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