Where Goes the Money?

The scandal known as Bibi-Tours began with a report on Israel’s Channel 10 TV. It said that as finance minister and as a Knesset
member, Benjamin Netanyahu made repeated trips abroad at the expense of private donors, foreign organizations and the Israel Bonds offices in the United States and England. Allegedly, Netanyahu’s wife Sarah and, on at least one occasion, his children traveled on the Israel Bonds tab, which covered first-class flights and luxury hotels.

As I write, all of this is in the category of allegations. Netanyahu sharply contested both the details of the report and the implication of wrongdoing. A laconic response from Israel Bonds said that arrangements for Netanyahu fit “standard practice since the establishment of the organization” for bringing Israeli public figures to speak before foreign investors. An inquiry by State Comptroller Micha Lindenstrauss could answer the question of whether the prime minister violated the law or parliamentary ethics.

But the affair raises another question: Why does Israel Bonds still exist in 2011? To broaden the question, do other classic Israeli fundraising institutions serve a legitimate purpose anymore, at least in their present forms?

Don’t get me wrong. Giving isn’t obsolete. It’s great that Jews like to give. “Checkbook Judaism” is a problem when writing checks is the only expression of someone’s Jewish identity, but not when it’s part of a diversified portfolio of living by Jewish values. Overseas gifts to Israel’s nonprofit sector—from soup kitchens to symphony orchestras, human rights groups to universities—are a blessing for Israel and a bridge between it and the diaspora. But some of the most prominent institutions channeling funds from world Jewry to Israel are past their expiration date.

Technically, buying bonds isn’t a gift at all; it’s an investment. But back in 1951, when Israel created the Bonds apparatus, the new state was flooded with Jewish refugees, not with eager investors. By buying bonds, diaspora Jews were providing a very poor country with desperately needed foreign currency. The gift consisted of accepting relatively low interest on a high-risk investment.
That’s history. As Yossi Beilin, who did a stint as minister of economics and planning, has pointed out, by the 1970s Israel was able to get bank loans at reasonable rates. Meanwhile, the philanthropic appeal of Israel bonds dropped, and the interest they paid rose. Knesset Member Meir Sheetrit of the opposition Kadima party notes that Israel bonds are now highly attractive—and institutional investors are the main buyers. Today, Israel has a high credit rating, large foreign currency reserves and flourishing exports. The government can borrow at lower rates commercially, without spending millions of dollars on the Bonds apparatus for salaries and bringing Israeli politicians to speak to investors.

But some politicians like those trips—not just for the pampering, but probably also for the opportunity to hobnob with high rollers whom they can later tap for campaign donations. In the wake of Bibi-Tours, Sheetrit promised to reintroduce a bill to dismantle Israel Bonds, but hawking that plan to his colleagues could be tough.

If the philanthropic appeal of Israel Bonds became obsolete in the 1970s, the Jewish National Fund arguably became an anachronism on May 14, 1948. The JNF’s original purpose was to buy real estate in the name of the Jewish people. Acquiring land, however, was itself only a means toward establishing a state. When Israel declared independence, the JNF’s land holdings should have been turned over to government ownership for the benefit of all Israeli citizens. Instead, the JNF was defined by law as a “national institution” tied to the state. The government actually sold it land abandoned by Arab refugees, amounting to nearly one-eighth of Israel’s territory—and JNF rules allowed only Jews, not Israeli Arabs, to lease that real estate.

Like other organizations burdened by fulfilling their goals, the JNF adopted new tasks. Some, such as environmental advocacy, make sense for a nonprofit—but only if it is independent of the government and able to challenge officialdom. The JNF could escape obsolescence by giving its land to the state, cutting its ties to the government and perhaps changing its name to the Israel Environmental Fund.

The Jewish Agency is even more of an anomaly. Before 1948, it was part of the movement to create a Jewish state. Yet it stayed in existence after 1948, as if in an alternate universe where Jews still struggled for independence. Unlike the state, though, it could still take donations from overseas and provide services such as rural development to Jews, but not Arabs. As with the JNF, keeping a pre-state organization alive became a mechanism for discriminating against the country’s Arab citizens.

The Agency, too, has shed some of its tasks and made changes over the years. Hagai Katz, director of the Israeli Center for Third Sector Research at Ben-Gurion University, notes that it has extended aid to Israeli Arabs as well—for instance, during the bombardment of northern communities during the Second Lebanon War.

But with a First-World economy, the State of Israel no longer needs a quasi-official body to schnorr overseas to meet government responsibilities. The Agency should stop being a “national institution” linked to the government and political parties. Either it should serve purely as a United Way-style channel for diaspora Jews who want to give to worthy Israeli projects, or it should close up shop. That should not mean an end to giving. Jewish donors, expressing their values and vision of Israel, will be able to choose from among many other organizations and institutions as worthy recipients. If the change gives diaspora Jews an incentive to learn more about Israel and actively debate its direction, that’s all for the best.

No one can forecast how the Bibi-Tours investigation will end. But you don’t need forecasts to understand the problems with the old institutions for giving to Israel.

Gershom Gorenberg is the author of The Unmaking of Israel, forthcoming from HarperCollins in November 2011.