Framing the American Jewish Economy

Steven Windmueller, Ph. D.

Posted on August 2, 2014 / 6 Av 5774

Written by Steven Windmueller, Ph. D.

 

The American Jewish community represents one of the largest religious/ethnic nonprofit economic centers within this nation, second only to the Roman Catholic Church in terms of its breath and impact. This economic enterprise needs to be understood as contributing not only to the sustaining of Judaism and the Jewish people within the United States but as a significant contributor to the larger society.

Defining the Dimensions of an American Jewish Economy:

The American Jewish economy contains a number of core elements that contribute to its vitality and reflects its embedded connections with core American principles. The values of competition and choice are essential components of this system. A commitment to the role of voluntarism represents another significant feature in expanding its impact and presence. The federalist system of governance and power-distribution operating inside the Jewish communal system mimics the American political system with its separation of powers and its geographical spread of authority and accountability. The focus on innovation and entrepreneurship emulates the general economic culture. Finally, the commitment to marketing and consumerism drives significant elements of the Jewish economic story. Yet, beyond its affinity with these economic principles, there are distinctive Jewish values and the overlay of its communal historical experience that give special purpose and definition to this system, aligning it with the global Jewish enterprise.

The Jewish economy seeks to support three core market principles:

  1. Sustaining Judaism and the Jewish people
  2. Building support for the State of Israel and the Upholding of the Zionist vision
  3. Engaging in Tikkun Olam, the Act of Repairing the World

There are a number of specific elements that define this economic system:

  1. Infrastructure
  2. Financial Viability
  3. Communications and Branding
  4. Investments
  5. Leadership
  6. Diversity and Growth
  7. Global Markets

Infrastructure:

Since the late 19th century, the Jewish community has been investing in hospitals, universities and seminaries, museums, schools, synagogues, camps, JCC’s, cemeteries, and agency facilities. In addition, the community manages an extensive amount of property donated and/or operated under the aegis of Jewish organizations.

Within this economy, thousands of individuals are employed that perform hundreds of different roles and services, not only contributing to the support and maintenance of the communal system but providing an infusion of monies back into the larger society. The services provided not only meet the educational, cultural, and religious needs of constituencies within the Jewish community but also offer assistance and support to literally thousands of Americans through its social service networks, medical and recreational facilities, thereby relieving the public service sector of having to deliver these programs.

Economists often speak of the ripple effect of a particular economic policy or activity; no doubt the Jewish communal system as a result of its size and scope of activities is able to generate services, offer employment, stimulate giving and promote affiliation and engagement. The growing presence of non-Jews as investors, donors, and purchasers of service represents an important undervalued resource. Of particular significance, business and commercial groups from all sectors of the economy are partnering today with the Jewish community around various projects and causes, frequently supporting or underwriting particular services or activities of the community.

Financial Viability:

While there is a body of literature on the overall economic history of the Jewish people, limited attention has been given to the American Jewish economic story.(1) For more than 100 years, until it ceased publication in 2008, the American Jewish Year Book annually provided some comprehensive data on Jewish communal finances.

More recently, Mark Pearlman writing in Jinsider in 2009(2) suggested that the Gross Domestic Product of the Jewish community consisted of $9.7 billion. In his research Pearlman analyzed the different categories of activity and funding over the course of a given fiscal year, in effect to create a Jewish GDP that could measure all of the services and goods produced by the Jewish economy within the United States. The Pearlman report noted that the “Jewish GDP study focused on the basic economics of the Jewish community, specifically the distribution and balance of funds throughout Jewish non profit organizations.” The breakdown of this economy by sector appears below:

  1. Social Welfare: 36%
  2. Education: 32%.
  3. Communal Life: 17%
  4. Advocacy: 4%
  5. Arts: 2%
  6. Arab-Israel: 1%

According to Pearlman, “More than 25 percent of all funds come through the Jewish federation system.” Thirty percent of all revenue based on this study was concentrated among the top 10 Jewish nonprofits, including UJA/Federation of New York, the Jewish Agency, JDC, Hadassah, and Yeshiva University.

In more recent times a sizeable private Jewish sector has emerged, consisting of businesses, consulting groups, service providers, and professional resources that in some instances compete with the nonprofit sector, while also meeting specialized needs and individualized tastes. This aspect of the Jewish economy has yet to be fully appreciated and correspondingly, its economic impact has yet to be measured. In an earlier article, I had occasion to specifically focus on the role of American Jewry in the global economy.(3)

Communications and Branding:

The community has not only created over time a mature economic system with all of the core components committed to sustaining Jewish life but also has constructed a communications network that today encompasses the internet with its hundreds of Jewish websites and resources, while maintaining its Anglo-Jewish press and publishing houses. The presence of newspapers, books, pamphlets, films, television specials, videos, and CDs adds a distinctive element in the branding of Jewish messages and in articulating a set of core values. No economy can operate without the capacity to deliver messages as well as garner input from its consumer base.

Investments:

Every economy must focus on building equity and ensuring continuity. One of the core features of the American Jewish economy involves the significant commitment by Jews to “invest” in their future. This can best be measured by the growth of endowment funds, the establishment of foundations, and the expansion of long-term giving programs.

In 2009 federations reported on community endowment portfolios where holdings were posted in access of $13 billion. Similarly, the Jewish Funders Network noted: “As the number of Jewish foundations and individual funders has grown – more than doubling in total assets over the past seven years to approximately $30 billion in the United States alone – so has the need for a dynamic international network of philanthropic leaders.” As a capital-driven system, the financial health of the community represents the core measure of its ability to market its ideas and messages and promote its services, while reaffirming its brand.

Leadership:

An essential strength of this system has been its ability to develop a strong lay and professional leadership cadre. This social network has operated around a set of specific characteristics, including the presence of interlocking directorates where organizations both share lay leaders and benefit from cross-institutional access and connections. There is high premium placed on leadership recruitment at both the lay and professional levels that has permitted this system to identify, prepare and promote high quality and engaged individuals. A set of shared leadership characteristics within the professional sector reflects a high degree of specialized training and education, access to professional and institutional networks, and a strong commitment to core institutional and communal outcomes.

Global Jewish Engagement: Building an International System:

The international aspects of the American Jewish economy are particularly significant in light of the Diaspora-Israel partnership. Here, one finds not only Jewish philanthropic dollars being provided to Israel and Jewish communities across the world but the investment by Jews and others in building infrastructure in Israel and elsewhere.

Federations have collectively raised more than $25 billion since 1948 as part of their annual campaigns, of which over $12 billion or approximately 47% has been earmarked for international concerns, including the Jewish Agency and the American Jewish Joint Distribution Committee. These numbers do not reflect Israel Emergency Campaigns and other special international appeals.

Correspondingly, institutions such as Hadassah generate significant annual revenues (in 2010 some $44 million) for their on-going programs within Israel, not including specific earmarked projects. In addition to the Jewish National Fund (JNF) which reported revenues in 2010 for their infrastructural programs in Israel of $37 million, there are some 30 “American Friends” organizations that have over the course of the past half century raised significant resources for the State of Israel and more directly, its universities, social service networks, religious movements, and cultural institutions. These transnational financial institutional partnerships represent collectively one of the largest global non-profit enterprises ever constructed.

Since its inception the State of Israel Bonds Corporation has invested more than $34 billion in the Jewish State, involving approximately a billion dollars a year in additional purchases.

Economic Principles that Drive the Jewish Economy:

The Jewish community is subject to the same factors that predict how any economic system is likely to perform. Five such principles are introduced below:(4)

We Shouldn’t Ignore the Long-Term and Unintended Consequences of Policies and Actions. “Henry Hazlitt defined “the art of economics” as tracing the effects of actions and policies and seeing how they affect everyone rather than just particular groups.” A strong and vital Jewish economic system has profound and sustaining consequences for the general economy and the collective interests of the Jewish people.

People are Rational. ”When we say that people are rational, we mean that they will tend to do things that they expect to provide them with net benefits. We mean that they have goals, they tend to choose the means that they believe are appropriate to achieve them, they respond to incentives…” Securing a Jewish education or supporting the State of Israel represents actions that offer both tangible and psychic rewards.

Trade Makes People Better Off. “Trade is a kind of voluntary cooperation, and it makes us wealthier.” The greater engagement that Jews have with their communal system produces not only personal satisfaction but there are collective benefits in growing and strengthening the community.

People Respond to Incentives. “Incentives motivate people to action.” As with any market, there are motivating factors associated with Judaism and aligned with the communal enterprise that trigger actions, i.e. a threat to the State of Israel or a desire to help those in need, may well prompt Jews to support various initiatives. This system is designed to regularly evoke responses to its core messages.

People Act. “People choose goals (ends), and they choose ways to achieve those goals (means).” This can best be understood in this setting in that Jews are compelled by their tradition and motivated in part by the marketplace to perform certain core actions.

Challenges Facing the American Jewish Economic System:

  1. Growing Business Partnerships: There is significant data to suggest an increasing set of arrangements are being negotiated that involve programmatic partnerships between the business sector and non-profit institutions. This represents a promising, yet underdeveloped, arena for the Jewish community.
  2. Expanding Models of Collaboration: Data on mergers and collaborative arrangements seems to be a central theme in today’s marketplace. There is increasing evidence that such is the case within the Jewish community.
  3. Focusing on Innovation and Growth: This communal system is extraordinarily vibrant despite an array of challenges facing it. Some 250 new institutions have been created since the mid-1980’s that now compete in the marketplace.
  4. Entering the For Profit Sector: Jewish organizations following the lead of other nonprofit communities are exploring new income streams by entering the business arena in order to generate additional revenues and broaden their exposure.
  5. Engaging in Quantitative Analysis: Following the lead of the commercial sector, there is growing evidence within the Jewish economic system for institutions to introduce quantitative as well as qualitative assessment in measuring outcomes and accessing their investment in program services and in the deployment of personnel.

Beyond these efforts to refine business and operational practices, it would appear to be essential for this system to collectively engage in an economic planning initiative in order to analyze national and international business trends, demographic and social patterns, cultural and religious practices, as a way to more formally chart long-term needs and economic priorities of the Jewish communal system. Quality economic systems demonstrate their competitive edge, by constantly encouraging and promoting innovation and by exploring new revenue streams.

As this author has noted elsewhere a central requirement for the Jewish community will be the creation of a Jewish Investment Bank and the promotion of a national resource and development fund.

If we examine the American Jewish community through the prism of an ethnic-business model, it will allow for a better understanding of the principles that ought to drive this sector. Six best practices ought to central to its core organizational culture: operating on the principles of accountability and transparency, constructing efficiencies of operations, being responsive to trends, creating a forward vision, and introducing effective governance and management systems.

Dr. Steven Windmueller is the Rabbi Alfred Gottschalk Emeritus Professor of Jewish Communal Service at Hebrew Union College’s Los Angeles campus. See his website, thewindreport for his other writings.

(1) 1.”Economic Transformation of American Jewry,” (with Carmel U. Chiswick), Yirmiyahu Yovel, Editor in Chief, Encyclopedia of Jewish Culture, Israel: Keter Publishing House, 2007 (Hebrew). “The Linguistic and Economic Adjustment of Soviet Jewish Immigrants in the United States: 1980 to 2000,” (with Michael Wenz), Research in Labor Economics, 24, 2006, pp. 179-216. “American Jewry: An Economic Perspective and Research Agenda.” Contemporary Jewry, 23, 2002, pp. 156-182. Revised and updated in Carmel U. Chiswick, Tikva Lecker and Nava Kahana, eds., Jewish Society and Culture: An Economic Perspective, Ramat Gan: Bar-Ilan University Press, 2007, pp. 177-206. 21. “Economic Status of American Jews,” in David M. Gordis, and Dorit P. Gary, eds., American Jewry: Portrait and Prognosis, New York: Behrman House, 1997, pp. 247-260. Presented at Conference on Policy Implications of the 1990 National Jewish Population Survey, July 1991, University of Judaism, Los Angeles, revised 1994. “The Skills and Economic Status of American Jewry: Trends Over the Last Half Century,” Journal of Labor Economics– Special Issue in Honor of Jacob Mincer, 11(1), January 1993, pp. 229-242. Expanded version in Robert S. Wistrich, ed., Terms of Survival: The Jewish World Since 1945, London: Routledge, 1995, pp. 115-129. “The Post-War Economy of American Jews,” in Peter Y. Medding, ed., America Since the Second World War, (Studies in Contemporary Jewry, Vol. 8),Oxford University Press, 1992, pp. 85-101. and a significant body of work from Barry R. Chiswick: http://tigger.uic.edu/~brchis/jewish.pdf

This article was published on eJewishPhilanthropy’s website on June 19, 2012. Article Link: Framing the American Jewish Economy


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