History of the Jews (51 page)

The pattern can be seen changing in eighteenth-century America. At the beginning of the century, the Jews there were almost entirely concentrated in the overseas trading sector, dealing in jewels, coral, textiles, slaves, cocoa and ginger. In 1701 in New York, though only 1 per cent of the population, they formed 12 per cent of the overseas trading community. By 1776, this proportion had fallen to only 1 per cent, as the Jews, feeling increasingly settled, secure and accepted, turned their backs on the sea—their traditional escape-route—and began to look inland, to developing the continent. They became settlers themselves, and sold guns, rum, wine, ironware, glass, furs and provisions.

In Europe, the financial means which held together the great coalition against Louis
XIV
, and eventually broke his military dominance of Europe—as it was to do Napoleon’s—was largely assembled by Jews. William of Orange, later William
III
of England, who led the coalition from 1672 to 1702, was financed and provisioned by a group of Dutch Sephardi Jews operating chiefly from The Hague. The two leading
providiteurs general
, as William had them called, were
Antonio Alvarez Machado and Jacob Pereira. As we have seen, such men, however useful they might be to Continental princes, had to operate in a climate of financial and personal insecurity. It required intense pressure from William and the Austrian emperor, for instance, to secure Machado or his agents admission into a city like Cologne. England, by contrast, was a far more secure base from which to operate. In 1688 the Lopez Suasso family advanced William two million gulden to finance his invasion of England, Suasso telling him: ‘If you are fortunate, I know you will pay me back. If you are unlucky, I agree to lose them.’
⁷³
Once William was safely installed many Jewish financiers moved to London, led by Pereira’s son Isaac, who became commissary-general there, being paid the enormous sum of £95,000 for shipping and supplies during the year September 1690 to August 1691.
⁷⁴

In London the Jews became a founding element in the financial market of the City which grew up in William’s day. The element of anti-Jewish blackmail, which dominated Jewish-state relations on the Continent, was not wholly absent to begin with. The Earl of Shrewsbury, as secretary of state, wrote to the Lord Mayor in February 1690: ‘Taking into consideration that the Jews residing in London carry on, under favour of the government, so advantageous a trade’, their ‘offer only of £12,000’ was ‘below what His Majesty expected of them’; it ought, he added, to be doubled to £20,000 or even raised to £30,000; and ‘His Majesty believes that, upon second thoughts’, they will ‘come to new resolutions’.
⁷⁵
But the English government did not confiscate Jewish fortunes or rob Jews by oppressive lawsuits. Solomon de Medina, chief London agent for the Hague consortium, was never brought to book for his many misdeeds—he admitted he bribed the Duke of Marlborough, the allied captain-general, £6,000 a year during the years 1707-11. William
III
had dined with him in Richmond in 1699 and knighted him the following year, and if Solomon ended up practically bankrupt, that was due to his own miscalculations, not to anti-Semitic fury.
⁷⁶

Whereas in central Europe the pillaging of an Oppenheimer could produce financial crisis, the London Jews, secure in their property, were able to help the state to avoid them. The Menasseh Lopes family under Queen Anne, the Gideons and the Salvadors under the first three Georges, played notable roles in maintaining the stability of London financial markets. They avoided the South Sea Bubble. When the Jacobite rising of 1745 panicked the City, Samson Gideon (1699-1762) raised £1,700,000 to help the government restore calm. At his death he left over £500,000, which went to his heir, not the
government—though the Gideons moved into the House of Lords and out of Judaism.
⁷⁷

It was the unconscious collective instinct of the Jews both to depersonalize finance and to rationalize the general economic process. Any property known to be Jewish, or clearly identifiable as such, was always at risk in medieval and early modern times, especially in the Mediterranean, which was then the chief international trading area. As the Spanish navy and the Knights of Malta treated Jewish-chartered ships and goods as legitimate booty, fictitious Christian names were used in the paperwork of international transactions, including marine insurance. These developed into impersonal formulae. As well as developing letters of credit, the Jews invented bearer-bonds, another impersonal way of moving money. For an underprivileged community whose property was always under threat, and who might be forced to move at short notice, the emergence of reliable, impersonal paper money, whether bills of exchange or, above all, valid banknotes, was an enormous blessing.

Hence the whole thrust of Jewish activity in the early modern period was to refine these devices and bring them into universal use. They strongly supported the emergence of the institutions which promoted paper values: the central banks, led by the Bank of England (1694) with its statutory right to issue notes, and the stock exchanges. Jews dominated the Amsterdam stock exchange, where they held large quantities of stock from both the West and East India Companies, and were the first to run a large-scale trade in securities. In London they set the same pattern a generation later in the 1690s. Joseph de la Vega, an Amsterdam Jew (though a nominal Protestant) wrote the earliest account of stock exchange business in 1688, and Jews were probably the first professional stock jobbers and brokers in England: in 1697, out of one hundred brokers on the London exchange, twenty were Jews or aliens. In due course, Jews helped to create the New York stock exchange in 1792.

Next to the development of credit itself, the invention and still more the popularization of paper securities were probably the biggest single contribution the Jews made to the wealth-creation process. Jews hastened the use of securities just as much in areas where they felt safe as in areas where they were vulnerable, for they saw the entire world as a single market. Here, too, the global perspective which the diaspora gave them turned them into pioneers. For a race without a country, the world was a home. The further the market stretched, the greater were the opportunities. For people who had been trading regularly from Cairo to China in the tenth century, the opening up of the Atlantic,
Indian and Pacific oceans to commerce in the eighteenth century was no great challenge. The first wholesale trader in Australia was a Montefiore. The Sassoons built the first textile mills and factories in Bombay. Benjamin Norden and Samuel Marks started up industry in Cape Colony. The Jews were in the whaling trade at both poles. More important than these specific pioneering efforts was the Jewish drive to create world markets for the staple articles of modern commerce—wheat, wool, flax, textiles, spirits, sugar, tobacco. The Jews went into new areas. They took big risks. They dealt in a wide variety of goods. They held big stocks.

Jewish financial and trading activities in the eighteenth century became so widely diffused that economic historians have sometimes been tempted to regard them as the primary force in creating the modern capitalist system. In 1911 the German sociologist Werner Sombart published a remarkable book,
Die Juden und das Wirt-schlaftsleben
, in which he argued that Jewish traders and manufacturers, excluded from the guilds, developed a destructive antipathy to the fundamentals of medieval commerce. These were primitive and unprogressive: the desire for ‘just’ (and fixed) wages and prices, for an equitable system in which shares of the market were agreed and unchanging, profits and livelihoods modest but guaranteed, and limits placed on production. Excluded from the system, Sombart argued, the Jews broke it up and replaced it with modern capitalism, in which competition was unlimited and pleasing the customer was the only law.
⁷⁸
Sombart’s work was later discredited because it was used by the Nazis to justify their distinction between Jewish commercial cosmopolitanism and German national culture; and Sombart himself, in
Deutscher Sozialismus
(1934), endorsed the Nazi policy of excluding Jews from German economic life. Sombart’s thesis contained an element of truth but the conclusions he reached were exaggerated. Like Max Weber’s attempt to attribute the spirit of capitalism to Calvinist ethics, it left out inconvenient facts. Sombart ignored the powerful mystical element in Judaism. He refused to recognize, as did Weber, that wherever these religious systems, including Judaism, were at their most powerful and authoritarian, commerce did not flourish. Jewish businessmen, like Calvinist ones, tended to operate most successfully when they had left their traditional religious environment and had moved to fresh pastures.

But if Jews formed only one of the elements in creating the modern commercial system, it was certainly an influential one. They rationalized what had previously been a comfortable, traditional and often obscurantist process. Their influence was exercised in five principal
ways. First they favoured innovation. The stock market was a case in point. This was an efficient and rational way of raising capital and allocating it to the most productive purposes. Traditional mercantile interests, unable to distinguish between the market’s occasional excesses and its fundamental validity, objected. In 1733, Sir John Barnard
MP
introduced, with all-party support, a Bill to make illegal ‘the infamous practice of stockjobbing’.
Postlethwayt’s Universal Dictionary of Trade and Commerce
(1757) condemns ‘those mountebanks we very properly call stockbrokers’. Stockjobbing was ‘a public grievance’, ‘scandalous to the nation’. Many of these accusations were dealt with by the Portuguese Jew Joseph de Pinto in his
Traité du crédit et de la circulation
(1771). In general, financial innovations which Jews pioneered in the eighteenth century, and which aroused much criticism then, became acceptable in the nineteenth.

Secondly, Jews were in the vanguard in stressing the importance of the selling function. Here again, there was much traditional opposition. Daniel Defoe’s
Complete English Tradesman
(fifth edition 1745), for instance, condemned elaborate window-dressing as immoral.
Postlethwayt’s Dictionary
commented on the ‘recent innovation’ of advertising (1751): ‘however mean and disgraceful it was looked upon a few years since, by people of reputation in trade, to apply to the public by advertisements in the papers, at present it seems to be esteemed quite otherwise, persons of great credit in trade experiencing it to be the best…method of conveying whatever they have to offer to knowledge of the whole kingdom’. A Paris ordinance of 1761 actually forbade traders ‘to run after one another trying to find customers’ or ‘distribute handbills calling attention to their wares’. Jews were among the leaders in display, advertising and promotion.

Thirdly, they aimed for the widest possible market. They appreciated the importance of economies of scale. As in banking and moneylending during the Middle Ages, they were willing to accept much smaller profits in return for a larger turnover. They accordingly—and this was their fourth main contribution—strove hard to reduce prices. They were much more willing than established traders to make an inferior, cheaper product and sell to a popular market. They were not alone in this. Sir Josiah Child, in his
Discourse on Trade
(fourth edition 1752) pointed out: ‘If we intend to have the trade of the world, we must imitate the Dutch, who make the worst as well as the best of all manufactures, that we may be in a capacity of serving all markets and all humours.’ The ability of Jews to undercut aroused much comment, fury and accusations that they cheated or traded in
smuggled or confiscated goods. In fact it was usually another case of rationalization. Jews were prepared to trade in remnants. They found uses for waste-products. They accepted cheaper raw materials, or devised substitutes and synthetics. They sold inferior goods to the poor because that was all the poor could afford. They effected further economies of scale by opening general stores selling a wide variety of products under the same roof. This angered traditional traders, who specialized, particularly when Jews attracted custom through what we would now call ‘loss leaders’. Above all, Jews were more inclined than others in commerce to accept that the consumer was the ultimate arbiter of trade, and that businesses flourished by serving consumer interests rather than guild interests. The customer was always right. The market was the final judge. These axioms were not necessarily coined by Jews or exclusively observed by Jews, but Jews were quicker than most to apply them.

Finally, Jews were exceptionally adept at gathering and making use of commercial intelligence. As the market became the dominant factor in all kinds of trading, and as it expanded into a series of global systems, news became of prime importance. This was perhaps the biggest single factor in Jewish trading and financial success. By the time of the Industrial Revolution, they had been operating family trading networks, over a growing area, for the best part of two millennia. They had always been passionate letter-writers. From Leghorn, Prague, Vienna, Frankfurt, Hamburg, Amsterdam, and later from Bordeaux, London, New York and Philadelphia—and between all these centres—they ran sensitive and speedy information systems which enabled them to respond rapidly to political and military events and to the changing demands of regional, national and world markets. Such families as the Lopez or Mendes of Bordeaux, the Carceres of Hamburg, the Sassoons of Baghdad, the Pereiras, the D’Acostas, the Coneglianos and the Alhadibs, operating from branches in many cities, were among the best-informed people in the world, long before the Rothschilds set up their own commercial diaspora. Traditional, medieval-style commerce tended to suffer from what has been termed the ‘physical fallacy’, that goods and commodities have a fixed and absolute value. In fact value varies in space and time. The larger the market, the longer the distances, the greater the variations. Getting the right goods in the right place at the right time is the essence of commercial success. It always had been. But in the eighteenth century, the increasing size and scale of the market made it of paramount importance. It enhanced the significance of strategic decision-making in business. Decisions, naturally, reflect the quality of the information
available in reaching them. That was where the Jewish networks scored.