The Jews or the Power of Banking

A Background

The Jews are reviled and bad-mouthed across nearly all societies where they live, with the possible exception of India. My first encounter with this community was in the novel, A Stone for Danny Fisher, where the protagonist remembers being bullied as a child in New York just because he was a Jew and being totally bewildered on that count – and so was I since I could not imagine such antagonisms between different communities. Later I came across other historical and current accounts of Jew-baiting. Jews are also supposed to have super-human intellect and other qualities, with the community having contributed to a disproportionately large numbers of bankers, scientists, philosophers, economists, doctors, sportsmen etc. both in Europe and in America.

But the idea of any community having superior skills flies in the face of basic finding in psychology that human nature is common to all human beings, and their talents and intellect are normally distributed. Shakespeare put it very graphically and forcefully in The Merchant of Venice, in which Shylock, a Jew money-lender puts up his defence in these terms. “I am a Jew. Hath not a Jew eyes? Hath not a Jew hands, organs, dimensions, senses, affections, passions? Fed with the same food, hurt with the same weapons, subject to the same diseases, healed by the same means, warmed and cooled by the same winter and summer as a Christian is? If you prick us, do we not bleed? If you tickle us, do we not laugh? If you poison us, do we not die? And if you wrong us, shall we not revenge?”

For example, an aboriginal hunter living in the Kalahari Desert who can track and identify from tracks in the sand as to the precise identity of a person or animal which made those tracks can be considered of as high intellectual capacity as the top-most theoretical nuclear physicist or economist. It is only a question of identifying the intellectual capacity, as George Stigler put it succinctly, “in a regime of ignorance Enrico Fermi would have been a gardener, Von Neuman a check-out clerk in a drugstore”. So how come Jews are considered superior intellectually to others.

To get to the roots of how and why Jews picked up such an unhealthy reputation, we need to take a detour – into of all things – the time value of money!

The Time Value of Money

As everybody knows and acknowledges, a rupee today is worth more than a rupee say one year from now. The reason being that a rupee today can be invested in some kind of productive purpose which would possibly yield a positive return. Even if the holder of a rupee today has no productive use of the funds, he can always lend it to someone who has. Say, the borrower is able to use his skills and talent to generate a return of 18% per annum after meeting all expenses, including his labour. It would always be beneficial for him to borrow the rupee at any rate below 18% per annum since he would have always have a surplus over his borrowing cost. In effect, time value of money is a natural and logical feature of money – something like gravity – life would be practically inconceivable without taking into account the time value of money! It is beyond imagination as to how would human society function, leave alone prosper, if the time value of money is not explicitly accounted for in our daily life and is so important that it is identified by a special term – Rate of Interest or simply Interest – and makes Finance such an interesting and complex subject of study.

The Nobel Prize winning economist Amartya Sen, in his Paolo Baffi Lecture (1991), “Money and Value On the Ethics and Economics of Finance”, makes a very profound and incisive comment on the dissonance between the low image of the practice of finance and the high social contribution it undoubtedly makes. In his words, “Finance has been traditionally subjected to much moral criticism. Yet it is also widely acknowledged that finance plays an important part in the prosperity and well-being of nations. How is it possible that an activity that is so useful has been viewed as being morally so dubious?”

Interest not only has a dirty sound to it, and charging of interest is prohibited in all the Abrahamic religions – Judaism, Christianity, and Islam.  We Indians are different since we are much more pragmatic and explicitly incorporated risk in our analysis, and in addition have a magic called caste. As per Dr. Y V Reddy, the ex-RBI Governor, in ancient India, “According to Manu and Vasistha, the interest rates were not to vary depending on the risk involved or the purpose for which the money was borrowed. But they were directly linked to the caste classification of the borrowers. Brahmin was to be charged 2 per cent, Kshatriya 3 per cent, Vaishya 4 per cent and Shudra 5 per cent per month. However, Chanakya’s interest rate structure was risk-weighted since the rate of interest increased with the risk involved in the borrowers’ business. The interest rate worked out to be 15 per cent per annum for general advances. The traders were charged a rate of 60 per cent per annum. Where the merchandise had to pass through forests, the traders had to pay 120 per cent per annum while those engaged in the export-import business handling sea-borne cargo had to pay 240 per cent per annum.”

Back to our story

Now since it is virtually impossible for human societies to function without borrowing and lending money (it would be needlessly inefficient), and since handling funds need special skills, various social groups developed in different parts of the world in the business of money lending.

In the western world, the Jews found a loop-hole which enabled them to get into the money lending business. The precise injunction as per their holy books being that, ‘thou shall not lend upon usury to thy brother but unto a stranger thou mayest lend upon usury’. That is, it was permissible for Jews to lend money on interest to non-Jews but not to other Jews. This enabled them to get into the money lending business initially in the Middle East and they later spread throughout Europe and later to the Americas. Similarly, various social groups developed skills in money lending and spread in other regions. For example, Gujaratis in Africa, Tamils and Chinese in South East Asia, Marwaris all over Indian sub-continent and Afghans in pockets of North India – and life went on for centuries.

 

However, about 500 years ago the Jews started getting lucky. Europe, which was one of the main areas in which Jews operated their traditional profession, started to develop and modernize with increasing speed with the coming of the Industrial Revolution there. This led to increasing accumulation of wealth in these areas. The increased scale of manufacturing and trade needed larger and larger amounts of capital, a large part of which was provided by the Jew bankers, which made them wealthier and wealthier over time. With wealth came education and social prestige. The education helped in funding and nurturing the legions of Jewish scientists, philosophers, economists etc. The wealth and social prestige invited jealousy and hatred, which was greatest in areas which had seen the most economic growth – Western Europe. The Middle East saw little growth till recently, and Jews continued to live across their traditional areas such as Egypt, Levant, Iraq, littoral states of the Persian Gulf etc. as they had lived over the ages – in comfortable co-existence with other social and religious groups. And in this historical circumstance lies the ill reputation that Jews have unwittingly built around themselves!

The irony lies in the fact, that Judaism, Christianity, and MusIslam share very many common cultural and religious symbols and practices. They all are part of what is known as the Abrahamic religions, with all the Prophets of Jews being acknowledged as Prophets by the Christians, and again all the Prophets of the Jews and Christians being considered as Prophets by the Muslims! But the reverse is not true and that is where the friction is generated.

Similarly, restrictions on the consumption of pork are common particularly in the Middle East amongst both Jews and Muslims. Even some Christian sects, such as, Seventh-day Adventists Eritrean Orthodox Church, and the Ethiopian Orthodox Church disfavor consumption of pork and consider it taboo.

Some Concluding Remarks

The power of bankers and banking should never be underestimated. Just consider WW I & II. The cause of both these wars was need to prove their superiority by the imperialist powers. In Europe all the main powers were either fighting with each other or trampling over the rest. No country was left unaffected – except one – which was small and virtually in the centre of all the fighting and had no army or other protection worth the name. But their defining strength was that they were bankers to all the countries involved in the Wars. The country is Switzerland.

It is through the control of banking in Europe and America and the associated wealth, that Jews continue to hold disproportionate power across the world, which in turn gives them substantial political power. So much so, that all the Arab powers with their vastly large populations and plenty of oil money have not been able to displace tiny Israel, which is surrounded on all sides by extremely hostile neighbours.