Israel Bonds Are Glue That Bind Jewish State and Diaspora

Financial Instrument Proves Unifying Force for a People


By Dan Lainer-Vos

Published June 04, 2013, issue of June 07, 2013.
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In 1949, Arthur Hertzberg, a young Zionist who later became a renowned historian and an important communal leader, decided to witness with his own eyes the wonders that were taking place in Israel. He traveled to Israel, but to his surprise, instead of a warm welcome his hosts nagged him with a barrage of demanding questions.

“Why don’t you stay in Israel? Why didn’t more Americans come to fight? Why don’t you send us more money?” As he later explained in an article in Commentary magazine: “Mine was not an isolated experience. Every fellow tourist from America had comparable tales to relate. Perhaps we brought much of the discussion upon ourselves. We were all rather pathetically eager to hear a word of commendation for our past efforts.”

Hertzberg’s recollection illustrates an important point. American Jews were the main financial backers of the Zionist movement, and their support solidified following the Holocaust and the establishment of Israel. Yet, securing American Jewish dollars was anything but simple.

Believing that their donations were a sign of generosity, American Jewish leaders felt entitled to retain a part of the United Jewish Appeal’s collection for their communal needs, and demanded some control over how the funds were to be used in Israel. Israeli leaders, in contrast, saw the American Jewish donations as an inadequate contribution to the national cause.

To overcome the impasse, in 1951 the Israeli government floated the first issue of its Diaspora bonds, commonly known as Israel bonds. Given Israel’s shaky economic standing and their modest interest rate, these bonds were not financially attractive. But by combining ethical and pecuniary appeal, David Ben-Gurion and his allies in the United States hoped to raise more money than possible through regular philanthropy and on better political and moral terms.

The American Jewish leadership, especially the leaders of the country’s various federations, strongly opposed the bond initiative. They feared that American Jews would simply take the money they previously donated to UJA and use it to buy bonds.

If such a scenario materialized, they cautioned, Israel would not get more money but only be burdened by a crippling debt. Even worse, the federations would be deprived of their main source of income, putting the whole structure of the community at risk.

Selling the Israel bonds, often against the opposition of community leaders, was not easy. Nevertheless, in the first three years of the drive, Israel sold more than $145 million worth of bonds to almost 700,000 subscribers.

Israeli and American Jews viewed the bonds differently. Israeli leaders treated the bonds mostly as an investment and enjoyed an increased stream of American dollars, free from the restrictions associated with regular philanthropy. Abba Eban, the Israeli ambassador in Washington, proudly explained that the bonds “expressed in the field of economic thinking the idea of independence and sovereignty.”

American Jews, in contrast, saw the bonds mostly as a gift to Israel. This orientation can be gleaned from the long-term trends of the sales. The Israel bonds’ sales surged during wartime. In contrast with typical investors, Israel bonds subscribers were not deterred by the risk associated with wars. At the same time, Israeli leaders never failed to thank subscribers for their generosity, and American Jews, for the most part, remembered to redeem their bonds upon maturation.

Both parties realized that the bonds were a bit of a gift and a bit of an investment, but by sustaining some kind of willful partial misunderstanding, American and Israeli Jews were able to cooperate and secure an increased flow of funds to the national project. After the first drive, others followed, and the sale of Israel bonds continues even today. Over the years, Israel bonds have provided Israel with more than $35 billion — roughly a third of Israel’s external debt.

Things could have gone very differently. In 1920, facing similar struggles over the distribution and control of philanthropic funds, the nascent Irish government issued Diaspora bonds in the United States. Like the Israel bonds, the Irish bonds combined elements of a gift and an investment. The first issue of the Irish bonds won considerable success, raising more than $5 million from more than 300,000 subscribers.

But in the Irish case, the sale of the bonds only intensified tensions between Irish American organizations and the Irish government. Irish American leaders treated the bonds exclusively as a gift. Accordingly, they demanded a voice on matters of national importance in exchange for their philanthropy. The Irish leaders, in contrast, insisted that the Irish bond was an investment, and so they rejected the Diaspora’s demands. As a consequence, an attempt to float a second issue of the Irish bonds in the United States in 1921 utterly failed.

Over and above finance, the contrasting outcomes of the bond projects influenced the development of Irish American and American Jewish ties to Ireland and Israel, respectively. In the Irish case, the conflicts surrounding the bond project led to the disintegration of major Irish American organizations. The intense conflict also crystallized the differences between Irish and Irish American communities and the incompatibility of their interests. That being Irish today in the United States is expressed largely through symbolic gestures devoid of practical implications, like wearing green on St. Patrick’s Day, is in part due to the collapse of the bond project.

In the Jewish case, in contrast, the bonds provided American and Israeli Jews with an additional venue to engage each other (one that was less humiliating for Israelis than regular philanthropy). By preventing tensions between Israeli and American Jews from erupting into a head-on conflict, the bonds contributed to the belief that the differences between these communities were somehow extraneous. Through the ongoing sale of bonds, American Jews became not only financially invested in Israel’s future, but emotionally invested, as well.

Dan Lainer-Vos is assistant professor of sociology at the University of Southern California and the author of “Sinews of the Nation: Constructing Irish and Zionist Bonds in the United States” (Polity Press).


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