An economist who was a prisoner of war during World War II found many of the characteristics of a market economy spontaneously arising in the prisoner-of-war camp, despite the absence of the established institutions on which they are supposed to depend.7 A large volume of trade arose among prisoners who received identical rations and identical Red Cross packages, indicating that (1) the same things had different values to different people at a given time, and that (2) the same things had different values when moved back and forth through time, since those prisoners who saved various items to the end of a ration period could lend them to others who had run out, collecting a larger quantity of the same items in return after the new rations or Red Cross packages were received. What is of wider social significance is that those prisoners who performed these services were both widely utilized and deeply resented. The physical fallacy arose as spontaneously as the transactions which demonstrated its falsity.
Whether in medieval society, a prisoner-of-war camp, or a modern market economy, the “middleman” essentially changes the location of things in space and time. If the same physical thing is assumed to have the same value without regard to space or time, then the middleman is simply cheating people. How this situation could persist over time, through repeated transactions, is unexplained. If A sells to B who sells to C, and B is simply cheating, then both A and C can benefit by direct transactions with each other — A charging somewhat more than he normally charges B, and C paying somewhat less than he normally pays B. Why would both then
In reality, they deal through the middleman because he is changing the value of things by relocating them, holding them to times that are more convenient, assuming various risks by stocking inventories — and doing so at
No small part of the historic anti-Semitism of Europe (and corresponding anti-Chinese feeling in many Asian countries) is due to the Jews’ role as middlemen. Legally — that is, forcibly — denied access to many occupations in the production of goods, Jews could survive in Europe only by finding interstitial services not covered by the sweeping discriminatory bans against them. They became middlemen in the movement of goods and money over time and space — time because the Catholic Church’s moral prohibitions against charging interest did not apply to them. The virtually universal dislike and suspicion of middlemen focused on an ethnically-identifiable group of people, separated by religion and customs from the rest of the population, and therefore a perfect target. The economic success and political vulnerability of the Jews over the centuries has been paralleled by that of the Chinese middleman minority throughout Asia. In both cases, general discrimination has been punctuated by sporadic confiscations, mass expulsions and mob violence. The history of both groups (and of other middlemen minorities in other parts of the world) has wider implications for the political vulnerability of market economies in general.