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I'd like to welcome Derek Pensler who is
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a professor of Israel studies at Oxford
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University and also a professor of
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Jewish history at the University of
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Toronto. Welcome to Knowledge at
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Wharton. Thank you. Thank you for
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joining us today. Um I want to ask you
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uh what are the features of a Jewish
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approach to economics and uh and how
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that differs from other approaches. But
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before I get to that, uh, I wanted to
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start with this idea of what do you
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think of pairing ethnicity with
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economics? Uh, and looking at the two
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together because that can be a
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controversial idea just starting off. It
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can be very controversial. No matter how
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you approach it, it it is sensitive. The
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fact is that until the 1930s, 1940s, it
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was very common for scholars, including
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Jewish scholars, who were really
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embedded in their communities, to write
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about the uh the relationship between
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the Jewish religion or Jewish
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nationality and Jewish economic
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behavior. Nothing wrong really was
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attributed to it. Anti-semites were
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making outrageous comments about Jewish
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economic behavior or domination, but but
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Jews considered it a completely
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acceptable thing to do. And then came
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the horrors of the
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1930s4s, Nazism, the Holocaust. And in
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the wake of that, a lot of the language
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that had been used to talk about Jews as
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a kind of an ethnic unit and an economic
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unit was discredited. It was considered
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no longer appropriate to talk about Jews
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that way. Even by Jews, even by Jews.
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And so Jewish scholarship, scholarship
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on the history of the Jews tended to
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focus on anything but economics,
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religion was okay, politics was okay,
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culture was okay, but economics was
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taboo. Very few people wrote on
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economics every every now and then. And
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just in the last, I'd say decade, decade
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and a half, we now see young scholars
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who are now, you know, two generations
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removed away from from the Holocaust who
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are beginning to take this subject up
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again. And after all, you can't
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understand any kind of group behavior
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without e without without economics. So,
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enough time has passed, it would seem. I
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think enough time has passed, although
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there are people who still are um
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nervous about it because of the way that
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anti-semites have made use of economic
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arguments to demean the Jews. Well,
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let's get into what some of these
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characteristics or features of the
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Jewish approach are and and how they may
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differ from other cultures, other
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countries, other nations. Well, one
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thing I I would say there's there's not
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some a monolithic thing called the
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Jewish economy that sort of marches
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across space and time. It's just that
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there seem to be certain forms of
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economic behavior or or economic culture
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throughout much of the Jewish world that
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seem to repeat themselves in in many
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different circumstances and it's hard to
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know how far back to go. But certainly
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by the time we get into the later middle
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ages up through early modern times, 20th
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century, the most important thing really
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is just one sentence, which is that Jews
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throughout most of history have not been
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peasants or aristocrats. Throughout most
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of human history, most people until
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recently were peasants. They worked the
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land. They often couldn't leave the
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land. And that doesn't encourage
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economic innovation. It doesn't
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encourage literacy. It doesn't encourage
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numeracy. It doesn't encourage
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entrepreneurship. And aristocrats are
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lords of the land and they tend to be a
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warrior elite and that also does not
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encourage innovation. So who innovates
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in the society? The middle classes, the
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towns people, the bourgeoa or the
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burgers. Well, Jews have been for
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millennia primarily a people of
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townsmen. It might be a small town, it
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might be a large one. And they've worked
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in a mixture of crafts, but also in in
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commerce. When people are doing that
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generation after generation, they
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develop certain comparative advantages
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whether it's literacy or numeracy. And
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let's not forget the fact that Jews are
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connected with each other across space.
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The Jew in one town in Poland has Jewish
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distant family from another part of
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Poland or from somewhere in Germany and
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so on.
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So uh but the Israeli economy as you
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alluded to in your last answer has
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changed a lot over the last 30 years.
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let's say without going back centuries
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just look at the last 30 years and it's
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gone from largely a social socialistic
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approach to the economy to a much more
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capitalistic approach can you talk about
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that change and how it came about why it
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came about sure and I can do it by
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actually bridging a little bit from you
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know the 16 1700s I was talking about a
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second ago into into directly into your
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question which is the Jewish world in
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central eastern Europe primarily was
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just overwhelmed by the possibility of
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revolution in the 19th century,
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capitalist revolution, transformation of
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economic relations, but also socialism,
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communism, various movements on the left
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and national movements. Zionism is after
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all a classic form of of Jewish
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nationalism were caught up with this
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idea of of a revolutionary change in the
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Jewish people. So Zionism when it
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realized itself in the state of Israel
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in 1948 was very strongly dominated by I
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wouldn't say a socialist
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ideology as such but one that had had
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socialist elements where the state
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played a very major role in the
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development of the country in the
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promotion of the nation. There was a lot
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of state-owned industry there were
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severe limits on wages. So for example,
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wage differentials between workers and
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say physicians or professors in the
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early state of Israel were quite
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minimal. So there was this kind of
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egalitarian ethos, not socialism per se,
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but kind of social democracy. And that
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was one kind of Jewish I would say
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economy in that it was influenced by the
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very strong role Jews had played in the
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revolutionary movements in the early
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20th century. But that was Israel of one
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era, 1950s,60s.
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It already begins to loosen up in the
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70s and the 80s. Israel becomes an
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industrial powerhouse
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manufacturing textiles, medical
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technology. It's no longer making money
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selling oranges and oranges and
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grapefruit alone. There's a lot more to
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the Israeli economy. And then comes the
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great uh privatization wave that begins
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in the 1980s and has really continued to
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our own day. stateowned industries are
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sold off. Um, and there's a kind of
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neoliberal economy where now Israel is
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one of the world centers really for
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investment from abroad and of economic
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innovation. It's seen uh as a world
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center for high-tech innovation in
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particular, but all kinds of innovation,
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right? Um, and uh I'm wondering to what
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extent uh the military in Israel has has
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played a role in that development of
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high-tech. How closely related are those
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two? They're very closely related now.
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They are in pretty much any country. So
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take aerospace and develops in
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California and you know the United
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States from uh World War II on. So
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clearly high-tech innovation in the
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United States, the internet came after
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all out of the US military. So that kind
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of connection is not unique to Israel.
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The difference is that the United States
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has this massive economy and as big as
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the military is in the US, there's an
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enormous consumer-driven business-driven
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economy. Israel is a smaller country
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with a smaller economy and the military
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is far more pervasive. So there's a lot
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more direct applications of military
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technology to the private sector. So it
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can be that some kind of programming
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that was developed let's say to help
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provide directional assistance to
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fighter aircraft might then become used
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in GPS um for for civilian automobiles.
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This sort of thing the much more direct
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transfer of technology. So uh over over
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history there's been other groups that
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have had um prominent merchant classes
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that also uh went to other parts of the
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world and established beach heads. I'm
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thinking of particularly the the Chinese
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throughout Southeast Asia uh where um
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they are often some of the chief
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merchant classes in some of the big
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cities in Southeast Asia even today
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although they are a a tiny percentage of
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the population. uh and India is another
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example where uh there's there's been a
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lot of merchant activity many much of
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which has or some of which has gone
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overseas. So there's a diaspora for from
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India of business people. How do those
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groups uh how are they similar to what's
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happened in Israel and to Jews over the
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years and how how do they differ? Well,
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there's there's two different ways of
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answering the question. One is that Jews
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until really 1948 were almost like a a
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periphery or a diaspora without a
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center. That is spiritually they had
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this notion of the land of Israel as
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their center. But that wasn't really
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their physical demographic home. So they
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were like a donut as it were, but
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there's no center in the donut. And they
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dealt with each other throughout the
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Jewish world. So you've got that Jewish
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merchant in New York who's got the
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colleague or the relative in Cleveland
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and someone in Los Angeles. So there's a
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lot of horizontal integration. And
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something similar happened of course
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with let's say Indian merchants
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throughout um much of Africa throughout
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British Africa. The difference is that
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there was a homeland. There was a
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homeland and although some of these
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Indian merchants never saw that homeland
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some of them did uh you know you have
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Mahandas Gandhi for example who's in his
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case an attorney from Gujarat in India
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but then he winds up making his career
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partially in South Africa and then comes
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back to India. there is a center,
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there's a place to go back to for
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Israel, for the state of Israel, that
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only happens in 1948. Then you have a
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state. But until really the 1970s, you
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don't have lots and lots of Israelis
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living abroad as you do now. Now there's
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an Israeli diaspora of who knows half a
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million, as many as a million living in
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the United States. They have very close
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ties, including economic ties with the
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state of Israel. So I'd say now the
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Israeli diaspora relates to Israel
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economically the way that the Indian
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diaspora or the Chinese diaspora of the
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past may have dealt with their
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homelands. So it's become more similar
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since it's becoming more similar because
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Israel is a normal state in that sense
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and the Israeli diaspora is a normal
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diaspora.
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Uh Israel as as I mentioned is well
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known for being innovative for being
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innovative in high-tech in particular.
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Are are there attributes of the Israeli
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economy related to that that can be
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adopted or adapted by other countries
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that see that success and and you know
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just as they would look at Silicon
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Valley and say how can we develop
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something like that in our country?
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Well, theoretically, yes, but it might
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be difficult because there are national
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cultures. There are ways of behaving.
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And if you look at Israel and the way,
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for example, the high-tech sector works
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in Israel, there's tremendous
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informality. There are authority
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structures, but they're very loose and
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you can challenge authority. You can
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challenge your boss and things uh are
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are much less well organized. There's a
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lot more improvisation. So the question
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is whether these corporate cultures in
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other parts of the world are frankly
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willing to loosen up uh the way that
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Israel has uh Israelis also they bring
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into the project a lot of intellectual
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independence um and one has to be
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willing to listen to a lot of that and
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so it has to be much more of a group
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sort of decision-making process than an
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individualistic one. Uh what I don't
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know if it can be translated as easily
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is the sense Israelis have of a very
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strong solidarity which keeps them
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united despite the often lack of the the
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lack of strong authority structures.
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Israel has a sense of common threat
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whether it's real or perceived is not
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the issue. There's that sense and uh
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there's a sense of sort of Jewish
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solidarity. Whether one can replicate
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that in other parts of the world, I'm
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not sure. But the actual chain of
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command, the way decisions are taken on
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a daily basis, the way brainstorming
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takes place. Yes, of course, one could
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try to replicate that. Uh, one last
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question. Any idea what the next
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iteration of the Israeli economy might
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look like? Are you seeing anything today
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that's moving on? That's that's a
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departure from what we tend to think
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about or or think we know about the
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Israeli economy today. Well, one thing's
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for sure. uh Israel shows every sign of
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continuing to be uh a world leader in
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many aspects of uh of high-tech but it's
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it's not just that and the fact is
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Israel does have competition and it's
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not just the United States and Canada
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there's the European Union and I mean
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Israel is not alone in this and there is
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a concern in Israel that uh inadequate
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government funding uh if the startup
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funding for example the investment
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funding that comes from venture capital
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uh capitalists all over the world if
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this were to dry up then the Israeli
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startup economy would dry up. So, Israel
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in some ways is very vulnerable. What I
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think might begin to happen is that
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Israel will become not only a leader in
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the development of new technologies, but
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the adaption of existing ones, the
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exist, for example, desalination, which
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30 years ago was considered outrageously
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expensive and simply impracticable. But
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Israel is now uh adopting desalination
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that I think is providing up to 70% of
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the country's drinking water. the
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country will actually have a water
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surplus in a few years. This would have
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been absolutely unheard of. They're
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using technology which is in part
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homegrown. A lot of it's come from from
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elsewhere. So Israel's innovation isn't
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simply that they're developing things at
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home. It's also what they make use of
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comes from what comes from the outside.
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So a second last question which is um
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what haven't I asked you that would be
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interesting for viewers to understand
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about the Israeli economy? I think what
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would be really interesting to
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understand I guess two things. One is
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similarities and differences between the
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Israeli economy and its Jewishness,
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however we can define that, and American
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Jews because American Jews by and large
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are is a very successful ethnic
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religious minority. Uh but it does not
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display as an aggregate it seems the
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same kind of thirst for innovation that
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one finds in the state of Israel.
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American Jews are by and large a
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comfortable and successful minority. And
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if anything, the innovative aspects of
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that community are being bled away by
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success. You know, 50, 60 years ago,
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American Jews, the first generations to
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go to university, they worked very hard.
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They had to be innovative to to make it
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in the world. Whereas now, they're more
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comfortable and they can trod in, you
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know, wellestablished paths in business,
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in the professions. Whereas in Israel,
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there still is this still is this kind
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of thirst to to succeed.
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And the other thing I would sort of want
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to mention gets back to where we started
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is is it even appropriate to ask these
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questions about the Jewishness of an
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Israeli economy. So um I would just say
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that in other parts of the world in
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China and in India there's much less
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embarrassment about talking about the
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relationship between culture and
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economics. Scholars of Indian studies
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simply do this all the time. What
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they're careful about and I would finish
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with this. There's a difference between
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saying that there can be a cultural
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influence behind economic behavior and
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some sort of determinant that people
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because they belong to a certain ethnic
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community or identify with it that they
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are automatically blessed or cursed or
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you know predetermined to succeed or to
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fail economically. There's enormous
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parameters, enormous spectrum of
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possibilities. This is not an issue of
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race. This is not an issue of uh
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genetics. This is an issue of culture.
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culture is fluid and organic and all
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we're talking about is a field of
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possibilities which in the case of
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Israel they've managed to realize.
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Thanks very much for joining us. You're
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welcome.
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[Music]
