Is There a Link Between Ethnicity and Economics?

Does ethnicity influence economics? [email protected] investigates this issue with Derek Penslar, professor of Israel Studies at Oxford University and also professor of Jewish History at the University of Toronto. He has written a book about the history of the Jewish people and the group’s strong association with commerce, Shylock’s Children: Economics and Jewish Identity in Modern Europe. Penslar argues that there is no monolithic “Jewish economy.” Rather, certain forms of economic behavior persisted throughout the Jewish world that tended to repeat themselves in many situations, enhanced by a sense of unity among Jews from different regions.

An edited transcript of the conversation follows.

[email protected]: What do you think of pairing ethnicity with economics and looking at the two together? Because that can be a controversial idea.

Derek Penslar: It can be very controversial. No matter how you approach it, it is sensitive. The fact is that until the 1930s, 1940s, it was very common for scholars, including Jewish scholars who were really embedded in their communities, to write about the relationship between the Jewish religion or Jewish nationality and Jewish economic behavior. Nothing wrong was attributed to it.

Anti-Semites were making outrageous comments about Jewish economic behavior or domination but Jews considered it a completely acceptable thing to do. And then came the horrors of the 1930s, 1940s — Nazism, the Holocaust. And in the wake of that, a lot of the language that had been used to talk about Jews as a kind of an ethnic unit and an economic unit was discredited. It was considered no longer appropriate to talk about Jews that way.

[email protected]: Even by Jews?

Derek Penslar: Even by Jews. And so, scholarship on the history of the Jews tended to focus on anything but economics. Religion was okay. Politics was okay. Culture was okay. But economics was taboo. Very few people wrote about economics — and just every now and then. In the last, decade or decade and a half, we now see young scholars two generations removed away from the Holocaust who are beginning to take the subject up again. After all, you can’t understand any kind of group behavior without economics.

“There’s not a monolithic thing called ‘the Jewish economy’ that marches across space and time.”

[email protected]: So, enough time has passed it would seem.

Derek Penslar: I think enough time has passed. Although there are people who still are nervous about it because of the way that anti-Semites have made use of economic arguments to demean the Jews.

[email protected]: Let’s get into what some of these characteristics or features of the Jewish approach are and how they may differ from other cultures or other countries.

Derek Penslar: There’s not a monolithic thing called “the Jewish economy” that marches across space and time. But there are certain forms of economic behavior or economic culture throughout much of the Jewish world that seem to repeat themselves in many different circumstances.

It’s hard to know how far back to go. But certainly, by the time we get into the later Middle Ages up through early modern times — 20th Century — the most important thing really is this one sentence, which is that Jews throughout most of history have not been peasants or aristocrats. Throughout most of human history, most people, until recently, were peasants. They worked the land. They often couldn’t leave the land. And that doesn’t encourage economic innovation. It doesn’t encourage literacy. It doesn’t encourage numeracy. It doesn’t encourage entrepreneurship. And aristocrats are lords of the land. And they tended to be a warrior elite. And that also does not encourage innovation.

So, who innovates in a society? The middle classes, the townspeople, the bourgeois or the burghers. Well, Jews have been for millennia primarily a people of townsmen. It might be a small town; it might be a large one. And they’ve worked in a mixture of crafts but also in commerce. When people are doing that generation after generation, they develop certain comparative advantages, whether it’s literacy or numeracy. And let’s not forget the fact that Jews are connected with each other across space. The Jew in one town in Poland has Jewish distant family from another part of Poland or from somewhere in Germany and so on.

[email protected]: But the Israeli economy has changed a lot over the last 30 years. It’s gone from largely taking a socialistic approach to the economy to a much more capitalistic approach. Can you talk about that change and how it came about, why it came about?

Derek Penslar: The Jewish world in Central Eastern Europe primarily was just overwhelmed by the possibility of revolution in the 19th Century. Capitalist revolution, transformation of economic relations, but also socialism, Communism, various movements on the left, and national movements. Zionism is, after all, a classic form of Jewish nationalism.

“Scholarship on the history of the Jews tended to focus on anything but economics. Religion was okay. Politics was okay. Culture was okay. But economics was taboo.”

We’re caught up with this idea of a revolutionary change in the Jewish people. So, Zionism, when it realized itself in the [formation of the] state of Israel in 1948, was very strongly dominated by — I wouldn’t say a socialist ideology as such, but one that had socialist elements where the state played a very major role in the development of the country and in the promotion of the nation. There was a lot of state-owned industry. There were severe limits on wages. So, for example, wage differentials between workers and say, physicians or professors, in the early state of Israel were quite minimal. There was this egalitarian ethos, not socialism per se, but social democracy.

And that was one kind of Jewish economy in that it was influenced by the very strong role Jews had played in the revolutionary movements in the early 20th Century. But that was Israel of one era –1950s, 1960s. It already began to loosen up in the 1970s and the 1980s. Israel becomes an industrial powerhouse, manufacturing textiles, developing medical technology [and others.] It was no longer making money selling oranges and grapefruit alone. There was a lot more to the Israeli economy. And then comes the privatization wave that began in the 1980s and has really continued to this day. State-owned industries are sold off and there’s a neo-liberal economy where Israel is now one of the world centers for investment from abroad and of economic innovation.

[email protected]: It’s seen as a world center for high tech innovation in particular, but also of all kinds of innovation. … I’m wondering to what extent the military in Israel has played a role in that development of high tech. How closely related are those two?

Derek Penslar: They’re very closely related [as] they are in pretty much any country. Take aerospace. It was developed in California in the United States from World War II on. … The internet came, after all, out of the U.S. military. So, that kind of connection is not unique to Israel.

The difference is that the United States has this massive economy. As big as the military is in the U.S., there’s also an enormous consumer-driven, business-driven economy. Israel’s a smaller country with a smaller economy

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