March 3rd 2012

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Articles from this issue:

CANBERRA OBSERVED: Labor pushes the self-destruct button

QUEENSLAND: Issues facing voters on March 24

EDITORIAL: Beyond the leadership woes: Labor's identity crisis

RURAL AFFAIRS: Huge cost of abolishing national wheat pool

ENVIRONMENT: Rudd's costly carbon capture scheme a dud

ENVIRONMENT: Earth Hour: World Wildlife Fund publicity stunt

INTERNATIONAL AFFAIRS: Western media duped by mirage of Arab Spring

UNITED STATES: Obama's left-wing diplomacy a global failure

STOCK MARKET: From mutual associations to profit-seeking enterprises

CIVILISATION: Has Europe lost its soul?

MARRIAGE: Don't blame gay lobby for decline in marriage

EUTHANASIA: Stacking the deck by suppressing contrary views

CINEMA: Baker Street sleuth's new look

BOOK REVIEW Should America have dropped the Bomb?

BOOK REVIEW A child's imagination is a terrible thing to waste

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Has Europe lost its soul?

by Chief Rabbi Lord Sacks

News Weekly, March 3, 2012

On December 12, 2011, the United Kingdom’s Chief Rabbi Lord Jonathan Sacks, spiritual leader of the United Hebrew Congregations of Britain and the Commonwealth, met Pope Benedict XVI in the Vatican. The two men exchanged views on the modern world’s loss of spiritual values, the current global financial crisis and the relationship between politics and religion.

After the meeting, the Chief Rabbi visited Rome’s Pontifical Gregorian University, where he spoke on the importance of business ethics based on Jewish and Christian principles. He paraphrased this with a famous Christian text: “What will it profit Europe if it gains the world yet loses its soul?”

A shortened version of his talk is reproduced below.

What I hope to show in this lecture is the religious roots of the market economy and of democratic capitalism. They were produced by a culture saturated in the values of the Judeo-Christian heritage, and market economics was originally intended to advance those values.

If Europe loses the Judeo-Christian heritage that gave it its historic identity and its greatest achievements in literature, art, music, education, politics, and as we will see, economics, it will lose its identity and its greatness, not immediately, but before this century reaches its end.

When a civilisation loses its faith, it loses its future. When it recovers its faith, it recovers its future. For the sake of our children, and their children not yet born, we — Jews and Christians, side-by-side — must renew our faith and its prophetic voice. We must help Europe recover its soul.

* * * * *

Let me begin with a striking passage from Niall Ferguson’s recent book, Civilisation. In it he tells of how the Chinese Academy of Social Sciences was given the task of discovering how the West, having lagged behind China for centuries, eventually overtook it and established itself in a position of world pre-eminence. At first, said the scholar, we thought it was because you had more powerful guns than we had. Then we concluded it was because you had the best political system. Then we realised it was your economic system. “But in the past 20 years, we have realised that the heart of your culture is your religion: Christianity. That is why the West has been so powerful. The Christian moral foundation of social and cultural life was what made possible the emergence of capitalism and then the successful transition to democratic politics. We don’t have any doubt about this.”

The Chinese scholar was right. The same line of reasoning was followed by the Harvard economic historian, David Landes, in his magisterial The Wealth and Poverty of Nations. He too pointed out that China was technologically far in advance of the West until the 15th century. The Chinese had invented the wheelbarrow, the compass, paper, printing, gunpowder, porcelain, spinning machines for weaving textiles and blast furnaces for producing iron. Yet they never developed a market economy, the rise of science, an industrial revolution or sustained economic growth. Landes too concludes that it was the Judeo-Christian heritage that the West had and China lacked.

Admittedly the phrase “Judeo-Christian tradition” is a recent coinage and one that elides significant differences between the two religions and the various strands within each. Different scholars have taken diverse tracks in tracing the economic history of the West. Max Weber famously spoke about The Protestant Ethic and the Spirit of Capitalism, with special emphasis on Calvinism. Michael Novak has written eloquently about the Catholic ethic. Rodney Stark has pointed out how the financial instruments that made capitalism possible were developed in the 14th century banks in pre-Reformation Florence, Pisa, Genoa and Venice.

Those who emphasised the Jewish contribution, from Karl Marx to Werner Sombart, tended to do so in a spirit of criticism. Nonetheless it cannot be pure coincidence that Jews, numbering less than a fifth of a per cent of the population of the world, have won more than 30 per cent of Nobel Prizes in economics and include such contributions as John von Neumann’s invention of Games Theory, Milton Friedman’s monetary economics, Joseph Stiglitz’ development economics, and Daniel Kahneman and Amos Tversky’s behavioural economics and the less-than-fully-rational way in which we make market choices. The biblical Joseph may have been the world’s first economist, having discovered the theory of trade cycles — seven years of plenty followed by seven lean years. The financial state of Europe would be better today if people knew their Bible.

There is, though, enough common ground to speak, at least here, of shared values. First there is the deep biblical respect for the dignity of the human individual, regardless of colour, creed or class, created in the image and likeness of God. The market gives more freedom and dignity to human choice than any other economic system.

Second is the biblical respect for property rights, as against the idea prevalent in the ancient world that rulers were entitled to treat property of the tribe or nation as their own. By contrast, when Moses finds his leadership challenged by the Israelites during the Korach rebellion, he says about his relation to the people, “I have not taken one ass from them nor have I wronged any one of them.” The great assault of slavery against human dignity is that it deprives me of the ownership of the wealth I create.

Then there is the biblical respect for labour. God tells Noah that he will be saved from the flood, but it is Noah who has to build the ark. The verse “Six days shall you labour and do all your work, but the seventh day is a Sabbath to the Lord your God” means that we serve God through work as well as rest.

Job creation, in Judaism, is the highest form of charity because it gives people the dignity of not depending on charity.

Equally important is Judaism’s positive attitude to the creation of wealth. The world is God’s creation; therefore it is good, and prosperity is a sign of God’s blessing. Asceticism and self-denial have little place in Jewish spirituality. By our labour and inventiveness we become, in the rabbinic phrase, “partners with God in the work of creation”.

Above all, from a Jewish perspective, the most important thing about the market economy is that it allows us to alleviate poverty. Judaism refused to romanticise poverty. It is not, in Judaism, a blessed condition. It is, the rabbis said, “a kind of death” and “worse than fifty plagues”.

At the other end of the spectrum they believed that with wealth comes responsibility. Richesse oblige. Successful businessmen (and women) were expected to set an example of philanthropy and to take on positions of communal leadership. Conspicuous consumption was frowned upon, and periodically banned through local “sumptuary laws”. Wealth is a Divine blessing, and therefore it carries with it an obligation to use it for the benefit of the community as a whole.

The rabbis favoured markets and competition because they generate wealth, lower prices, increase choice, reduce absolute levels of poverty, and extend humanity’s control over the environment, narrowing the extent to which we are the passive victims of circumstance and fate. Competition releases energy and creativity and serves the general good.

* * * * *

So the market economy and modern capitalism emerged in Judeo-Christian Europe and not in other cultures like China that were more advanced in other ways. The religious ethic was one of the driving forces of this once new form of wealth creation.

Equally, however, this same ethic taught the limits of capitalism. It might be the best means we know of for generating wealth, but it is not a perfect system for distributing wealth. Some gain far more than others, and with wealth comes power over others. Unequal distribution means that some are condemned to poverty. And poverty is not just a physical disaster for those without the means to sustain themselves. It is a psychological disaster. Poverty humiliates. It can also force the poor into a cycle of dependence. They may be forced to borrow. They might in biblical times be forced to sell themselves into slavery.

The Hebrew Bible refuses to see as an inexorable law of nature, a Darwinian struggle in which, in Thucydides’ words, “The strong do what they can and the weak suffer what they must.” That is the ethics of ancient Greece, not the ethics of ancient Israel.

And so we find in the Bible an entire structure of welfare legislation: the corner of the field, the forgotten sheaves, and other parts of the harvest, left for the poor, together with the tithe on certain years; the sabbatical year in which all produce is available for everyone, debts cancelled and slaves set free; and the jubilee year in which ancestral land returned to its original owners.

This is a highly sophisticated system, aimed at two things: first that the poor should have means of a livelihood, and second that there should be, every seven and fifty years, periodic redistributions to correct the inequalities of the market and establish a level playing field. And what was done in biblical times in a largely agricultural economy was done in post-biblical times through a vast extension of the tzedakah, the word we usually translate as charity, though it also means justice.

Every Jewish community in the Middle Ages had an elaborate system of tzedakah that amounted to nothing less than a mini-welfare state. There was a chevra, a fellowship, gathering and distributing funds for every conceivable purpose: for poor brides, for the sick, for education, for burial, so that no one was deprived of the means of a dignified existence. What made this structure remarkable, indeed unique, was not only that it was the first of its kind, the precursor of the modern welfare state, but also that it was entirely voluntary, the collective decision of a community with no governmental power and often no legal rights.

So not only is the market the outcome of a Judeo-Christian ethic. So too is a keen sense of the limits of the market and the need to supplement it with a system of welfare itself funded by the market.

* * * * *

However as the critics of capitalism pointed out, the market does not create a stable equilibrium. It engages in creative destruction, or as Daniel Bell put it, capitalism contains cultural contradictions. It tends to erode the moral foundations on which it was built. Specifically, as is manifest clear in contemporary Europe, it erodes the Judeo-Christian ethic that gave birth to it in the first place.

Instead of seeing the system as Adam Smith did, as a means of directing self-interest to the common good, it can become a means of empowering self-interest to the detriment of the common good. Instead of the market being framed by moral principles, it comes to substitute for moral principle. If you can buy it, negotiate it, earn it and afford it, then you are entitled to it — as the advertisers say — because you’re worth it. The market ceases to be merely a system and becomes an ideology in its own right.

We find it increasingly hard to understand why there might be things we want to do, can afford to do and have a legal right to do, that none the less we should not do because they are unjust, or dishonourable, or disloyal, or demeaning. When Homo economicus displaces Homo sapiens, market fundamentalism rules.

* * * * *

Let’s begin with the current crisis and what led to it. First the sheer complexity of the financial instruments involved in subprime mortgages and the securitisation of risk, was so great that for many years their true nature eluded the regulatory authorities, who continued to give the firms involved Triple A ratings, despite the fact that as early as 2002 Warren Buffett described them as weapons of mass financial destruction. Governments, and sometimes even the bankers themselves, did not fully understand the risks involved nor the way in which failure in any part of the banking system could cause the entire system to collapse.

Second, many people, especially in America but also in Europe, were encouraged to take out mortgages, often with low initial repayment rates, that they could not repay, and that those encouraging them should have known they could not repay except under the most optimistic and unlikely scenarios of continued low interest rates and continually rising house prices. This is forbidden in Jewish law under the biblical prohibition: “You shall not place a stumbling block before the blind.”

Third, the bankers themselves not only awarded themselves disproportionately high salaries but also, by providing themselves with “golden parachutes”, insulated themselves from the very risks to which they were exposing both their customers and their shareholders. Almost two thousand years ago the rabbis established a series of enactments precisely to avoid the possibility that someone could benefit from failure or dereliction of duty.

Fourth, no one who reads the Bible with its provisions for the remission of debts every seventh year could fail to understand how morally concerned it is to prevent the build up of indebtedness, of mortgaging freedom tomorrow for the sake of liberty today.

There are larger issues. There is the fundamental question of who can control the modern international corporation and to whom is it accountable. In medieval times, however much the owners of land abused those who worked for them, there was an organic connection between them. The landowner had some interest in the welfare of those who worked for him, for if they were well and reasonably happy, they worked reasonably well. Likewise in the 19th century, industrialists may have created appalling working conditions, but at least some enlightened employers, like Robert Owen or the Cadburys and Rowntrees, knew that satisfied employees produced good work. Their example, together with the great 19th century social reformers, eventually led to more humane working conditions.

To whom are international corporations answerable? Often they do not employ workers. They outsource manufacturing to places far away. If wages rise in one place, they can, almost instantly, transfer production to somewhere else. If a tax regime in one country becomes burdensome, they can relocate to another. To whom, then, are they accountable? By whom are they controllable? For whom are they responsible? To which group of people other than shareholders do they owe loyalty? The extreme mobility, not only of capital but also of manufacturing and servicing, is in danger of creating institutions that have power without responsibility, as well as a social class, the global elite, that has no organic connection with any group except itself.

It was precisely the breakdown of trust that caused the banking crisis in the first place. We sometimes make the mistake of thinking that the market is a shrine to materialism, forgetting that its keywords are deeply spiritual. “Credit” comes from the Latin credo meaning “I believe.” “Confidence” comes from the Latin meaning “shared faith.” “Trust” is a word that has deeply religious resonance. Try running a bank, a business or an economy in the absence of confidence and trust and you will know it can’t be done. In the end we do not put our faith in systems but in the people responsible for those systems, and without morality, responsibility, transparency, accountability, honesty and integrity, the system will fail. And as it happens, the system did fail.

With this we come to perhaps the most profound truth of the Judeo-Christian ethic. That ethic, based on justice, compassion and respect for human dignity, took moral restraint from “out there” to “in here.” Good conduct was not dependent on governments, laws, police, inspectorates, regulatory bodies, civil courts and legal penalties. It was dependent on the still, small voice of God within the human heart. It became part of character, virtue and an internalised sense of obligation. Jews and Christians devoted immense energies to training the young in the ways of goodness and righteousness. A moral vision, a clear sense of right and wrong, was present in the stories they told, the texts they read, the rituals they performed, the prayers they said and the standards the community expected of its members.

If you were Jewish, you knew what it felt like to be a slave in Egypt, eating the bread of affliction and the bitter herbs of slavery. You knew what it felt like to be homeless for forty years as you wandered through the desert. You knew the call of Isaiah, “Learn to do good, seek justice, rebuke the oppressor, defend the fatherless, plead for the widow.” You had social justice engraved in your neural pathways. When I asked the developmental economist Jeffrey Sachs what motivated him in his work, he replied immediately, tikkun olam, the Jewish imperative to heal a fractured world. Christians did likewise. They did not need regulatory bodies to ensure that they worked for the common good. They knew they were morally responsible, even if they were not legally liable, for the consequences of their decisions for the lives of others.

Those who believe that liberal democracy and the free market can be defended by the force of law and regulation alone, without an internalised sense of duty and morality, are tragically mistaken.

* * * * *

The concept of the holy is precisely the domain in which the worth of things is not judged by their market price or economic value. This fundamental insight of Judaism and Christianity is all the more striking given their respect for the market. Their strength is that they resisted the temptation to believe that the market governs the totality of our lives, when it fact it governs only a limited part of it, that which concerns goods subject to production and exchange. There are things fundamental to being human that we do not produce; instead we receive from those who came before us and from God Himself. And there are things which we may not exchange, however high the price.

When everything that matters can be bought and sold, when commitments can be broken because they are no longer to our advantage, when shopping becomes salvation and advertising slogans our litany, when our worth is measured by how much we earn and spend, then the market is destroying the very virtues on which in the long run it depends.

* * * * *

Today, in a Europe more secular than it has been since the last days of pre-Christian Rome, the culprits are an aggressive scientific atheism tone deaf to the music of faith; a reductive materialism blind to the power of the human spirit; global corporations uncontrollable by and sometimes more powerful than national governments; forms of finance so complex as to surpass the understanding of bodies charged with their regulation; a consumer-driven economy that is shrivelling the imaginative horizons of our children; and a fraying of all the social bonds, from family to community, that once brought comfort and a redemption of solitude, to be replaced by virtual networks mediated by smartphone, whose result is to leave us “alone together.”

What can we do, we who, because we have faith in God, have faith in God’s faith in humankind? There is a significant phrase that Pope Benedict XVI has often used: creative minority.

If there is one thing Jews know how to be it is a creative minority. So my proposal is that Jews and Catholics should seek to be creative minorities together. A duet is more powerful than a solo. Renouncing any aspiration for power, we should seek to encourage the single most neglected source of energy in a consumer-driven, profit-maximising society, namely the power of altruism.

We should use this moment of recession to restore to their rightful place in society the things that have value but not a price: marriage, the family, home, dedicated time between parents and children, the face-to-face friendships that make up community, the celebration of what we have — not the restless pursuit of what we don’t, a sense of gratitude and thanksgiving, and a willingness to share some of God’s blessings with those who have less.

These are the true sources of lasting happiness and have been empirically proved to be so.

A full transcript of the above address is available at:


Capitalism’s morality gap: Davos founder

German economist Dr Klaus Schwab, founder and leader of the prestigious annual World Economic Forum, which meets annually in Davos, Switzerland, said in a recent interview that went unreported in Australia: “We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations.

“Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.

“We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual.... Capitalism, in its current form, has no place in the world around us.”

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