Sermon: On Energy Prices and Ethical Business

Written by Rabbi Josh Levy — 8 November 2013

The letter, when it came, began like this.
“Dear Mr Levy,
Last October, we promised not to increase energy prices until the second half of 2013 at the earliest, and we kept this promise.
Unfortunately, we will have to put your energy prices up on 15 November 2013.
There are many reasons for this, including the rising cost of energy efficiency programmes, support for low-carbon energy and help for vulnerable customers”.

As an example of trying to communicate with your customer – about which there are people in the room who definitely know more than I do – the letter felt, well, pretty clunky.  How good of them to keep their promise – before their hand was forced by the unreasonable demands of the environment, the old and the infirm!
If only there weren’t these awful ‘Government sponsored initiatives’ they said, you, Mr Levy, who of course cares only about your bottom line would not be paying so much.
The letter did go on to talk about wholesale energy prices and profit levels, but the bad taste was already there.

Now, I have to say until this point I’ve always been pretty happy with my energy supplier.  I’ve even considered them to be a pretty ethical company – the UK’s biggest Living Wage employer, noch.
And (unfortunately in common with our politicians) I am spectacularly ill-equipped to address the dysfunctional nature of the energy market, to analyse the real levels of wholesale gas prices, or to remark upon the advisability of government imposed price freezes.

But the letter not only tasted unpleasant, it also raised my rabbinic shackles.
Something is happening in the conversation about energy prices which feels – not OK – Jewishly, ethically, not OK.

It is not that the price is going up, per se.  It may feel unfair, we may not want to pay more, but Judaism is not fundamentally hostile to the making of profit.  Our tradition recognizes the importance of making money as a driving force in our economic activity.  There is nothing fundamentally wrong with businesses seeking to make money, or to reward their shareholders.  Halachah – the detailed Jewish Law that was built by the rabbis during the first few centuries CE – does limit the acceptable level of profit – which itself is a telling – but even then it is pretty generous.  The rabbis – who, of course experienced a very different sort of market culture to us – set the limit of legitimate profit at 16%.  Only a merchant who overcharges by more than one-sixth is guilty of ona’at mammon – of monetary deception, of financial wrongdoing. If this seems generous, then even more pro-business is that the price from which any overcharge is measured, according to the specifics of Jewish Law, is not the value of the product – not the wholesale cost – but the going retail market value. So, if all the sellers of the same type of goods decide to sell at a 100% profit – as long as they are not colluding with one another – Jewish law does not prevent them from doing so.

But I do want to come back to that telling point, that Judaism does limit the acceptable level of profit.  Because underlying this is an important Jewish principle – that profit making, that the internal dynamic of a market is OK – but in itself it is not enough.
Markets require regulation: In order to protect the consumer and to ensure ethical practice.  And to reflect a fundamental religious value – that wealth, and the resources of the world are ours by gift, not by right; that the market itself while a, hopefully efficient, mechanism for distributing resources to people, is not to be treated as a thing of sanctity.

So, the rabbis were pro business but they were also pro regulation, particularly when it came to things like the sale of vital commodities.  For them these were basic staple foods – such as wine, oil, flour and eggs – but we can definitely include in this category the ability to heat our homes.  They recognised that those who sell these things have a greater social responsibility than those who sell luxury items, and they were especially concerned to ensure that the market operated in a way that was fair to all.  As an example – one of many we could give – in his Hilchot Mechira – Laws of Selling, the great twelfth century authority Maimonides, states about the egg market that profit on eggs may not be taken twice; they cannot be sold on and on, with each merchant adding to the price and taking another cut.  Change ‘egg’ for ‘therm’ and we are not far from one of the accusations made about the energy market.

So, the belief of the rabbis, fundamentally, was that the market is good, but that it should be the servant of society, rather than the other way round.  Nowhere is this better expressed than in the general principle of Jewish business ethics “lifnim mishurat hadin”, which means “beyond the letter of the law” – the idea that in business it is right to go beyond what is strictly allowed by the law, to seek to do what is right, even at our own cost, because maximizing profit is not enough.

The classic example of “lifnim mishurat hadin” is a story of the sage Rav Safra, who was also a wine merchant.  One day, a potential buyer came to him while he was reciting the Shema.  The customer said ‘Sell me this wine for such and such a price.’ Rav Safra did not answer because he was saying shema.  Assuming this was a negotiating tactic, the customer added to his original offer, and said, ‘OK, sell me the wine for such and such a price.’
The cycle repeated a couple of times with the price always growing.
On finishing the Shema, Rav Safra then sold the wine at the first price, saying ‘From the time you made your first offer, I had agreed in my mind to sell it to you. Therefore I may take no greater amount [than your first bid].’

In other words, we can maximise profits, but it is not always right to do so.  Or as the Archbishop of Canterbury put it this week, there is a duty to “behave with generosity and not merely to maximise opportunity’. The underlying issue of the debate around energy prices is that we no longer believe – if we ever did – that large companies are capable of thinking beyond that bottom line.

Of course, in this they do not help themselves.  For there is one further duty that Jewish law requires, that Jewish ethics demand, that that letter I received did not demonstrate – the duty of companies to do all they can to avoid misrepresentation.  From the Torah injunction that one should have “honest balances, weights and measures”, the rabbis forbid even the most tacit misrepresentation in selling – anything that might mislead the consumer, any hint of hidden practices or hidden costs.  The conversation about ebergy prices is contaminated by the current lack of clarity.  The letter I received is a classic example – it gives the impression that there is something to hide, rather than merely the unfortunate need to raise prices.

The letter I wanted to write back went like this:

Dear SSE
I don’t mind you making a profit.
As a rabbi, I really don’t – as long as it is earned honestly, and without manipulation. I do think there is a limit to acceptable profits, but I can’t really tell whether you are operating outside of this because you are not helping me to understand, by speaking to me clearly.
I want to believe that, as yours is a company dealing in chayei nefesh – the essentials of life – you are aware of your social responsibilities.  I think you might be, but, right now, I can’t really tell.  I hope you are, and if you are I am actually willing to pay a bit more.  So please stop underestimating me.
I would like you to bear in mind the words of the sage and scribe Shimon ben Yeshua ben Sira who lived in Jerusalem in the second century BCE.  He stated “A merchant can hardly keep from wrongdoing, nor a tradesman be innocent of sin.”
I don’t want to believe that is true. Please show me it is not.