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Moral Capitalism: A Biblical-(Answered)

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Friedman, Hersey H., & Adler, William, D. (October 01, 2011). Moral Capitalism: A Biblical Perspective.?American Journal of Economics and Sociology, 70,?4, 1014-1028.


Moral Capitalism: A Biblical Perspective

 


 

ajes_800

 


 

1014..1028

 


 

By HERSHEY H. FRIEDMAN* and WILLIAM D. ADLER**

 

ABSTRACT. We argue that laissez-faire capitalism in its current form is

 

unsustainable, and that if it is to survive, we need to develop a new

 

moral capitalism. An underexplored source on the subject that may

 

provide insight into current difficulties is the Hebrew Bible. We

 

explicate four basic principles of the Hebrew Bible and Talmud on

 

economic affairs, and show how these ancient ideas can be used to

 

create a more moral economic system.

 


 

Introduction

 


 

During the past several decades many crises have beset the American

 

laissez-faire capitalist system. The savings and loan debacle cost

 

American taxpayers $124 billion and led to the failure of more than

 

1,000 banks. This was followed by numerous corporate scandals

 

involving accounting fraud and financial irregularities at such firms as

 

Enron, Adelphia, Global Crossing, WorldCom, and Tyco International.

 

In 2008, the largest Ponzi scheme in history, perpetrated by Bernard

 

Madoff, also made it apparent that our financial system was not being

 

monitored properly. The final straw, of course, has been the financial

 

meltdown that has nearly destroyed the world economy. Millions of

 

jobs have been lost worldwide and trillions of dollars in assets have

 

evaporated.

 

It is ironic that just when the world has given up on communism,

 

it has become clear that capitalism in its current form, based on

 

theories of pure rationality, is also in trouble. A number of scholars

 

have been warning the American public that capitalism based solely

 

on greed was dangerous. Robinson (2007) asserted that the singleminded pursuit of self-interest has caused much harm to society and

 

*Hershey H. Friedman is Professor of Business and Marketing at Brooklyn College of

 

the City University of New York. He can be reached via email at x.friedman@att.net.

 

**William D. Adler is Patrick Henry Postdoctoral Fellow, John Hopkins University,

 

Political Science Department. He can be reached via email at williamadler@gmail.com.

 

American Journal of Economics and Sociology, Vol. 70, No. 4 (October, 2011).

 

? 2011 American Journal of Economics and Sociology, Inc.

 


 

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that we should cease associating Adam Smith with this doctrine. In

 

actuality, Smith believed that ?society . . . cannot subsist among those

 

who are at all times ready to hurt and injure one another.? In the book

 

he believed would establish his reputation, The Theory of Moral

 

Sentiments, Smith made it clear that he believed that economic growth

 

depended on morality. To Smith, benevolence?not pursuit of selfinterest?was one of the highest virtues (Pack 1991). Smith (2002: 162)

 

argued that:

 

Man . . . ought to regard himself, not as something separated and detached,

 

but as a citizen of the world, a member of the vast commonwealth of

 

nature and to the interest of this great community, he ought at all times to

 

be willing that his own little interest should be sacrificed.

 


 

Alvey (1999) demonstrates how economics started out as a moral

 

science but somehow got derailed and is no longer concerned about

 

ethics. He quotes Sen, who discusses the discipline and says ?economics has been substantially impoverished by the distance that has

 

grown by economics and ethics.?

 

Suskind (2008) reports that Alan Greenspan, Chairman of the

 

Federal Reserve, was at a meeting on February 22, 2002 after

 

the Enron debacle and was upset with what was happening in the

 

corporate world. Greenspan noted how easy it was for CEOs to ?craft?

 

financial statements in ways that could deceive the public. He slapped

 

the table and exclaimed, ?there?s been too much gaming of the

 

system. Capitalism is not working! There?s been a corrupting of the

 

system of capitalism? (Suskind 2008). Lawrence H. Summers, in a 2003

 

speech to the Chicago Economic Club, made the following prescient

 

remark: ?For it is the irony of the market system that while its very

 

success depends on harnessing the power of self-interest, its very

 

sustainability depends upon people?s willingness to engage in acts

 

that are not self-interested? (Snyder Belousek 2009).

 

The business world will have to make significant changes to overcome its tendency toward selfishness. One way this can be accomplished is through changes in the business school curriculum. The

 

current financial crisis has made it quite apparent, for instance, that

 

business schools have to rethink what they are teaching (Holland

 

2009; Jacobs 2009; Vass 2009). Mandatory ethics courses in most MBA

 

curricula have apparently not been very successful. One study found

 


 

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that graduate business students are the most likely to cheat; 56 percent

 

of them admitted to cheating (Di Meglio 2006). Even before the

 

financial meltdown, scholars were maintaining that ?today?s business

 

schools, by elevating shareholder profit above social benefits and

 

other concerns, may have unintentionally become breeding grounds

 

for a generation of Gordon Gekkos? (Mangan 2006: A14?A16). Friedman and Friedman (2008) maintain that it is time for homo spiritualis

 

to replace homo economicus in the business curriculum.

 

Leaders as diverse as President Barack Obama, French premier

 

Nicolas Sarkozy, and Pope Benedict XVI all agree that capitalism

 

based on selfish behavior is not sustainable (Berenson 2008). The

 

Pope just signed his third encyclical, ?Charity in Truth? (Caritas in

 

Veritate), in which he calls for a radical new approach to the world

 

economy that requires ?greater social responsibility on the part of

 

business? (Donadio and Goodstein 2009). The Pope notes that the

 

?pernicious effects of sin are evident? in our economic system and he

 

singles out the financiers who have not been building their work on

 

an ethical foundation (Donadio and Goodstein 2009). President

 

Obama, in a speech at Georgetown University on April 14, 2009,

 

called for ?a new economic foundation? for the United States. He felt

 

that the Bible could be used as a basis for this new approach

 

(Leonhardt 2009).

 

We agree with the president. The Hebrew Bible is replete with

 

precepts that deal with business ethics and can therefore be used as

 

a starting point for those interested in developing a more moral

 

capitalistic system. Considerably more than 100 of the 613 precepts in

 

the Pentateuch1 deal with economic life and business (Green 1997).

 

The Bible has had a profound effect on a countless number of people.

 

The Bible is the most popular book of all time?it is estimated that as

 

many as 6 billion copies have been sold?and is the source of many

 

metaphors and scenarios that can be very helpful to those interested

 

in developing a new kind of capitalism.

 

Rather than attempting to merely maximize shareholder wealth,

 

companies need to give workers and consumers a stake in the

 

investments they make. A model of capitalism oriented around strict

 

principles of rationality has encouraged too much selfishness. Stakeholder theory has long recognized the importance of including moral

 


 

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principles in the running of businesses (Freeman 1984). Leaders must

 

consider the interests of all the stakeholders, rather than only do what

 

is best for shareholders. These stakeholders include the local community, customers, employees, the environment, the nation, society, and

 

suppliers. Of course, decisions that are good for one group may be

 

contrary to the interests of other groups. An ethical leader does not

 

only focus on the needs of stockholders and is thus mainly interested

 

in short-term profits. Instead, the needs of all stakeholders are considered and balanced.

 

Based on work by Donaldson and Preston (1995), we argue here for

 

a moral conception of corporate responsibility, guided by the principles of the Hebrew Bible. This article will outline four principles,

 

derived from the Hebrew Bible and Talmud, on which a new moral

 

capitalism can be based. Together, these principles can be used as a

 

foundation for an economic system that produces growth and jobs

 

while simultaneously incorporating ethical, environmental, and social

 

responsibility and respecting human dignity.

 

A New Kind of Capitalism: Four Biblical Principles

 

Principle One: Material Wealth, Not Greed

 


 

Scholars such as Friedman (2001) and Levine (1998) agree that the

 

attitude of the Hebrew Bible towards wealth is quite positive. One

 

does not have to be an ascetic and disdain owning property. The ideal

 

system is not one in which every individual has exactly the same

 

amount of property. The Bible recognizes that there will be poor as

 

well as wealthy individuals. What matters is how the wealth is used

 

and whether or not one is grateful to God for it. Wealth, peace, and/or

 

long life should be seen as rewards from God for obeying His laws

 

(Leviticus 26: 3?13; Deuteronomy 11: 13?16; Deuteronomy 25: 15;

 

Proverbs 22: 4). The patriarchs, Abraham, Isaac, and Jacob, were all

 

affluent. Abraham leaves Egypt ?very rich in livestock, silver, and gold?

 

(Genesis 13: 2). He uses his wealth to build altars for God and to tithe

 

(Genesis 13: 18; Genesis 14: 20). The Bible states clearly that Isaac was

 

blessed by God and became very prosperous, so prosperous that he

 

aroused the envy of the Philistines (Genesis 26: 12?14). Jacob had to

 


 

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escape Esau and arrives in Padan Aram, hometown of Laban, penniless. Twenty years later, after working as a shepherd for his fatherin-law, Laban, Jacob becomes extremely wealthy. In fact, in his prayer,

 

he notes how kind God has been to him; he started out with only a

 

staff and became so prosperous that he has become two entire camps

 

(Genesis 32: 11).

 

Wealth is good; greed, on the other hand, is not. One scholar, in

 

discussing the Ten Commandments, asks why the dictum ?you shall

 

not covet the house of your fellow, you shall not covet the wife of

 

your fellow, his servant, his maid, his ox, his donkey, nor anything

 

that belongs to your fellow? (Exodus 20: 14) is considered so important as to require inclusion in the Decalogue. After all, it is only

 

coveting, and does not seem to require much in the way of action. His

 

answer is that once you engage in coveting?which inevitably entails

 

greed and lust (itself a manifestation of greed)?you often end up

 

violating the other nine commandments as well (Avi Ezer, commentary

 

to Exodus 20: 14). This commandment thereby demonstrates that

 

there is nothing intrinsically wrong with owning property; greed,

 

however, is considered a serious problem.

 

Amos (4: 1) says that acquiring wealth is acceptable, but using it for

 

the wrong purposes is not: ?Hear this word, you cows of Bashan, who

 

are on the hill of Samaria, who defraud the poor, who crush the

 

needy, who say to their husbands, ?Bring so we may carouse!? ?

 

Clearly, the prophet is concerned about the wives of the powerful and

 

wealthy who in their desire for a flamboyant lifestyle push their

 

husbands to become deceitful and not care for the destitute.

 

Kantzer (1989), in his discussion of Christian business ethics,

 

makes a clear distinction between greed and the acquisitive motive:

 

?greed is always bad. The acquisitive motive implanted in us at

 

Creation is not bad; it represents a divine, providential motive for

 

work and expenditure of energy for our own good.? Green (1997:

 

21?30) uses the Hebrew Bible and Talmud in developing guiding

 

principles of Jewish business ethics. He likewise concludes that

 

Jewish law takes into account the belief that ?all wealth derives from

 

and, in a sense, belongs to God, who apportions it to human beings

 

as caretakers and stewards.? God?s ultimate ownership of all property makes humanity ?tenant farmers for God,? in his view. Business

 


 

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activity is fine, as are profits, as long as people are guided by moral

 

laws.

 

There are numerous examples in the Hebrew Bible where kindness

 

trumps the belief in private property and other principles of capitalism. Thus, the Bible demands (Exodus 22: 25?26): ?if you ever take

 

your neighbor?s garment as a pledge, you must return it to him before

 

nightfall. For that is his only covering, it is his garment for his skin.

 

What will he sleep in? When he cries to Me, I will hear, for I am

 

gracious.? Similarly, one is not permitted to take a widow?s garment as

 

a pledge (Deuteronomy 24: 17). Land was restored to its original

 

owners during the Jubilee year (Leviticus 25: 13). On this concept,

 

Hertz (1992: 533) observes, ?in this way the original equal division of

 

the land was restored. The permanent accumulation of land in the

 

hands of a few was prevented, and those whom fault or misfortune

 

had thrown into poverty were given a ?second chance.? ? Of course,

 

historically not everyone did this for purely altruistic reasons; nevertheless, the Bible?s aim is to encourage good behavior regardless of

 

underlying motives. It is inevitable that with time wealth will become

 

inequitably distributed and the gap between rich and poor will be

 

great. The Jubilee ensures that there will be a redistribution of wealth

 

every 50 years. Hertz (1992: 533), quoting Heine, makes the observation that the Bible aims at the ?moralization of property.? Thus, we

 

see that capitalism based on greed is not consistent with biblical

 

values. Capitalism that has biblical values built into it can help lead to

 

a more acceptable economic system.

 

Principle Two: Industriousness

 


 

According to the Bible, working hard is an integral component of a

 

moral life. As the Psalmist declares (128: 2): ?when you eat the labor

 

of your hands, you shall be happy, and it shall be well with you.?

 

Schnall (2001: 49) feels that this text supports the view ?that the six

 

days of labor hold intrinsic religious value in rough parallel to the

 

spiritual benefits derived from the Sabbath itself.? The creation story in

 

Genesis shows God being pleased after each day of creation with

 

what He has accomplished, demonstrating that even God finds great

 

joy in productive labor.

 


 

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Rae (2004) notes that the messianic vision of Isaiah (2: 4) in which

 

nations will ?beat their swords into plowshares and their spears into

 

pruning hooks? is one in which people work with their tools, plowshares and pruning hooks. Humankind works to improve the world

 

and make it a better place for everyone. This will help lead to Isaiah?s

 

vision of a future with all of humanity living in an idyllic, rustic,

 

spiritual world filled with beauty and peace (Isaiah 11: 6?9).

 

The ?Woman of Valor? hymn in Proverbs (31: 10?31) describes the

 

attributes of the perfect wife. What is fascinating about it is that it

 

describes an entrepreneurial woman. The following are the traits of

 

this ideal woman: (1) She is industrious:

 

She seeks out wool and flax, and works with her hands willingly . . . She

 

stretches out her hands onto the distaff, and her palms support the

 

spindle . . . She arises while it is yet night, and gives food to her household

 

and a portion to her maidservants . . . She does not eat the bread of

 

idleness.

 


 

(2) She is enterprising: ?She considers a field and buys it; from the fruit

 

of her handiwork she plants a vineyard . . . She makes a cloak and

 

sells it, and supplies aprons to the merchant.? (3) She is honest: ?She

 

knows that her merchandise is good.? (4) She is charitable: ?She

 

spreads out her palm to the poor; and extends her hand to the

 

needy . . . the lesson of kindness is on her tongue.? (5) She is devout:

 

?a woman who is God-fearing shall be praised.? The Bible thus

 

describes an entrepreneur who simultaneously refuses to lose sight of

 

higher goals.

 

Principle Three: Social Responsibility

 


 

Jonathan Sacks, the Chief Rabbi of Great Britain, sees the Bible as

 

?God?s call to human responsibility? (Sacks 2005: 28). In fact, he

 

argues that responsibility is its ?greatest overarching theme? (Sacks

 

2005: 135). As noted above, prophets such as Isaiah (1: 17) stressed

 

that humanity should ?learn to do good.? The Bible demands that our

 

entire economic system be built on a foundation of social responsibility. Friedman and Klein (forthcoming) demonstrate that the Hebrew

 

Bible was concerned with such issues as conservation of resources,

 

pollution, humane treatment of animals, and beautifying the environ-

 


 

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ment. Humankind, according to Jewish tradition, has an obligation to

 

make the world a better place. This philosophy is known as tikkun

 

olam, which means repairing the world. People have an obligation to

 

imitate God (Leviticus 19: 2), which implies acting in a manner that is

 

concerned with social realities, in the same way that God cares about

 

society (Levine 1993: 14?15). People were given dominion over the

 

entire earth (Genesis 1: 26) for a purpose. We are the caretakers of this

 

planet and have to continue God?s work of creation by improving the

 

world and making it a better place for all. Each individual is obligated

 

to participate in this task (Tamari 1998). Indeed, the Psalmist (104: 14)

 

thanks God for the wondrous and magnificent world He created. The

 

Psalmist (104: 24) concludes, ?how manifold are your works O God!

 

All were made with wisdom; the earth is full of your possessions.?

 

The Bible is concerned with all aspects of business ethics. In fact,

 

Friedman (2000) shows how many of ethicists? contemporary concerns regarding business ethics have their antecedents in the Hebrew

 

Bible. Thus, fair treatment of employees, avoidance of fraud and

 

deception, tampering with weights and measures, and raising prices

 

unjustly are all serious crimes. Indeed, the verse states (Proverbs 11:

 

1): ?dishonest scales are an abomination to the Lord; but a just weight

 

is his delight.? The Talmudic sages thought business ethics were so

 

important that they say the first question an individual is asked in the

 

next world at the final judgment is, ?were you honest in your business

 

dealings?? (Babylonian Talmud, Shabbat 31a). The prophet Jeremiah

 

(9: 23?24) succinctly stated what truly matters. Individuals, organizations, and countries should not be praised for their might or riches, but

 

for ?practicing kindness, justice, and righteousness to everyone on

 

earth.?

 

There has to be some regulation since people are often tempted to

 

cheat. Thus, the first independent audit is described in the Book of

 

Exodus. The Bible states (Exodus 38: 21?31), ?these are the accounts

 

of the Tabernacle, the Tabernacle of the Testimony, as they were

 

calculated according to the commandment of Moses . . .? Moses realized the importance of making a full accounting of all contributions

 

and commanded others to do a proper audit so that the Israelites

 

would not have cause to suspect that even one piece of gold or silver

 

used in the construction of the Tabernacle went into any individual?s

 


 

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pocket (Midrash Exodus Rabbah 51: 1). The Bible placed strict limits

 

on charging interest (Exodus 22: 25; Deuteronomy 23: 19?20). Similarly, the Talmud (Babylonian Talmud, Baba Batra 89a) reports that

 

the sages required market commissioners to be appointed to supervise

 

weights and measures.

 

A key component of social responsibility is respect for all people

 

and society at large. There are numerous passages in the Bible dealing

 

with helping the poor and downtrodden. The Psalmist declares

 

(Psalms 82: 3): ?do justice to the needy and the orphan; deal righteously with the poor and the impoverished; rescue the needy and the

 

destitute and save them from the hand of the wicked.? The Bible

 

constantly refers to helping the destitute, the orphan, the widow, and

 

the stranger. Isaiah (1: 17) also makes this very same point: ?learn to

 

do good; seek justice, aid the oppressed, defend the orphan, plead for

 

the widow.?

 

The Bible sees the positive side of the acquisitive motive and in

 

private property. Yet there are some laws that seem to be inconsistent

 

with the concept of private property. These laws deal with gleanings

 

and the corner of the field. The Bible states (Leviticus 19: 9?10):

 

When you harvest the harvest of your land, you shall not complete your

 

reaping to the corner of your field, and the gleanings of your harvest you

 

are not to gather. You shall not glean your vineyard; and the fallen fruit of

 

your vineyard you are not to gather; for the poor and the stranger you are

 

to leave them.

 


 

Another passage expresses a similar idea (Deuteronomy 24: 19?21):

 

When you reap the harvest in your field and overlook a sheaf in the field,

 

do not turn back to get it; for the stranger, the orphan, and the widow it

 

shall be?in order that the Lord your God may bless you in all your

 

undertakings. When you beat down the fruit of your olive trees, do not go

 

over them again; for the stranger, the orphan, and the widow it shall be.

 

When you gather the grapes of your vineyard, do not pick it over again;

 

for the stranger, the orphan, and the widow it shall be.

 


 

The corners of the field were not harvested by the owner but were left

 

for the poor. In addition, individual stalks that fell from the sickle

 

during the harvest had to be left for the poor. Also, if a bundle of grain

 

was accidentally left in the field during the harvest, it too had to be left

 

for the indigent. In a similar vein, the farmer was not permitted to pick

 


 

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all the fruits off the vine or tree and leave it bare. He was obligated

 

to leave the gleanings of the vine and the olive tree for the poor

 

(Maimonides, Mishneh Torah, Laws of Gifts to the Poor, 1: 1?15).

 

What is unique about these laws is that private property from the

 

biblical perspective is not entirely private. Humankind is permitted to

 

own property; however, God is a silent partner who demands that a

 

portion of this property be used for spiritual purposes. The Bible in

 

effect gives the indigent the right to a portion of a landowner?s field.

 

From the Book of Ruth (Chapter 2), it is apparent that the poor

 

followed the harvesters while they were working and picked up the

 

gleanings. The harvesters did not have the right to tell them not to

 

trespass. Indeed, the poor owned the corner of the field and the

 

gleanings belonged to them. The verse (Leviticus 25: 23) stresses the

 

fact that the true owner of all property is not man: ?the land shall not

 

be sold in perpetuity, for the land is Mine: for you are strangers and

 

sojourners with me.? The obvious lesson to be derived from this is that

 

the Bible accepts private property but demands that a portion of the

 

profits be used to help the poor. Charity is not sufficient.

 

Capitalism that draws from the Bible requires that all firms help the

 

poor by setting aside a portion of a company?s profits for the needy.

 

According to Maimonides (Mishneh Torah, Laws of Gifts to the Poor,

 

10: 7), the highest form of charity is providing one with the ability to

 

earn a living so that the individual does not become poor. He derives

 

this from the verse in Leviticus (25: 35) that talks about ?strengthening?

 

the destitute individual: ?if your brother becomes impoverished and

 

his hand falters beside you, you shall strengthen him, whether he is a

 

stranger or a native, so that he can live with you.? This may be

 

accomplished by providing a gift or loan enabling one to start a

 

business, taking the destitute person in as a partner, or helping the

 

individual find employment. Thus, government should work with

 

business to ?strengthen? those in economic jeopardy by providing

 

individuals with training and employment. If a firm finds that it has to

 

close down a plant because of economic conditions, management

 

should do everything possible to find employment for the affected

 

employees in other parts of the company.

 

The obligation to take care of the poor and helpless is not merely

 

the responsibility of individuals but is also the responsibility of the

 


 

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entire society. The economic system has to function in a way such that

 

the poor and helpless are taken care of. Ezekiel argues that the sin of

 

Sodom was not caring about the plight of the needy: ?Behold, this was

 

the sin of your sister Sodom; she and her daughters had pride, plenty

 

of bread, and untroubled tranquility; yet she did not strengthen the

 

hand of the poor and the needy? (Ezekiel 16: 49). Ezekiel also says

 

that since ?the people of the land have perpetrated fraud and committed robbery; they have wronged the poor and needy and

 

defrauded the stranger without redress . . . I have therefore poured out

 

My wrath over them and consumed them with My fire of fury? (Ezekiel

 

22: 29, 31).

 

Job started out as a wealthy capitalist and emphasized how he ran

 

his business with concern for those around him: ?because I rescued

 

the poor that cried, and an orphan, and him who had no one to help

 

him, the blessings of the forlorn came upon me, and I caused the

 

widow?s heart to sing with joy? (Job 29: 13). A system that makes the

 

poor and helpless ?sing with joy? is the only one in accordance with

 

the Bible. Job describes how a...

 

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