Post 4: The Challenge of Diminishing Marginal Impact

[eJP note: This post, by Gidi Grinstein, was originally published on May 13, 2008, as part of a series on Philanthropy in Israel. With this year’s Jewish Funders Network conference taking place in Israel, we thought it would be timely to rerun the series.]

The diminishing marginal impact of Jewish philanthropy in Israel stems from the constant growth of the Israeli economy compared with the stagnation of Jewish philanthropic giving in Israel.

The Zionist movement survived and thrived on the philanthropic generosity of world Jewry. However, as Israel grows in economic and political power, the relative importance of philanthropic giving by Diaspora Jewry is diminishing. In depth comprehension of these trends is critical to create the sense of urgency that is essential of the necessary overhaul.

Initially, Zionism was fully dependent on Diaspora philanthropy. Adding cents to a dime, millions of Jews contributed to the Jewish National Fund (Keren Kayemet Le’Yisrael), to the United Jewish Appeal, to Keren Ha’Yesod and to other charitable organizations. The list of Jewish philanthropists – individuals and families – that have made a significant, sometimes even transformative, contribution to Zionism is also remarkable. Rothschild, Wolfson or Montefiore are some of the most prominent examples.

Over the time leading up to 1948, Jewish philanthropy has evolved, with the Zionist movement continuously playing a central role. It met needs of the nascent national movement and matured with it. Without its financial, political and diplomatic support Zionism would have not progressed to the extent and in the speed that it did. I doubt that there is any other parallel story of mass financial mobilization by any nation anywhere.

Upon the establishment of the State of Israel, world Jewry played an important role in absorbing millions of immigrants, redeeming the land, making the desert bloom, recreating the world of Torah or building our security and economic power. Many also bought State of Israel bonds.

However, the balance of power has shifted demographically, economically and now also in terms of quality of life.

First, on demography: When the State of Israel was established, only five percent of world Jews lived in it (600,000 in total). According to some estimates, in 1995 the Jewish community in Israel became the largest in the world and more than fifty percent of Jewish babies were born in the State of Israel. This trend is strong and persistent.

Second, on economics: Obviously, in the early fifties Israel was in dire need of assistance. Its economy was small and Jewish philanthropy played a central role in covering the budget needs of the nascent state including in critical areas such as weapon acquisition.

Nowadays, the numbers leave no doubt. The marginal role of Jewish philanthropic giving relative to the overall size of the Israeli economy is diminishing rapidly. In 2007 alone, the Israeli economy grew by more than 7 billions dollars. If the Jewish philanthropic giving in Israel is estimated between 600 million to 1.2 billion USD, than Israeli economic growth this year is between 6-12 times the annual Jewish philanthropic giving in Israel. Within a few years the total of Jewish philanthropic giving in Israel would only amount to a half of a percent (0.5%) of Israel’s economy.

Finally, on quality of life: No doubt that initially Israelis were relatively poor and the undertaking of absorption of millions of immigrants was huge. Diaspora communities mobilized to respond with financial and material support which often included clothing and food. However, during the fifties and sixties, Israel rapidly caught up to the quality of life of developed nations. By the early seventies, our standard of living was roughly 60% of the USA. Today, Israel enjoys a quality of life of a developed nation, albeit at the bottom of this family of nations.

All of these numbers point in one direction: the relative importance of world Jewish philanthropy in Israel is diminishing. Furthermore, if attempts to promote philanthropic giving by Israelis will succeed, the marginal role of Jewish philanthropy in Israel will diminish even further. (More on that in post no.6 of this series).

These consistent and powerful trends are a challenge Jewish philanthropy. Their major advantage is one: understanding them may generate a sense of urgency that is essential for the overhaul.

Gidi Grinstein is the Founder and President of the Reut Institute.