Foundations of a Jewish Economic Theory

More from the latest Azure. Rabbi Yosef Yitzhak Lifshitz writes about the differing Jewish and Christian attitudes towards private property and the obligation to give charity.



The summary:

In the classical Christian view, man should not keep more than he needs to live modestly, and property should be made available to the needy, even in contravention of the owner’s wishes.



Jewish tradition, in contrast, takes a positive view of both the institution of ownership and the accumulation of wealth. It respects economic success, seeing it as both a blessing and the basis of normative life on earth—so long, that is, as it is obtained honestly, and proper respect is shown for the social responsibility that accompanies it.

Thus, while in Christian thought wealth is inherently suspect, Jewish law sees the obligation to give charity as simply one of many moral obligations man has towards his neighbor. No poor man has a right to demand redistribution of wealth from the rich. The rich are legitimately blessed by God, and must - like everyone else - help their fellow Jews who are in need.



R' Lifshitz concludes as follows (apologies for the long-winded quote):

Is it possible to draw conclusions from this with respect to economic policy? It is fair to suggest that any economic system that sets severe limits on the individual’s control over his property, restricts the degree of wealth one may attain through honest means, or undermines his capacity to give charity voluntarily is inconsistent with a desire to enable man to act in accordance with the Jewish understanding of the godliness within him. An economic system based on the redistribution of income with the aim of fostering economic equality is likely to violate many of these basic tenets. By supporting a great portion of its population through transfer payments, such a system encourages dependence and undermines the value of hard work and creative innovation. At the same time, the heavy taxation required to sustain such a system seems to violate the basic right to private property, and undermines the incentive to work, innovate, and take responsibility. The Jewish approach seeks to encourage individual responsibility and innovation among both society’s most successful and its poorest members, for it is in these qualities that man acts as one created in God’s image.



None of this is to say that the government cannot create a safety net for society’s poor through taxes. If citizens are given the economic breathing room to support the needy through philanthropy, it is legitimate to demand that all citizens contribute a minimum amount to that end—perhaps even using the biblical model of a ten-percent minimum of charitable contribution. Regardless of the way it is implemented, what makes a welfare system accord with the principles of a Jewish economics is not that the solution to economic distress be laid solely on the shoulders of individuals, but that it be found through policies which encourage a sense of responsibility among all citizens, wealthy and poor. True charity stems, first and foremost, from the goodness of one’s heart, and not from the mechanism of coercion. In the words of Rabbi Elazar: “The reward of charity depends entirely upon the kindness in it.”

In a radio interview after the original publication of this essay, R' Lifshitz explained - rightly, in my opinion - that he wasn't suggesting that Judaism calls for unrestricted free markets. He suggested that, while he preferred to avoid labels, the model is more like the European social democratic system, with private property and free markets combined with a social support system for the needy.



This answer disappointed me. While this describes the Jewish economic model reasonably well, it is far from an accurate depiction of European social democracy.



For example, his theory of Jewish property rights would seem to imply, though he avoids saying so, that income should be taxed by a flat tax (like the Biblical tithes). Indeed, Jewish sources forbid giving more than one-fifth of one's income to charity. It would seem to make a progressive tax schedule illegitimate; after all, the rich has as much a right to their honestly-earned property as do the non-rich.



What European social democratic society even comes close to a 20% maximum tax rate, let alone a flat tax? Most charge that much just for value-added tax (VAT) alone, with income taxes even higher!



Furthermore, the European welfare state does not stop with a safety net for the poor. It includes comprehensive cradle-to-grave nannying of all citizens, nationalizing their health care, pension funds and more. Respect for private property indeed exists, but only within the boundaries of an excessive regulatory and tax system. How does this square with the second-to-last paragraph quoted above? That paragraph is a perfect critique of the European economic system!



I suspect one of the following explanations:



1. Maybe R' Lifshitz didn't write those concluding paragraphs himself - note that it's the only place in the essay where he discusses economic policy. Perhaps the editors added them as a summary, feeling it necessary to address policy ramifications, and they don't accurately reflect his views?



2. Maybe R' Lifshitz reconsidered his policy conclusions and backtracked?



3. Maybe the above paragraphs do reflect R' Lifshitz's policy conclusions, but he realized it was counterproductive for him to be associated with "right-wing economics" and so he preferred to portray himself as being within the Israeli mainstream by using a phrase like "European social democracy"?



I'm mystified.