of credit instrument. and that their influence as speculators pressured the change and the standardization of securities. securities. which could be bought and sold on a market like any other asset. with these elements in place. but also bills.Nonetheless. banknotes and bonds were available for trade as regular commodities. 71)due to their interest in advanced money lending to plantation owners on security of their plantations. a mere speculation on his behalf. now not only consumer goods were the only commodities available on the market. The proclamation of Amsterdam January 24 1651 was the first legal recognition of the bill of exchange. were obviously not directly linked to issuing public bonds. Banknotes Here Sombart is concerned with the standardization of banknotes.

(Sombart. Third. the cost of ensuring property rights became more inexpensive thus feasible for states. but there is evidence in Jewish participation in the production of commodities. (Katz. This came about through the creation of property rights. Sombart links their dominance and monopolization of the bill broking trade to the creation of the Stock Market. in textile mills. North and Thomas argue that with the expansion of trade. which gave them the versatility to move from one place to another and operate through the world s financial capitals. As the potential grows for private gains to exceed transaction costs. tanneries or distilleries (Khan. the operation of distilleries and the production of potash (Katz. 40)This mobilization of funding and extension of credit allowed the production of commodities to grow on a larger scale. but operated through various states. coin minting to government order. 1And although the Jews were prominent in the worlds financial system and in trade. These states were not oblivious to the practicality and Economic growth will occur if property rights make it worthwhile to undertake socially productive The creating. Vienna and many other towns as early as the 16th century and even arriving as far north as Stockholm in the early 19th century. p. 1973 1 3 . But it also meant that they were constrained by the laws of other states. which meant they needed the protection of others over their trade and investments. efforts will be made to establish such property rights. specifying and enacting of such property rights are costly. p. According to Sombart. in a degree affected by the state of technology and organization.Ahmed Abdel Latif 260306836 This market system depended heavily on regulation by governments.the origin of the Stock Exchange dealing most likely began with the associating of bill brokers. This also meant that they had no army of their own. but we can see no clear or distinct order or decree issued by a Jew himself. Douglass and Thomas Robert P. Governments take over the protection and enforcement of property rights because they can do so at a lower cost than private volunteer groups. and could only operate within their realms. 8 The Rise of the Western World North. Cambridge University Press. 83)This business was regarded as a Jewish specialty in cities such as Venice. p. At the time Jews did not have a state of their own. these privileges and mechanisms were granted to the Jews by state. 85)in tsarist Russia. Amsterdam. Hamburg. This form of security enhanced global trade. We can see Jewish influences on these fundamental mechanisms that act as a base for the modern financial markets. patents and insurance companies. p. the exploitation of mines. 38)There is also evidence in their participation as as army supply contractors. Jewish occupations were not solely attributed to monetary exchange. Frankfurt.According to Katz There was only one area vital to economic development in which the Jews did have a particularly important role-namely the mobilization of monetary reserves. such as tax and customs farming. through property right laws and the creation of markets whereby stocks can be bought and sold.pg.

Where does such a movement or set of teachings arise? Most scholars and educated men at the time were religious. or spirit. According to Sombart the same relationship that now exists between state and business. therefore they were more capable of understandings the mechanisms of Capitalism. 205) For Sombart. unlike Jews who are rational. since every religion has charged some sort of fee at any point in history.Ahmed Abdel Latif 260306836 impacts of such elements. p. therefore some religious movement must have taken place to allow this new realization of immense profits. So they had to be backed up by some movement. This relationship that shaped the Jewish people. p. it banned all pictorial art from its cult (Sombart. where the relationship between buyer and seller had to be based on some sort of law that provided protection for each other. fear of loss. that in a sense shaped the very forms of who they are today. in fact it is Capitalism (Sombart. before capitalism could develop the natural man had to be changed out of all recognition. 238)Thus the Jewish religion for the Jews increased and heightened (Sombart. Capitalism is all about Rationalism or Intellectualism. could only develop with that rational mindset. p. and the Jews through their laws and teachings already possessed this mindset. is power. their expulsion from the Holy Land. p. Hinduism and Islam. This relationship between man and God demanded of the Jew that he obeys the law and to be holy. 4 . (Sombart.One the one hand we have Max Weber s connection between Puritanism and Capitalism. He believes that mysticism in other religions such as Christianity. p. and then from country after country made Jewish History one full of strife. hard work. and a rationalistically minded mechanism introduced in his stead. 1913. all have mystical elements that weaken people because of their reliance on these mystical elements. 238)their capitalistic mindset. Capitalism needed a strong legal foundation. 192)and he even goes as far as saying I think the Jewish religion has the same leading ideas as Capitalism. Capitalism. a contract with all its consequences and all its duties. In that sense Religion became the law for the Jews and their strongly grounded moral and ethics. that allowed these changes to take place. and becoming pioneers in that field. 209)This relationship between man and God. whether Christian or Jewish. 208)Their persecution for centuries. and Sombarts argument that that which is called Puritanism is in reality Judaism (Sombart. p. (Sombart. exists between Jehoavah and his chosen people. This argument is weak. Religion. made them rational beings is the basis for economic success. 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. is what shaped the Jews to have a sense of loss and gain and a complicated system of bookkeeping (Sombart.

and it was this element that made them play a big role in the formation of the world today. and that these elements are both found in Puritanism as well as Judaism. 18) Weber pinpoints labor as a key component to the formation of the capitalist system. New York. and the moving away from the catholic church were the first signs of rationalism. 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. A. New York: New York University Press. Chicago: University of Chicago Press. but we have to distinct that the Jews. H. not clergymen. plays a big role in the formation of the worlds capitalist system. (1993). It gave way for state to overpower the Church. The rational man is necessary to capitalism (Weber. p. Essays In Jewish Social and Economic History. but the substitution of a new one. it is evident that Weber believes that Capitalism was brough about by a change. in this case the catholic prefers to sleep well. The sort of education obtained by the Protestants was that of industrial and commercial occupations as opposed to Catholics seeking higher education. he looks for security. 39)The reformation and its doctorines were for purely religious motives (Weber. can make decisions.Ahmed Abdel Latif 260306836 For Weber. it is the Jewish religion and the Jewish law. p. They both agree that rationalism. could have been expelled easily. Bibliography Katz. The reformation removed the burden of having the church penetrating the private and the public life. or rather Sombart agrees with Weber. Weber describes the Protestants with more of a profit seeking than the Catholics either eat well or sleep well. Soloveitchick. rather they were welcomed by monarchs due to their prominence in the circulation of the money supply. and security comes in the form of money. Taboo and the origin of Jewish Moneylending in Germany. so that economists and politicians. although pioneers. Sombart argues well that the Jewish religion in a sense promotes the spirit of rationalism. In conclusion. or a movement in the learning s and teachings of the Puritans. Tradition and Crisis Jewish Society at the end of the Middle Ages . the Jews always had it. p. Khan. p. undoubtedly the leading men when it comes to financial matters. 5 . Therefore Judaism. 30)He agrees with Sombart that the development of rationalism is the standpoint from which capitalism is generated. The reformation. Therefore there is the notion here that as man becomes rational. (Weber. the protestant reformation did not mean the abolishment of religion from everyday life. It is obvious that the Jews at the time were very prominent in the moneylending business. Halakhah. For Sombart. for Sombart. J. and for Weber also this is a key factor in the formation of Capitalism. 45)it did not look to introduce social reform or cultural ideals.

(1913). M. Weber. The Protestant Ethic and the spirit of Capitalism . W. New York: Burt Franklin. The Jews and Modern Capitalism . 6 . New York: Norton and Company. (2009).Ahmed Abdel Latif 260306836 Sombart.

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