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In 1978, Friedrich Hayek proposed a great debate. He was by then almost eighty years old, but the passion with which he sought to defend the market order against what he saw as the heresy of collectivism was undiminished. So, as if hoping to settle the issue once and for all, he suggested nothing less than an international disputation that would discuss the question, “Was socialism a mistake?” The event did not take place, but Hayek nonetheless produced a large manuscript setting out his beliefs, which was published in an abridged form as The Fatal Conceit. What interests me in particular about the book is its last chapter, “Religion and the Guardians of Tradition.” What led Hayek, who had devoted a lifetime to the study of economics and politics, to seal this work with a reflection on religion and tradition?

The striking feature of religion, for Hayek, is its attitude of humility, even reverence, towards the great moral institutions without which our complex liberal democratic societies could not have developed. It guards against what he calls “the rationalist delusion that man, by exercising his intelligence, invented morals that gave him the power to achieve more than he could ever foresee.” Of course it does so by insisting that our morals were given by God. For Hayek, they were arrived at by the evolutionary forces of history. What these two views held in common, though, was a strong and principled opposition to the idea that individually or collectively we can devise a better system rationally constructed to maximize happiness or some other good.

It is a fascinating argument, and it places Hayek in a line of thinkers—such as Edmund Burke, Max Weber, and most recently Francis Fukuyama—who have reflected not only on the morality of the marketplace (what we call nowadays “business ethics”) but on the wider question of what kind of society gives rise to and is able to sustain a market economy. The answer each of them gave—an answer that has been given new salience by the rise of the economies of Southeast Asia—is that it tends to be a society with a strong respect for certain kinds of tradition.

Like Burke, Hayek combines liberalism in economics and politics with a marked conservatism in morality. Free institutions, Burke and Hayek seem to say, are best preserved by a certain piety towards the past. Traditions encode the accumulated wisdom of earlier generations in a way that no single generation, however sophisticated, could discover for itself; and it is through learning those traditions and passing them on to our children that we avoid extremely costly mistakes. Paradoxically, it may be just those societies that have strong religious and moral habits that form the best environment for economic development and technological innovation. It may be that those who are most secure in their past are the most confident and energetic in shaping the future.

Twenty years after The Fatal Conceit and a decade after socialism’s fall, it is important for us to bear in mind that the market economy can be sustained only by the habits of behavior and restraint that Hayek called traditions. He believed that the threat to these traditions was socialism. Doubtless, in his day it was. But what he paid far less attention to was the possibility that traditions might be undermined not by antimarket ideologies but by the very power of the market itself. For the market is not only an institution of exchange. It is also a highly antitraditional force, at least in advanced consumer societies. The stimulation of demand, for example, depends on a culture, even a cult, of the new, the product that improves on the past and renders it obsolete in an increasingly short space of time. It encourages a view of human life itself as a series of consumer choices rather than as a set of inherited ways of doing things.

One of the most fateful developments is the displacement of human identity. Our identity used to be something given by the history into which we are born. Now we conceive of it as something like a suit of clothes we can choose, wear for a while, and then discard in favor of the new season’s fashion—the move graphically illustrated by our change of terminology from “life” to “lifestyle,” with its suggestion that there is nothing of substance that defines who we are. In the process, religion itself is transformed from salvation to a branch of the leisure industry, and we are transformed, as one writer put it, “from pilgrim to tourist.”

That is why it is sometimes useful to do what Hayek advised us to do in The Fatal Conceit, namely, to reflect on the role of religion in sustaining a particular kind of moral order. That is what I want to do, taking the experience of Jews and Judaism as an example. It was of course Max Weber, in his famous work on The Protestant Ethic and the Spirit of Capitalism, who made us familiar with the idea that religion—in particular Calvinism—was one of the great shaping forces of the modern economy. More recently Michael Novak has written powerfully about the same subject from a Catholic perspective. But few writers have doubted the contribution Jews made to the development of finance, business, and industry, a contribution that can be traced far back into the Middle Ages and beyond.

It would be quite wrong to identify a great religious tradition with any particular set of economic institutions. It was, after all, the biblical Joseph who instituted the first known example of centralized economic planning, using the seven years of plenty to prepare for the seven years of famine, and whose ability to forecast trade cycles is probably still the envy of economists. Jewish history contains some of the great experiments in socialist utopias, from the property—sharing communities of the Essenes in the Second Temple period to the modern Israeli kibbutz. But there is no doubt that, for the most part, Jews and Judaism itself found free competition and trade the system most congruent with their values.

What was it about Judaism that led to this elective affinity between it and the market economy? In his stimulating recent book The Wealth and Poverty of Nations, David Landes identifies a number of factors. First there was the biblical respect for property rights. This he sees as nothing less than a revolution against the ancient world and the power it gave rulers to regard the property of the tribe or the people as their own. By contrast, when Moses finds his leadership challenged by the Israelites during the Korach rebellion, he says about his relation to the people, “I have not taken one ass from them nor have I wronged any one of them.”

For a ruler to abuse property rights is, for the Hebrew Bible, one of the great corruptions of power. Judaism is the religion of a people born in slavery and longing for redemption; and the great assault of slavery against human dignity is that it deprives me of the ownership of the wealth I create. At the heart of the Hebrew Bible is the God who seeks the free worship of free human beings, and two of the most powerful safeguards of freedom are private property and economic independence. The ideal society envisaged by the prophets is one in which each person is able to sit “underneath his own vine and fig tree.” The prophet Samuel in his famous speech on the dangers of monarchy—which might borrow Hayek’s title The Road to Serfdom—warns against the constant temptation of kings to expropriate persons and property for the public good. Government, he seems to argue, may be necessary, but the less of it there is, the better.

Beyond this, Landes identifies in the Judeo-Christian tradition an openness to invention and innovation. In part this has to do with the biblical respect for labor. God tells Noah, for example, that he will be saved from the flood, but it is Noah who has to build the ark. The high value Judaism sets on work can be traced throughout the biblical and rabbinic literature. If not itself a religious act, it comes close to being a condition of the religious life. “Six days shall you labor and do all your work, but the seventh day is a Sabbath to the Lord your God”—meaning that we serve God through work as well as rest. By our labor we become, in the striking rabbinic phrase, “partners with God in the work of creation.”

The Jewish liturgy for Saturday night—the point at which the day of rest ends—culminates in a hymn to the value of work: “When you eat of the labor of your hands, you are happy and it shall be well with you.” On this, the rabbis commented that “you are happy” refers to this life; “it shall be well with you” refers to life in the world to come. Work, in other words, has spiritual value, because earning our food is part of the essential dignity of the human condition. Animals find sustenance; only mankind creates it. As the thirteenth-century commentator Rabbenu Bachya put it, “The active participation of man in the creation of his own wealth is a sign of his spiritual greatness.”

As a result, Judaism never developed either an aristocratic or a cloistered ethic that was dismissive of the productive economy. The great rabbis were themselves laborers or businessmen or professionals. They knew that the Jewish community needed an economic as well as a spiritual base. Accordingly, the Talmud lists as one of the duties of a parent to teach one’s child a craft or trade through which he can earn a living. Maimonides rules that one who is wise “first establishes himself in an occupation which supports him, afterwards he buys a home, and after that he marries.” More powerful still is his ruling that to provide someone with a job is higher than any other form of welfare benefit:

The highest degree of charity, exceeded by none, is that of a person who assists a poor Jew by providing him with a gift or a loan or by accepting him into a business partnership or by helping him to find employment—in a word, by putting him where he can dispense with other people’s aid. With reference to such help it is said, “You shall strengthen him, be he a stranger or a settler, he shall live with you” (Leviticus 25:35), which means to strengthen him in such a manner that his falling into want is prevented.

All other forms of charity leave the recipient dependent on charity. Work alone restores his self-respect and independence. “Flay carcasses in the marketplace,” said the third-century teacher Rav, “and do not say: I am a priest and a great man and it is beneath my dignity.”

No less important than the value placed on work is Judaism’s positive attitude to the creation of wealth. Asceticism and self-denial have little place in Jewish spirituality. The world is God’s creation; therefore it is good, and prosperity is a sign of God’s blessing. God has handed the world over to human stewardship, commanding, “Be fruitful and multiply, fill the earth and subdue it.” God, taught Rabbi Akiva in the second century, deliberately left the world unfinished so that it could be completed by the work of man. Industry is more than mere labor. It is the arena in which we transform the world.

It was Max Weber who observed that one of the revolutions of biblical thought was to demythologize, or disenchant, nature. For the first time human beings could see the condition of the world not as something given, sacrosanct and wrapped in mystery, but as something that could be rationally understood and improved upon. This perspective, central to Judaism, even today makes rabbinical authorities surprisingly open to new medical technologies such as genetic engineering and cloning, and tends to make religious Jews among the most dedicated users of the Internet and multimedia for purposes of education.

Above all, from a Jewish perspective, economic growth has religious significance because it allows us to alleviate poverty. Judaism’s early sages had the sanest view of poverty I know, and they did so because most of them were poor men. They refused theologically to anaesthetize its pain. They would utterly have rejected Marx’s description of religion as the opium of the people. In Judaism, poverty is not, as in some faiths, a blessed condition. It is, the rabbis said, “a kind of death” and “worse than fifty plagues.” They said: “Nothing is harder to bear than poverty, because he who is crushed by poverty is like one to whom all the troubles of the world cling and upon whom all the curses of Deuteronomy have descended. If all other troubles were placed on one side and poverty on the other, poverty would outweigh them all.”

The sages were not so much concerned with the elimination of poverty through redistributive taxation. Instead, what they sought to create was a society in which the poor had access to help when they needed it, through charity to be sure, but also and especially through job creation. Hence with wealth came responsibility: richesse oblige. Successful businessmen were expected to set an example of philanthropy and to take on positions of community leadership. Conspicuous consumption was frowned upon, and periodically banned through local “sumptuary laws.” Wealth was a divine blessing, and therefore it carried with it an obligation to use it for the benefit of the whole community.

Not the least significant of Judaic contributions to the development of Western Civilization was its emphasis on, perhaps even invention of, linear time. Ancient cultures tended to think of time as cyclical, seasonal, a matter of eternal recurrences to an original and unchanging nature of things. The Hebrew prophets were the first to see time in a quite different way—as a journey towards a destination, a narrative with a beginning and middle, even if the end (the messianic society) is always beyond the horizon. It is ultimately to this revolution that we owe the very notion of progress as a historical category, the idea that things are not predestined always to remain what they were. Hope, even more than necessity, is the mother of invention.

And to this we must add one further idea. The great philosophical advocates of the market—Bernard Mandeville, David Hume, and Adam Smith—were struck by a phenomenon that many considered to be scandalous and amoral. This was their discovery that the market produced benefits to all through a series of actions and transactions that were essentially self-interested in their motivation. As Adam Smith bluntly put it: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Within the system of free trade, as Smith put it most famously, the individual “intends only his own gain, and he is, in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” This fact—that markets and their associated institutions tend to work on the basis not of altruism but of somewhat earthier motives—has always led to a high-minded disdain for everything suggested by the word “commercial.”

Not so within Judaism. Long before Mandeville and Smith, Judaism had accepted the proposition that the greatest advances are often brought about through quite unspiritual drives. “I saw,” says the author of Ecclesiastes, “that all labor and all achievement spring from man’s envy of his neighbor.” Or as the talmudic sages put it, “Were it not for the evil inclination, no one would build a house, marry a wife, have children, or engage in business.” Purity of heart was essential to the relationship between man and God. But in relations between man and man what mattered was the result, not the sentiment with which it was brought about. Jews would find it easy to agree with the remark of Sir James Frazer that “it is better for the world that men should be right from wrong motives than that they would do wrong with the best intentions.”

In general, then, the rabbis favored markets and competition because they generated wealth, lowered prices, increased choice, reduced absolute levels of poverty, and in the course of time extended humanity’s control over the environment, narrowing the extent to which we are the passive victims of circumstance and fate. Competition releases energy and creativity and serves the general good. Admittedly, Jewish law permitted protectionist policies in some cases to safeguard the local economy, especially when the outside trader did not pay taxes. There were also times when rabbinic authorities intervened to lower prices of essential commodities. But in general they favored the free market, nowhere more so than in their own professional sphere of Jewish education. An established teacher could not object to a rival setting up in competition. The reason they gave for this ruling illustrates their general approach. They said simply, “Jealousy among scholars increases wisdom.”

Needless to say, in a strongly moralistic faith like Judaism, alongside the respect for markets went a sharp insistence on the ethics of business. At one of the critical points of the Jewish calendar, on the Sabbath before the Ninth of Av when we recall the destruction of the two Temples, we read in the synagogue the great first chapter of Isaiah with its insistence that without political and economic integrity, religious piety is in vain:

Seek justice, encourage the oppressed, Defend the cause of the fatherless, Plead the case of the widow . . . Your silver has become dross, Your choice wine is diluted with water, Your rulers are rebels, companions of thieves, They all love bribes and chase after gifts.

The same message is carried through into the teachings of the rabbis. According to Rava, a fourth-century sage, when a person comes to the next world for judgment, the first question he is asked is: Did you deal honestly in business? In the school of Rabbi Ishmael it was taught that whoever conducts himself honestly in business is as if he fulfilled the whole of Jewish law. The perennial temptations of the market—to pursue gain at someone else’s expense, to take advantage of ignorance, to treat employees with indifference—needed to be fought against. Canons of fair trading had to be established and policed, and much of Jewish law is taken up with these concerns. The rabbis recognized that a perfect market would not emerge of its own accord.

Perhaps the best summary of the way Judaism differed from Christianity, at least in its pre-Reformation guise, was given by Michael Novak:

In both its prophetic and rabbinic traditions Jewish thought has always felt comfortable with a certain well-ordered worldliness, whereas the Christian has always felt a pull toward otherworldliness. Jewish thought has had a candid orientation toward private property, commercial activity, markets, and profits, whereas Catholic thought—articulated from an early period chiefly among priests and monks—has persistently tried to direct the attention of its adherents beyond the activities and interests of this world to the next.

So much, then, by way of an overview of Jewish economic ethics. Next, I want to draw attention to five features of Judaism, essential to its way of life, that on the face of it stand utterly opposed to the market ethic.

The first, of course, is the Sabbath and its related institutions, the sabbatical year and the jubilee. The Sabbath is the boundary Judaism draws around economic activity. What marked the Sabbath off from all other religious celebrations in the ancient world was its concept of a day of rest. So unintelligible was this to the writers of ancient Greece that they accused Jews of observing it merely out of laziness. But of course what was at the heart of the Sabbath was and is the idea that there are important truths about the human condition that cannot be accounted for in terms of work or economics. The Sabbath is the day on which we neither work nor employ others to do our work, on which we neither buy nor sell, in which all manipulation of nature for creative ends is forbidden, in which all hierarchies of power or wealth are suspended.

The Sabbath is one of those phenomena—incomprehensible from the outside—that you have to live in order to understand. For countless generations of Jews it was the still point in the turning world, the moment at which we renew our attachment to family and community, during which we live the truth that the world is not wholly ours to bend to our will but something given to us in trust to conserve for future generations, and in which the inequalities of a market economy are counterbalanced by a world in which money does not count, in which we are all equal citizens. The Jewish writer Achad Ha-am was surely correct when he said that more than the Jews have kept the Sabbath, the Sabbath has kept the Jews. It was and is the one day in seven in which we live out all those values that are in danger of being obscured in the daily rush of events; the day in which we stop making a living and learn instead simply how to live.

Secondly, consider marriage and the family. Judaism is one of the great familial traditions, and this despite the fact that in strict legal terms a Jewish marriage has the form of a contract; that Judaism has never prohibited divorce by mutual consent; and that it is quite relaxed about that modern development, the prenuptial agreement, and indeed sees it as a useful device in alleviating the stress of separation. The reason Judaism has often succeeded in sustaining strong marriages and families has little to do with the structure of Jewish marriage law, and a great deal to do with its ritual life, the way in which many of the supreme religious moments take place in the home as a dialogue between husband and wife, or between parents and children. Ultimately, Judaism saw marriage not as a contract but as the supreme example of a covenant, namely a commitment based not on mutual benefit but on mutual belonging, whose key value is fidelity, holding fast to one another especially during difficult times because you are part of who I am. The Jewish family survived because, in the graphic phrase of the sages, it was surrounded by “a hedge of roses,” an elaborate network of rituals that bound individuals together in a matrix of mutual giving that was utterly at odds with a market ethic.

Thirdly, consider education. I have already mentioned that Jewish law favors competition in the provision of teaching. What it did not do, however, was to leave access to education to the market and to the ability to pay. Even in the days of Moses, Jews were instructed to set the highest religious value on education—as one of our most famous prayers, taken from the book of Deuteronomy, puts it: “You shall teach these things diligently to your children, speaking of them when you sit at home or travel on the way, when you lie down and when you rise up.” And by the first century, Jews had constructed the world’s first system of universal compulsory education, funded by collective taxation. Education, the life of the mind, an ability to follow a train of thought and see the alternative possibilities that give rise to argument, are essential features of Jewish spirituality, and ones to which everyone, however poor, must be given access.

Fourthly, the concept of property. I mentioned earlier that Judaism has a high regard for private property as an institution governing the relations between human beings. At the same time, though, governing the relationship between humanity and God, there has been an equal insistence that what we have we do not unconditionally own. Ultimately everything belongs to God. What we have, we hold in trust. And there are conditions to that trust—or as the great Victorian Jew Sir Moses Montefiore put it, “We are worth what we are willing to share with others.”

And finally, there is the Jewish tradition of law itself. It was a non-Jew, William Rees-Mogg, who first drew my attention to the connection between Jewish law and the control of inflation, a link that I confess I never thought of making. His argument is contained in The Reigning Error, a book he wrote in 1974, a time of high inflation. It was simply this: “Inflation is a disease of inordinacy.” It comes about through a failure to understand that energy, to be channeled, needs restraints. It was the constant discipline of law, he says, that provided the boundaries within which Jewish creativity could flow. The law, to quote his words, “has acted as a bottle inside which this spiritual and intellectual energy could be held; only because it could be held has it been possible to make use of it. It has not merely exploded or been dispersed; it has been harnessed as a continuous power.” Jews, for Rees-Mogg, were a model of acquired self-restraint, and it was the failure of societies to practice self-restraint that led to runaway inflation.

And with this I come back to Hayek and The Fatal Conceit. It was Hayek’s view that moral systems produced their results, not directly or by conscious intention, but rather in the long run and often in ways that could not have been foreseen. Certainly Jews believed that their way of life would lead to the blessings of prosperity. That, after all, is the substance of many of Moses’ prophecies. But there was no direct connection between institutions like the Sabbath and economic growth. How could there be? The Sabbath, the family, the educational system, the concept of ownership as trusteeship, and the disciplines of the law were not constructed on the basis of economic calculation. To the contrary, they were ways in which Judaism in effect said to the market: thus far and no farther. There are realms in which you may not intrude.

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

Socialism is not the only enemy of the market economy. Another enemy, all the more powerful for its recent global triumph, is the market economy itself. When everything that matters can be bought and sold, when commitments can be broken because they are no longer to our advantage, when shopping becomes salvation and advertising slogans become our litany, when our worth is measured by how much we earn and spend, then the market is destroying the very virtues on which in the long run it depends. That, not the return of socialism, is the danger that advanced economies now face. And in these times, when markets seem to hold out the promise of uninterrupted growth in our satisfaction of desires, the voice of our great religious traditions needs to be heard, warning us of the gods that devour their own children, and of the temples that stand today as relics of civilizations that once seemed invincible.

The market, in my view, has already gone too far: not indeed as an economic system, but as a cast of thought governing relationships and the image we have of ourselves. A great rabbi once taught this lesson to a successful but unhappy businessman. He took him to the window and asked him, What do you see? The man replied, I see the world. He then took him to a mirror and asked, What do you see? He replied, I see myself. That, said the rabbi, is what happens when silver covers glass. Instead of seeing the world you see only yourself. The idea that human happiness can be exhaustively accounted for in terms of things we can buy, exchange, and replace is one of the great corrosive acids that eat away the foundations on which society rests; and by the time we have discovered this, it is already too late.

The market does not survive by market forces alone. It depends on respect for institutions, which are themselves expressions of our reverence for the human individual as the image and likeness of God.

Jonathan Sacks is Chief Rabbi of the United Hebrew Congregations of the British Commonwealth.

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