Sunday, January 13, 2008

Jewish Economic Morality

The Below article is written by my good friend Mr. Joel Bainerman

'Righteousness is the positive action for those things that Justice comes to rectify' Samson Raphael Hirsch on Deuteronomy 6:24

The Divine origin of wealth is the central principle of Jewish economic philosophy. All wealth belongs to God, who has given it temporary to man, on a basis of stewardship- for his physical well-being. This means that because all wealth has a Divine source- all form of theft and dishonesty are religious crimes- above and beyond being crimes against society.
A basic concept to the economic philosophy of Judaism is that part of the wealth of individuals is given to them by the Deity, to provide for the needs of less successful members of society. This is done by making sure that the weaker members of society are also cared for- by the wealthier members of society.
Unlike some other religions, Judaism doesn’t view poverty as a virtue. Wealth, on the other hand, was always seen as a challenge. Judaism places many social and charitable responsibilities on the financially stronger elements within society and emphasizes the need to prevent exploitation of the weak.
As Judaism saw man's material welfare as a reward from Heaven, a gift of the Deity, material wealth couldn't be viewed as something intrinsically bad, but rather to be valued and respected. Nowhere in Jewish religious texts or commentary do we read that "riches are not good to have" or that "prosperity is a reflection of the exploitation of others."
From a philosophical perspective, Judaism views the drive to succeed and to prosper is legitimate- but within limitations. Judaism does recognize that mankind has two essential drives- a selfish one and a selfless one. In the Talmud (Bereshit Rabbah 9:7) it states that: “But for the evil desire, no man would build a house, or take a wife or have children or buy and sell in business.”
Thus Judaism acknowledges the need for individual ambition in society and recognizes that man has a need to produce and to be successful in all endeavors of life. Judaism recognizes this but sees man’s role of moderating and controlling the selfish drive as one of the greatest moral challenges. .
Judaism recognizes the negative aspect of the human being's "desire to attain riches" and instead of denying it- limits it and places restrictions on this aspect of human inclination. Despite the legitimacy of economic activity and of man's enjoyment of material goods, Judaism does not allow unlimited accumulation of such goods or unlimited use of them.
All of man's actions, including those involved in the accumulation of material goods, are to be subjected to the ethical, moral and religious demands of the Torah, so that the individual and society can attain a state of sanctity even while carrying out the most mundane acts. Gathering wealth is acceptable as long as the person follows the moral and ethical path towards helping the less fortunate members of society.
This is how Judaism builds barriers and limits into the question of man's quest for riches. It is the "checks and balances" which keeps everything in perspective so that a man's life isn't spent merely striving to gain more material possessions and wealth- solely for that purpose and that purpose alone. Efficiency in wealth creation is never allowed to become the sole aim of human existence.
The Definition of "Jewish Economic Morality"
Dr. Meir Tamari- the pioneer of "Jewish economic thought" is a Torah scholar who lives in Jerusalem. He worked for the Bank of Israel as an economist for 20 years with a specialization in the role of small business in advanced economies. In the 1980s he began to research the subject of how Judaism looks at economic issues from a moral and economic perspective- and is widely considered the founder of this entire school of thought. In the late 1980s he published: With All Your Possessions: Jewish Ethics and Economic Life which archived for the first time- all of the major issues that make up this particular subject. As I was a business journalist at the time- I met him and was fortunate enough to learn from his great knowledge on this subject.
In defining what Jewish economic morality is, he writes in The Challenge of Wealth: Economic Justice in a Jewish perspective:
"Jewish social justice and economic responsibility can only be understood in the light of the important role that society plays in Judaism. Unlike other religions and monotheistic faiths, Judaism is a single nation religion. The nation is who the covenant at Sinai was made with- not with a founder or with the individual followers of a religion. The legislated and spiritual Jewish economic morality obligates the national entity both in the economic activity between individuals and individuals, as well as between the individual and society."
Judaism's views of economic morality is unique because it developed not from an economic or national perspective- but from a "moral" and "ethical" basis- always putting the needs of the weaker members of society ahead of personal profits and market efficiencies- yet trying to strike a balance between the needs of the community and the economic rights of the businessmen and entrepreneur.
Jewish Business Ethics
The guiding principle of secular business ethics is "doing well by doing good" to distinguish the "enlightened" businessman who recognizes that fairness pays dividends in improved community relations, employee good will and so on. It is employed by some corporations and individuals so as to distinguish the "primitive" profit seeker" who will stop at nothing for an extra dollar of profit from those that are more "morally and ethically enlightened."
However Judaism recognizes that ethics can only exist where there is an effective and respected legal infrastructure.
The Torah sanctifies all areas of life- including business affairs. So there is the requirement for businessmen to carry out his business dealings according to G-d's commandments. Not just to improve the company's reputation or relationship with its workers- but to sanctify G-d's name-. Wealth is viewed as something that ultimately- originated from the Creator- thus it must be used to further the Creator's desires- tzedek (justice) and chessed (good acts).
That is the basis for the ethical nature of the religion and it is the basis for the ethical nature of business and commerce in Judaism.
Judaism recognizes the fact that one important aspect of commerce is that it gives people a motivation for cooperation. "When each person or each nation is self-sufficient economically, then there is a tendency for each to be isolated or even hostile.
Says Dr. Asher Meir of the Jerusalem-based Business Ethics Center ( "When they see that there is an opportunity for mutual gain through trade, then people learn to accommodate each other and get along. The creation of wealth is also viewed as positive as it can help others- i.e., every new factory creates not only profits for the owners and investors- but new workplaces for families".
Thus business is not only ethical- it is one of the most important ways that God gave us to foster coexistence and understanding among human beings. This is why Jewish ethics and law views business as being dependent on being conducted in an ethical way- in a manner which is based on cooperation and not on exploitation. It is for that reason that Judaism considers the merchant and the entrepreneur to play not only a legitimate- but even desirable role in commerce and therefore is morally entitled to a profit in return for fulfilling their function- without any need of apology.
Does Judaism Support Free Market Capitalism or Socialism?
Judaism does not object in principle to a free-market economy- nor does it buy into the entire concept of a planned economy. It sees the virtues (and the vices) in both systems.
The Torah never denies man a basic human condition- such as the desire to work, prosper, and provide the highest standard of living possible for their family. The Jewish sages recognized that denying private property and the substitution of it with centralized planned economies for the decision process of the market- leads ultimately to immorality and injustice. So the Jewish view in this matter cannot be regarded as synonymous with socialism or economic polices which deny private property.
Dr. Tamari states: "Judaism does not propose any specific economic theory or system; rather, it proposes a moral-religious framework within which the theory or system must operate. Decisions on investments, on consumption, on rates of growth, on fiscal policy, and on all the other constituents of economic life have to be made on the basis of economic criteria; then they have to reexamined in light of this religious framework to discover whether or not the proposed choices are acceptable."
According to Rabbi Pinchas Rosenstein: "Judaism isn’t interested in economic freedom or the efficiency of the marketplace. It’s sole concern is whether the demands of justice and mercy are met. Thus there is nothing wrong with a free-market economy and profits- to the corporation, small business and individual- as long as the demands of mercy and justice are met in the process."
The free market was generally seen as an efficient and pragmatic mechanism for achieving the welfare of the community. Yet at the same time, a regulatory system imposed by, and policed solely by, the market, was viewed as being unlikely to be based on anything except self-interest. Commercial pressures generally encourage the application of morality and ethics only to the degree that the individual or company fear discovery of wrongdoing and any consequences thereof.
Such a system clearly has many inherent weaknesses. Judaism recognizes this and is quite prepared to impair the efficiency of the market for the sake of its values which is "compassions" and "justice" for the weaker members of society.
Judaism Supports Price Controls in Certain Instances
Judaism's view of price controls is based on this verse in Leviticus 25:14: "And if you sell anything to your fellowman, or buy anything from the hand of your fellowman, you shall not wrong one another. You shall not oppress your brother".
From this the concept of "onaah" was derived which is translated to be "price oppression".
Thus while Judaism supports free markets and the right to pursue profits- limitations on profit levels were introduced if essential products that the weaker members of society required to fill the basic commandments of the Jewish religion- were too expensive and thus beyond their ability to purchase them. This wasn't done due to any anti-market philosophy- but simply a requirement that economic justice and protection of the weak if maintained.
In Judaism, while profit for the individual may be recognized and defended- it doesn't take precedence over protecting the weakest members of society. In many instances throughout the centuries the community's spiritual leaders intervened in the marketplace and ordered price caps to be put on certain basic food products- or restrict rents that could be charged when a shortage of housing existed which would have rendered the poorer elements of the population homeless.
Thus intervention into the marketplace is accepted when it serves a "moral good." Subsidies, rent control, price control, prevention of monopolies and the promotion of the public good at the expense of the individual entrepreneur are accepted as legitimate in Jewish law- if the needs of the weaker members of society are being threatened.
How Judaism Views Competition
The Jewish Sages always believed that competition was healthy and beneficial to a society which they believed resulted in lower prices and better services. It was generally accepted that benefits to society and to consumers in general outweigh benefits to the individual or smaller groups.
Judaism views the free entry into a market as a right only given to local entrepreneurs. Local citizens have equal rights to that of their neighbors. But foreigners- from another neighborhood or city or country- should not necessarily enjoy these same rights. If they pay local taxes- the foreigners have a right to compete with locals. That way the tax burden is shared by all- not just those that reside in a community.
Many Jewish religious authorities were passionately concerned to maintain each individual's ability to support him at some minimal level. Thus there is the view that one has a responsibility not to undermine the income of his neighbor in situations where cut-throat competition will not sustain the new traders. The fact is unlimited competition in various forms and often does bring human hardship and suffering despite the economic benefits derived. Thus Judaism does- in some instances support the idea of restrictive practices.
The Rabbis understood that "fair" competition does not only mean that the rules are fair, but that the rules apply equitably to all players. The competition is sometimes unequal as in the case of a chain store versus an individual storekeeper. Attracting customers by providing an advantage in merchandise or price is permissible, provided the merchant is not exploiting any unfair advantage unavailable to competitors.
Thus Judaism would not allow, for instance, Wal-Mart to freely enter a community and force out local merchants due to the stronger financial position of Wal-Mart in relation to their suppliers which enables them to sell products for less than a smaller, local store. In this case, society may be faced with such undesirable consequences as large- scale unemployment, depressed industry and widespread bankruptcy. Society has to pay the human and moral costs with such adjustments. In the long run the economy may be better off- but who pays these costs in the meantime?
Judaism deals with this question whereby free market advocates simply assume that the rights of the individual or corporation for profit is supreme and that the rest of society must pay the economic and social costs of unrestricted competition. The Rabbis and sages always tried to concern themselves with the social and moral values of society and then offer legislation to strike a balance between the economic loss resulting from restrictive practices and the human suffering arising out of unlimited competition.
Judaism and the Workplace
Judaism has a lot to teach employees and employers which could help the labor market become more efficient.
For instance, an employee is not allowed to use the resources of the employer for his own needs nor allowed to take on extra work if unable to perform his regular work properly. A worker is required to arrive to work on time, and able to work his full shift. Therefore it would be considered "stealing from an employer" for an employee to be out all night partying and then arrive at work not able to carry out the duties required by other workers who had the proper amount of sleep the previous night.
Helping oneself to the employer's property- such as free phone calls- is forbidden. In the Bible (Deuteronomy 23:26-27) it states: "When you come into your neighbor's vineyard, you may eat as many grapes as is you desire, to your fill, but you may not put any into a receptacle."
These laws ensured that a field worker has a right to eat a small amount of the crop while harvesting. However Maimondies cautions the worker that: "He may not eat like a glutton, since the Torah granted him the right only to eat his fill."
One could ask the same in our day of excessive corporate expense accounts. The Jewish view provides for no gray areas between what is right and what is wrong in this area- whether it is the purchasing of luxury apartments and the use of the corporate jet for personal use or a few paperclips or personal telephone calls.
Obligations of Employers
Much of the literature on how employers must treat their employees stems from the fear that the employment relationship would devolve into something akin to slavery. The rabbis acted to instill justice and compassion in the workplace, lest the employer, individual or corporate, become a master with the worker virtually enslaved to his job. At no time is there any concept in Judaism of buying anything but the worker's services. He is not obligated to be servile to his master nor is there any necessity for loyalty other than the obligations to fulfill honesty what he contracted to do.
As to how the Jewish employer must treat his workers and paying his workers on time, the Rabbis and Sages were guided by Biblical scripture such as Deuteronomy 24:14-15 where it says: "You shall not oppress a day labor who is poor and in need, whether of your brethren, or of the strangers that are in your land- on his day you shall give him the wage and let not the sun go down on it- for he is poor and sets his heart upon it."
From a Jewish perspective, employment is primarily the hiring of services or labor by one free agent from another. Thus the employer does not have an unwritten obligation to care for his workers even when there is no economic justification for their employment.
While under no obligation, there is however a moral obligation for the employer to assist his redundant workers as acts of charity. This would mean retention of workers at a cost which would not cripple the firm even if it did reduce profits. As charity always constitutes a reduction in profits retained by the giver- this would be no different. But since people are not required to impoverish themselves in order to grant others charity, such retention would of necessity be limited. (It is important to note that Judaism makes no distinction between the individual and the corporation- as the corporation is merely viewed as the collective owners of the company and thus they, as owners, or the managers as representatives of the owners, have a moral responsibility to act in an ethical manner. Unlike secular law, Judaism does not recognize the corporation as an entity that is absolved of abiding by moral and ethical standards.)
The employer could, however, introduce changes in the job structure whereby white collar workers could assume unskilled positions rather than be fired. Available jobs could be shared so that all workers earn less but none would be paid off. During periods of high profits part of the undistributed profits could be placed in reserves to provide interest free loans to redundant workers who wish to establish new enterprises. This is based on the concept of the fulfillment of the obligation of all Jews to extend interest-free loans. In providing the poor with a job or with a loan to establish a business or to enter into partnership with him- is considered by Jewish law to be the highest form of charity.
An example of how a person acts in a moral and ethical manner- would be Aaron Feurstein, President of Malden Mills in MA who in December 1995 watched in tears as his textile company burned to the ground.
He could have just taken the insurance money and not rebuilt the company. Being an orthodox Jew- he decided to act according to Jewish law and he rebuilt the factory to save the jobs of his 3000 workers- and he paid idled workers for three months and their healthcare expenses for six months at a total cost of nearly $10 million. He was not required by law to provide this amount of protection for his workers. However by going beyond what the law required- Feuerstein displayed how Jewish morals and ethics are put into practice by the corporation that wants to act in the highest moral and ethical manner- to work in G-d's ways.
Judaism in the Shopping Mall
If the corporate world sold items the way the Rabbis and Sages required Jews to- their would be no need for a warranty or guarantee on any item sold.
Says Dr. Tamari: "Free market economists simply take it for granted that knowledge and information regarding the nature and quality of the goods transacted- are equally available to buyer and seller, so that all that is required for ethical markets is the due diligence of both parties. In real life, that seldom is true as the seller almost always has better knowledge than the buyer, so that merely relying on caveat emptor may result in injustice. Jewish law insists on the obligation of full disclosure as the basis for markets."
So Judaism doesn't recognize the concept of "let the buyer beware" (a Roman concept) and places a responsibility on the seller to ensure that the buyer has full information regarding the goods it sells. If this is not done the seller is guilty of fraud and the transaction is nullified.
Jewish law and ethics in the area of selling is heavily based on the concept of "genivat d'at" which literally means- to "steal one's mind or thoughts." In the Talmud (Tosefta Bava Kama 7:3) we learn that there are seven types of thieves and, of these, the worst is the one who "steals the minds" of people.
Or, put another way, "to fool someone and thereby causing him or her to have a mistaken assumption, belief and/or impression.
According to Dr. Hershey Friedman, a professor of business and marketing at Brooklyn College, the term is used in Jewish law to indicate deception, cheating, creating a false impression, and acquiring underserved goodwill. The act goes beyond just lying. Any words or actions that cause others to form incorrect conclusions about one's motives is in violation of this prohibition.
In short, one does not have the right to diminish the ability of another person to make a fair and honest evaluation. In the Talmud (Tosefta, Baba Metzia 3:15) we learn how a storekeeper is not permitted to sprinkle his store with superior-quality wine or oil because he would be "stealing the minds" of people by fooling the customers in the store into believing that all the wine in the store is the same quality.
Sellers are obligated to reveal any defect in a product- even if they intend to sell the product at a fair price that takes the imperfection into account. More than 2000 years ago the Mishnah, the Oral Law, taught Jews that: "One many not mix inferior fruit with quality fruit in order to sell it as first grade."
Judaism would also not allow a seller to mislead a customer into thinking that the quality of the item they purchased is much better than it really is. The seller would be "stealing the mind" of the buyer if he did this. Needless to say, all forms of deceptive advertising would be forbidden as well as selling products with misleading nutritional information or health claims which could not be proven. Advertising puffery which making very vague and/or subjective statements regarding a product's superiority- is also prohibited.
Deceiving one's customer and making them believe that they have received a bargain when they would not have- is also forbidden. Thus phony markdowns where customers think they are getting a bargain but are really buying an inferior product- are not allowed. In addition, "clearance sales" and "last day of sale" would also be forbidden. The seller is not permitted to make a buyer believe that he/she has obtained a bargain when in reality is that he/she had paid the regular price.
The advertising of luxury goods as necessities falls under the prohibition in Jewish law of "giving bad advice" as does putting pressure on customers to buy things that are quite unnecessary for them by seeking to convince them that they are necessary.
It also forbidden to buy products that were obtained fraudulently- as this would, as the great Jewish thinker from the 12th century, Rambam, ruled: "strengthens the hand of evildoers since, if he would not be able to sell the goods, the thief would not steal." So buying that shiny new palm pilot that "fell off the truck" but you would rather not hear about how the seller obtained the goods- is forbidden.
The Rabbis also ruled that the purchase of goods which are not what they appear to be- in view of the unequal information available to all participants in the market- would constitute fraud and erroneous sale. This would apply to "inside information" of stocks as not all buyers had access to this info.
Bankruptcy, Credit Loans
Judaism's view of bankruptcy is completely opposite that of western society. There is no such concept as "Chapter Eleven, a "bail out" or "hiding behind creditors" that exist in western business life. Torah considers the obligation to pay debts as absolute.
Although Jewish law says there is no way to avoid the clutches of the creditor- there is more communal responsibility for the debtor than in the secular system. Judaism views the problem of the creditor and debtor as a problem of society- not merely a dispute between two parties. While in the secular world the Creditor suffers the loss if the debtor defaults- in Judaism, the loss are shared by society as a whole.
While on the surface it looks as if the Jewish system is softer on the debtor- as it transfers some of that hardship on to the rest of society- in reality- it is a very sophisticated loss sharing mechanism that's more responsible and compassionate to the plight of poverty and difficult circumstances. Defaulting on a loan meant a certain degree of shame on the Debtor as the rest of the community would have to pay off his debts and thus this would cause the Debtor to be disgraced in front of the entire community.
Dr. Meir Tamari has commented that when "bail outs" in any form become a normal market condition, a general moral weakening occurs in the investment process; a weakening which of necessity pervades the whole social fabric. Borrowers become involved in debt when they know that they will ultimately not have to repay- with all the resultant immoral effects. Freed from the risk of loss and bankruptcy, entrepreneurs are encouraged to make uneconomic investments which against represent a waste of the public funds needed for the bail out.
Jewish law views the giving of interest-free loans as an act of charity to break the poverty cycle, to prevent descent into poverty. Although giving of an interest free loan as an obligatory requirement rather than an act of voluntary philanthropy- this in no way implies a waiver of rights of the creditor to receive payment of his loan or absolve the debtor from his obligations. Even if the lender is wealthy and the borrower poor the debtor has to meet his obligations- even at the cost of losing all his property. To do otherwise would saddle the lender with all the social an economic problems of the borrower. The requirement to repay the loan is based on the concept that people have obligations as well as rights- a consideration often blurred in modern welfare economics.
Here is perfect example of how Jewish law operates in the economic sphere: on the one hand, a Jew has a religious obligation to lend his fellow Jew money in the form of an interest-free loan. On the other hand, the debtor too, has religious obligations. He is not permitted to mismanage the funds given to him and waste the money. The debtor is also obligated to return he loan at the date agreed upon; any deviation from this is akin to theft.
Taxation to achieve moral and ethical goals
There is no philosophical basis in Judaism for taxation being used as a means of redistributing income. Nor can taxation be confiscatory; arbitrary or discriminatory. In Judaism, taxation is a manifestation of the concept of the rights of the community and of less fortunate individuals in the property of all other individuals. It is a moral and ethical imperative- not as a punishment on the wealthy for being successful in their economic endeavors.
Taxes may not be levied twice on the same wealth which would preclude double taxation on profits. In all cases, the conflict between the tax authorities and the taxpayer- the tax authorities claims that some was paying less than the amount he owed, the onus of proof was on the authorities?
Taxes were levied according to the area the income was earned and not according to domicile. Rabbis intervened when rich people wanted to move to less-taxed domiciles with a lighter tax burden. Such a move would be to the detriment of the other taxpayers so harem was used to prevent the migration of wealthy cities to other communities. By doing so the Rabbis were making a moral statement by shaming those that are prepared to throw the burden of taxation on the weaker members of society.
If this were practiced more today it would prevent the decay of the city centers whereas the wealthier live in suburbia and so do not fund the needs of the cities they earn their incomes in.
Tax evasion is considered a crime because it deprives other taxpayers of a loss of services or benefits and means they have to pay more. It is not a criminal issue in Judaism- but a moral one. Evading taxes would result in the person be shamed by his community- a much bigger potential penalty than a potential fine that is often levied to people today who evade their taxes.
Jewish sources have always demanded controls and a commitment to financial transparency as prerequisites for adequate corporate governance. The Mishnah (Shekalim 3:2) related that the priests who had to enter the Temple treasury were not even allowed sleeved cloaks so as not to arouse any suspicion that they were illegally enriching themselves through stealing public funds. It was always understood that charitable funds would require more than one person to administer them in order to ensure strict financial control. Even Moses was expected to provide a full set of accounts relating to the raw materials donated for the construction of the Tabernacle.
The Theological Basis of Charity in Judaism
Says Dr. Tamari: "Judaism created a non egoistical and a socially responsible perspective entrenched in Jewish law and regarding the role of wealth, economic justice, the dignity and worth of all individuals, and the moral responsibility devolving on owners of wealth. Judaism believes it is the community's duty to provide for the social needs of the individuals in that community. This is based on the theological principle of Judaism which states that part of the wealth of individuals is given to them by the Deity in order to provide directly for the needs of the less successful members of the community."
The theological reason why a Jew would give charity is because the religion instructs him to "imitate G-d's ways" and to "walk in G-d's paths". As G-d is all-merciful and kind and righteous- so should too man be that way. Charity is one way to fulfill these commandments.
In other words- to give the Jew a chance to be "righteous" and act with "chesed".
God could have distributed the wealth in the world so neither one would have to give, nor would the other have to receive. In that case, how would the Jew learn to care for his fellow and share in his sorrows? The welfare bureaucracy that has developed in the western world and the impersonal individual contributions to communal funds via "general taxation" has taken this aspect out of the equation.
Charity as philanthropy and as taxation- rather than welfare- is the Jewish model. Assistance society is obliged to give is not an entitlement for the recipient but rather an obligation of the giver. Charity is not simply an act of kindness but rather the fulfillment of a legal obligation. The "haves" in Judaism have an obligation to share their property with the "have nots" since it was given to them by God partly for that purpose. The Jewish concept that the market mechanism may, for moral reasons, be distorted to assist the poor- is the Jewish view of the theological basis for charity.
How to "do/give" charity according to Jewish law
Jewish texts do not talk about "giving" charity, but rather "to do charity"- the giving of the assistance being only part of the positive commandment (a mitzvah). It isn't only the giving of charity (tzedakah)- but also the spirit in which it is given.In the Jewish text, The Shulchan Arukh, (Yoreh De'ah, 249) we learn: "He should give charity with a warm and friendly expression, with happiness and with a good heart, and he should mourn with the poor person in his distress and should speak words of consolation to him, and if he gave to him with an angry and harsh countenance, he lost the merit of this mitzvah." By carefully examining the traditional Jewish approach to alleviating poverty those who administer modern economies can gain avoid some of the pitfalls of a welfare state.The vision of the welfare state in Judaism embodies two important values:1. The poor should be provided for a dignified standard of living, not a subsistence existence; 2. Responsibility for the poor rests upon the community as a whole, so that the poor are not held hostage to the whims of wealthy donors.In Judaism, there is no distinction between deserving and non-deserving poor. The reasons for the person's poverty, his ability to effectively change his situation, or the evaluations by the giver of alternative methods of assisting him are never allowed to become factors absolving the Jew of his obligation to help.
Checks and balances built into the system
The problem in Western societies is that when we combine these two values, dignified living becomes an unconditional entitlement, not a charitable grant. This has an unfortunate result: the community standard of a "dignified standard of living" tends to be defined by the level which can be achieved by a simple, hard-working family head. When this standard of living becomes an unconditional standard of community support -- an entitlement -- the result is that hard work is discouraged and disparaged. If modern societies followed the Jewish system of assistance it could avoid these pitfalls. A related problem is that when so much responsibility is placed on the government, the individual who is not poor may feel a diminished sense of empathy and responsibility for the poor. He may view his responsibility as being fulfilled by merely paying taxes, without requiring any personal involvement in alleviating the plight of the deprived. Unlike today's welfare system in western societies, Judaism has built in a "badge of shame" for those taking charity so that the system does not get abused. Giving to charity is commandment in Judaism and supreme obligation- both on the individual and the community accepting charity carries an unavoidable taint of shame.
Judaism believes that means tests- except in life and death circumstances are permissible to prevent fraud and waste. Judaism commands Jewish communities to keep the poor, addicted, and the weak, alive- but not to enrich them. Thus those requiring charity had to demonstrate their case. While anyone would be given food to eat if starvation was imminent- beyond that- a need had to be demonstrated for additional communal support was required so that living on communal funds did not become a long-term situation.
When it is called "welfare" rather than "charity" many of the same people who would not wish to draw on charitable funds- with the resulting stigma, see nothing wrong with "living off welfare" since it is "coming to them" so to speak, as a right. This leads to a certain moral disease that encourages abusing the system.
In most cases, Jewish welfare is meant only to provide basic necessities or to achieve economic justice, not economic equality. This leads to restrictions on the degree of public support for welfare. This is yet another part of the "checks and balances" built into the way Judaism views economic issues.
Yet on the other hand, the honor and dignity of the recipients of welfare are to be preserved throughout. One may not insult them, or cause them to be slighted or insulted as a result of them receiving the charity. One way to do this was to give charity wherein the recipient and the giver are ignorant of each other's identity.
In the Shulchan Arukh, Yoreh De'ah 249:13, we are told by the Sages: "A person should not make a public display of the giving of charity (earning for him social status and personal pride at the expense of the poor).

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