Bankruptcy of the Jewish community in the Grand Duchy of Lithuania
Ideas about tremendous wealth of the Jews, their well-being, which was thought to have been created by incurring losses on the Christians, was prevalent in the society of the Grand Duchy of Lithuania ( GDL and later periods). The reality, however, was quite different. Only a small part of the Jews was successful business people, the majority of them that engaged in small businesses, trade and crafts could hardly make both ends meet.
They competed not only with the Christians but also among themselves. Taxes paid to maintain the community and the institutions of its self-government, levies for Judaism practice (e.g., taxes similar to excises on kosher food, the possibility to sleep on feather pillows and the acquisition of ritual items) made a personal financial condition even more difficult. The irrational system of taxing the Jews applied by the State, which was at variance with the size of the community and its financial capacities, ruined the Jewish community most. Though the main tax paid by the Jews to the State was called the "Jewish pillow", which had to mean taxation of an individual, actually the size of the tax imposed on all the Jews in the GDL in general each year was determined by the needs of the State.
The abyss of never-ending debts
Almost simultaneously two interrelated processes, which drove the Jewish community and individual households to bankruptcy, took place in the community. One of them was personal debts of the Jews, which was felt from the second half of the 17th century (e.g., in universal privileges granted to the Jews the Christians were forbidden, in case there was no other property of a Jew, to take over the bought out seat in the Synagogue for debts). The second phenomenon was falling into debts of individual communities and the whole Jewish community of the Grand Duchy of Lithuania, as a physical entity, which gradually grew into insolvency.
At the end of the 18th century, insolvency of the Jewish community of the Polish-Lithuanian Commonwealth became the problem that the State dealt with for several decades and which remained unsolved until the third division, which affected different strata of society (especially the Jesuit Order and the noblemen that lent money to the Jews). The inability of the Jewish community to pay taxes imposed by the State, to repay the debts and the increasing interest rate were the main reasons for the Jews to abolish the Lithuanian and Polish Vaada (Jewish Council) (1764). The first signs of the Jewish community in the GDL falling into debt were noticed in the middle of the 17th century already when Vaadas of Lithuania, which failed to collect the increasing pillow tax complained that it could not borrow under favourable conditions.
The expenditures for the pillow tax of the Jewish community constituted about half its total expenditures. The debt of the Jewish community of the Grand Duchy of Lithuania was especially large and amounted to about two and a half million gold roubles. The debts of Vilnius kahals (self-government institutions of the Jewish community) alone exceeded the annual income by 21 times. The situation was complicated, specific communities and all Jews in the GDL lacked funds not only to repay the debts but also to ensure functioning of self-government, to carry out the most necessary social activities of the community. Sometimes, having no other sanctions the creditors sealed the Synagogues, which were the ownership of the Jewish community.
Saving of the Jews ended in their bankruptcy
In 1764, the convocation Seimas of Warsaw announced the "Jewish pillow" Constitution. It provided for the first step in resolving the problem of the debts of the Jews –taking account of and evaluating the debts of the Jews and their community. The debtors had to submit the documents confirming their debts to the Treasury Commission; they were strictly forbidden to borrow anew. Despite the State's supervision, the process of repaying the debts of the Jews was very slow. Complicated repayment of the debts of the Jews became the problem of the State due to which even the implementation of the strategic objectives of the State was hindered.
Having calculated the debts of the Jews it became clear that the activity of the Education Commission had no financial resources to develop because 500 thousand gold roubles of the liquidated assets of the Jesuit Order whose management was taken over by the Commission, was debts of the kahals of the GDL. The fact that no plans were made about how the debts of the Jews had to be paid back aggravated the situation. The communities that had to pay back the calculated debts could find no other ways of repaying the debts but borrowing anew (though it was forbidden to do that) because they had to pay back the old debts and pay interest on them. It was complicated and expensive for the Jews who had lost trust of the creditors to borrow, and the interest rate on the credits extended to them was higher than usual.
To legalise new debts a new stage of their accounting was needed – in the summer of 1792 the Jewish deputation prepared the universalis (universalas) at the Four-Year Seimas ("Commission to the Land Courts of the Polish-Lithuanian Commonwealth concerning the Debts of the Jews) declaring accounting of the new debts that appeared after the 1764 Constitution had been issued. It specified that these debts would be started to be paid back only after the debts calculated during the first stage of the repayment of the debts had been covered. A part of the communities solved the problem with the help of the internal resources – imposing new taxes on the members of the communities – rather than taking new loans.
In 1789 Vilnius Jews paid 27 taxes of secular and 7 taxes of religious nature to kahal; the situation in other communities was similar. Several kinds of permanent expenditures can be distinguished in the communities burdened with debts: maintenance of self-government and assurance of social and religious activities of the society, repayment of debts, gifts and bribes given to resolve matters or to ensure long-term support and favours, covering the costs of administration of the Jewish community initiated by the State. The Jewish system of administration in the GDL was organised in such a way that their management cost nothing or almost nothing to the State. All expenditures of the Jewish community management were covered by the Jews. After the Jews had gone bankrupt, the State was unable to resolve the problem that arose, avoided restructuring taxation and administration of the Jews, did not change its relations with the Jewish community.
Contrary to the prevailing stereotype about the well-being of the Jews, in the 17th-18th centuries the Jewish community in the Grand Duchy of Lithuania further fell into debts and finally went bankrupt. This was determined by large taxes paid to the State.
1. Printed universalis of Stanisław August Poniatowski "Commission to the Land Courts of the Polish-Lithuanian Commonwealth concerning the Debts of the Jews" that announced the second stage of counting the debts of the Jews (1792 m.). The main provisions of the universalis had to be disseminated in public all over the State, and "to be announced to foreign creditors – in all the newspapers" – Lithuanian State Historical Archives, f. 1135, inv. 23, b. 58.