How American Productivity Drives the Jewish Economy
America has enjoyed several economic revolutions, each of which would generate high productivity and sustained growth. The first such era occurred from 1750 to 1830 and was driven by the deployment of steam-powered engines, the railroads, and the onset of industrialization. The second phase would be launched in 1890 and would end in 1972. This sustained eighty-year period of economic development would be highlighted by a series of new inventions, i.e. cars, aircraft, and a series of scientific advancements. Further, this extended level of growth could have only occurred as a result of urbanization, the expansion of opportunities for women, the centralization of core resources including heating and air-conditioning, and access to electricity and gas resources. A significant factor involved medical and scientific achievements, resulting in expanding the quality and length of human life. A third, yet more contained period of accelerated growth would take place between 1996-2004, and would generate the technology and communications revolutions.
It is therefore not surprising to see a corollary growth in the American Jewish economy that would parallel these stages of productivity and economic transformation. American Jewry would experience significant demographic expansion and institutional development during these separate phases of prosperity and economic growth. As a result of each of these economic “revolutions,” the Jewish communal enterprise would evolve from a series of independent colonial congregations in the 1700’s with no more than 2500 Jews at the time of the American Revolution to a robust network of synagogues, communal organizations, national institutions and social services following the Second World War, serving in excess of five million Jews. Today this economic system represents a multi-billion dollar investment of institutional services, facilities, and programs.
Since the end of the Second World War this nation would experience on ten occasions economic downturns. On average, it would take two years for employment numbers to return to pre-recession levels and for investment patterns to stabilize, allowing markets to return to pre-recession levels of productivity. However, with each of the past three crises, it would take the economy considerably longer to recover. This last recession required nearly seven years to regain economic equilibrium. Smaller economies, such as the Jewish communal system, would by necessity be directly tied to the broader contours of the general financial sector, and accordingly, one would find similar recovery patterns operating within the Jewish institutional world.
A number of prominent economists have suggested that we are not likely to experience for some time another dramatic period of rapid growth. Indeed, according to these analysts, “Americans have plucked all the low-hanging fruit,” leaving investors in particular and the market in general with fewer long-term options for extended growth.
Among the new realities, wealth acquision will slow as the economy reflects a “stand in place” condition. This has significant implications for the nonprofit sector in seeking to identify and cultivate “new wealth.” As the general economy demonstrates a slower pace of expansion, this will create a certain level of economic retraction in order to generate additional revenues and to accelerate profits, especially as the costs of doing business increase over time.
These trends create corresponding ripple effects for nonprofits. Indeed, smaller economies, such as the Jewish communal system, have fewer options with reference to managing their institutional resources. Marginal growth and a declining membership base represent specific challenges to agencies and congregations. Complex networks of institutions, as represented by the Jewish communal model, will struggle to find alternative income streams beyond their traditional reliance on membership dues, donor earmarked giving, and foundation grants.
Over the past twenty years, family and community foundations generated the primary growth within the American Jewish system as endowed gifts and designated grants supplanted annual fundraising and membership campaigns. The core issue is whether our community is likely to experience the same pattern of endowed giving over the next generation.
Without a significant infusion of new growth within the general economy, one is more likely to see only modest adjustments to the overall economic wellbeing of the Jewish community. A static financial environment will more likely result in the continuous need to make structural adjustments on the edges rather than experiencing any positive long term transformation and growth to the core of this system. With the likelihood of rising costs and diminishing income streams, institutions will be pursuing both short and long term fiscal and structural solutions. The particular Jewish demographic realities of declining memberships, increased competition, and a static or diminished revenue base may result in additional institutional closures, organizational mergers, and the introduction of different forms of collaborative arrangements, designed to reduce or contain the costs associated with the operation and maintenance of this vast enterprise of Jewish services and offerings. Finally, in the context of the emerging cultural patterns of the millennial generation, donor support is likely to diminish, placing further economic pressures on institutions.
With fewer financial instruments generating higher yields, investors are forced to explore alternative options for growing their returns or in sustaining their economic position. The implications here for the Jewish sector would suggest a three-fold outcome. Some institutional leaders will seek to maximize their agency’s financial position by altering their investment philosophies, shifting to different funding instruments or considering more risky fiscal options. Others will explore unloading specific assets, including the sale of property or the reconfiguration of building use-age, as means of generating additional income. A third category of behavior will involve exploring new business ventures as a way to diversify income and to generate additional revenues.
By definition the Jewish communal system is responsive to the broader economic contours of American industry and business. Living through a period of minimalist growth continues to challenge the third sector in seeking ways to sustain their economic position while identifying new or alternative income options.