Free Entry for Outsiders

Responsa of the Week: Free Entry for Outsiders

A weekly series by Dr. Meir Tamari about responsa regarding business ethics issues.

In order to demonstrate the work of the halakhic system and its moral considerations regarding a variety of issues in business and economics, I will present a number of responsa drawn from the literature. These represent questions addressed either by laymen or by rabbis or communities to rabbinical authorities and their answers. They cover a period of close to 2000 years and reflect Jewish life in all the countries of the Diaspora. Even though the answers may vary and conflict with each other so that one cannot draw behavioral conclusions from them, they demonstrate Jewish thinking and values in this field.

It may well be that the general pro-free entry attitude that we have seen in the previous responsa would alter when considering the free entry of foreign firms or entrepreneurs. One could argue that the principle of each person being entitled to do with their property as they like, that is the basis for free entry, would only apply to local citizens, who after all have the equal rights of neighbors. Foreigners from another neighborhood, city or country, should not necessarily enjoy these same rights. They can be presented as taking away jobs or businesses from the locals. This is the argument used today to protect local industry through tariffs, quotas or exaggerated quality requirements. It is also used to prevent immigration and trading bloc agreements.

The problem in essence is whether the local people and entrepreneurs have acquired a moral or property right that would prevent foreigners from competing with them. If so, then such competition would be considered theft. Additionally, even if this is so, there is the question of whether it is to the public’s benefit to uphold such competition. Already in Talmudic days, the opinion of Rabbi Huna the son of Yehoshua had become the halakhic decision (Baba Bathra 21b). This opinion was that a foreigner had the full rights of residence including those of an economic nature, provided he paid the taxes applicable in that community. Still, even given the opinion that they had the right to trade, still left open the question of the competition through the lower wages or the lower prices of the foreigners.

Although it is easy to see these responsa as pertaining to small communities and to question their applicability in our modern global village, there are general principles that make them extremely relevant. After all, the basic issues remain the same A typical responsum regarding the price competition offered by new foreign firms is that of Rabbi Avraham ben Moshe di Boton of 16th century Salonika.

QUESTION.

Reuven, a tailor from one of the neighboring villages has come to settle in our town. In the village his expenses were minimal and the average cost of living low, so he is accustomed to working cheaply. Now he undertakes work in our town 50% below the prevailing price. The other tailors now complain that they are unable to match his prices because their costs are high and he is therefore stealing their livelihood. Can they prevent him from operating here or order him to charge the same prices as they are doing?

ANSWER.

From a legal point of your view, the townspeople cannot prevent him from lowering his prices. This is the opinion of Rabbi Yosef ibn Migas. [This opinion expressed in his commentary on the Talmud (Chidushin Baba Bathra,21b) is based on the understanding that locals can prevent outsiders from opening similar businesses, even if they pay the applicable taxes, only on condition that there is no loss caused to consumers. If, however, they offer the same goods more cheaply or provide goods and services of better quality, then they cannot be prevented from operating. The reason for this is that one cannot make a ruling that will benefit a minority part of the population, in this case the local businessmen, at the expense of the majority, the consumers. The opinion of Ri Migas remains the benchmark ruling to this day, and is understandable in view of the communal-national character of Judaism).

Even according to the Nimukei Yosef that this rule only applies where the price differential is very great, surely there cannot be a greater one than in our case. It is true that it is arguable that there are authorities who offer an opposing view. Still these arguments are insufficient to prevent the competition. Lechem Rav, section 216.

The right of the foreigners to compete with the locals, provided they paid the local taxes, is enshrined in all the Codes. To allow freedom of entry without the corresponding tax liability would be immoral as well as unfair. Applied to contemporary context, this ruling would argue in favor of payment of out-of-state taxes or city taxes by those from other localities who wished to earn their livelihood in another state or city.

There were certain types of competition that were allowed even if the entrepreneurs did not participate in the tax burden. The relevant section in the Talmud (Baba Bathra 21b) mentions that in the days of Ezra the Scribe [circa 500 B.C.E], peddlers were allowed to wander freely from city to city without paying taxes, “so that the daughters of Israel should not lack for jewelry and cosmetics.” On market days, out-of-city merchants were allowed to display their goods without becoming liable for municipal taxes, despite the complaints of local merchants. In view of the status accorded to Torah scholars and in order to encourage the study of Torah by providing the economic basis for their settlement in the town, such scholars enjoyed free competition without the constraint of taxes.

This column presents general principles for approaching business ethics topics. For specific guidelines, please refer to a halachic authority.

Dr. Meir Tamari is the former chief economist of the Office of the Governor at the Bank of Israel, and the founder of the Business Ethics Center of Jerusalem.