It' s Yom Kippur, the holiest day of the Jewish calendar. The synagogue is crowded with congregants, their minds focused by fasting and prayer. For several hours they've been absorbed in introspection, confessing their sins and asking forgiveness. Now it's time for another annual ritual. A speaker ascends the podium while ushers distribute envelopes to the congregation. Each envelope contains a card with tabs indicating various dollar amounts. The speaker exhorts the congregants to fold down the tabs. By doing so, they promise to donate money to the United Jewish Appeal. Their generosity won't necessarily expiate all those sins they've been cataloging. But it can't hurt.
Or can it? North American Jews contribute about half a billion dollars a year to Israel, mainly through the UJA. In late 1990 and early 1991, the organization raised $1.2 billion, capitalizing on Saddam Hussein's Scud missiles and the wave of Soviet immigration to Israel. In addition to Yom Kippur appeals, the UJA's techniques include telephone networks, pledge dinners, donor books, and special trips to Israel for big givers. The UJA's fund-raising prowess has led Carl Bakal, author of Charity USA, to call it "probably the most successful money-making machine in the history of philanthropy." Nonprofit Times reports that less than 7 percent of the UJA's budget is spent on fund raising and administrative expenses. "The UJA runs a lean operation, and its fund-raising record is spotless," writes Wall Street Journal reporter Cynthia Crossen.
But the UJA's reputation for effectiveness rests almost entirely on its ability to collect money. Rarely does anyone take a close look at what happens to that money once it gets to Israel, where it's filtered through a cumbersome bureaucracy that is closely tied to a socialist system. Along the way, the flow is diverted by political cronies, redundant workers, and monopolistic contractors. The trickle that finally makes its way to the intended recipients is more disappointing than the Jordan River in summertime.
The appalling inefficiency of private aid to Israel is instructive for anyone interested in helping formerly socialist countries make the transition to capitalism. Most free-market advocates recognize that government-to-government aid, such as that proposed for the Soviet Union, is wasteful and counterproductive. But they may be too quick to assume that private efforts are, by contrast, sensible and cost-effective. The example of Israel shows that when private aid is distributed by a quasi-governmental body, when the money is spent in a rigidly controlled economy, and when charity comes with no strings attached, the results are every bit as disastrous as any government boondoggle.
The demeaning effects of the $1.2 billion in economic aid that Israel receives each year from the U.S. government have been well documented by several commentators. The money covers a deficit caused mostly by a repressive economic system. (See "Perestroika in the Promised Land?," October 1990.) Israel's aid addiction is prolonging badly needed free-market reforms and propping up a huge bureaucracy, making the lives of Israelis needlessly difficult.
But a comparable amount of money enters Israel through private donations, and the effects are the same: corruption, nepotism, and slothfulness. The intention of these charitable donations is to reduce poverty, but poverty continues to grow, in no small part because of too much charity.
American donors commonly believe that Israelis are poor because they spend so much on defense. The $6 billion that Israel spends each year on defense is about 20 percent of the GNP. But subtract U.S. military aid to Israel, and Israelis spend about the same per capita on defense as Americans do. The truth is that the Israeli economy is hobbled by heavy regulation, price controls, oppressive taxation, state-sanctioned monopolies, and huge trade barriers. The well-intentioned efforts of American donors perpetuate Israel's dependence on handouts, while failing to help those truly in need.
The failure can be traced largely to the quasi-governmental Jewish Agency, which distributes the money raised by the UJA and similar organizations. The Jewish Agency predates the state of Israel; it was the governing body of the Jewish community in Palestine until 1948. With an official working budget of more than $800 million, the agency manages to run a deficit every year, and the interest on its debt is covered by American philanthropy. (Moreover, the Israeli government borrows aid money from the UJA to cover its deficits.)
High personnel costs are one reason for the Jewish Agency's profligate spending; the organization is full of deadwood. Restrictive labor laws make firing an agency worker with tenure almost impossible, and much American money goes to feed and house redundant workers. Years ago, for example, the agency hired a general and war hero for a public-relations job. Politics in the agency changed, and he was no longer wanted. But labor rules kept him at his post, and today he runs an office with a secretary and a minimal budget. Another agency employee continues to earn a salary as an editor even though his cultural journal has ceased publication.
I once sat in a meeting with these two people in which I heard a good public-relations plan. They asked me to work for free, since no money was allotted to carry out the project.
Hundreds of agency workers are severely underemployed but nevertheless draw good salaries. More than 700 are emissaries (shlichim) sent to cities around the world to convince Jews to immigrate to Israel. Many are former military officers or obedient civil servants rewarded for faithful service with meaningless posts abroad. Most Jews who immigrate to Israel come from places like the Soviet Union and Ethiopia, because things are much worse there. The emissaries to Western cities are a waste of money, yet American donors to the UJA and other organizations continue to pay for them.
When my wife immigrated to Israel from Scotland, the details were arranged by an emissary in Glasgow, a city with all of 5,000 Jews. In a given year, he deals with no more than a dozen immigrants. He goes on speaking engagements to earn spare cash and costs donors to Israel tens of thousands of dollars a year in salary, rent, travel, and administrative expenses.
A friend of mine once lived with a woman whom the Jewish Agency sent to the United States to recruit immigrants. She found a microwave oven in New York that she wanted to take back to Israel, but it was out of stock. Her schedule had her ending her tour in Los Angeles and returning from there to Tel Aviv. In the middle of the trip, using her agency expense account, she flew back to New York to buy her oven. Now for every batch of microwave popcorn she makes, she can thank American donors to Israeli causes.
While some employees get perks and generous salaries for doing next to nothing, there never seems to be enough money to pay those who do the real work. Esther—who works for the agency for a paltry sum while her boss draws a huge salary, gets free use of a Volvo, and goes on twice-yearly "exploratory" trips abroad—describes a rebellion in her office. The staff demanded a pay raise. The boss said that was impossible but suggested that each worker fill out overtime forms, which he would approve. Esther says such fraud is commonplace.
Another source of waste is the misuse of money in construction projects. For the last 13 years, much of the UJA's money has been directed at a worthy experiment called Project Renewal. An American community adopts an impoverished Israeli community and raises funds to rehabilitate it. Last year, The Jerusalem Post sent me to cover the dedication of a $2.5-million community center in Gan Yavne built with money from Winnipeg donors.
I had previously reported on a dozen Project Renewal communities, but none was like Gan Yavne. In terms of the size of the homes and the lots they were built on, the place is little different from New Rochelle. New York. I wrote that this was the least deserving recipient of foreign aid imaginable. In retaliation, Keren HaYesod (UJA-Canada) launched a smear campaign against me. One letter to the Post, from a Keren HaYesod official, warned me not to set foot in Winnipeg, as if the UJA ran the town.
Project Renewal donors in Montreal also have reason to I doubt that their money is being put to its best use. In 1989, former City Councilor Jeff Halper and Idelle Ross, a reporter with Israel Radio, began to wonder what was happening to the millions donated by citizens of Montreal to uplift the slums of central Jerusalem. It seemed that little was being done to improve the neighborhood. They investigated and discovered that the project's Israeli director, Dan Waxman, was drawing a salary of $120,000 annually. (The average Israeli salary is about $8,000.) The monthly rent for the project's office was $2,000. After the Israeli media publicized these facts, Project Renewal's Montreal office fired Waxman and moved the Jerusalem headquarters.
A year later, Ross was reporting for Israel TV news on the dedication of a new recreation center funded by Montreal donors. The first 15 seconds of her one-minute report were spent on a glowing official description of the good that this piece of tarmac would do for the residents of the area. The rest of the report consisted of comments from residents, who demanded to know why millions of dollars had been spent to buy so little. After the first 15 seconds aired, a sudden technical glitch wiped out the rest of the report.
The real beneficiaries of Project Renewal largess are the neighborhood administrators. In two cases I investigated in Jerusalem, the local technocrats who handled the applications from residents seeking money for renovations were closely associated with radical political groups (one actually called "the Black Panthers") and allegedly had criminal ties. A number of American communities woke up to the shenanigans and established better oversight, but others continued to naively trust the Israelis who get the checks.
Every four years, when the Jewish Agency elects its executive, American fund-raisers try to take over the organization. They argue that money is being seriously misallocated and deep reforms are needed in a hurry. But the agency is an Israeli organization, and years of political appointments make a takeover very difficult. After each failed coup, the new Israeli director fires a lot of low-level staff to prove he's serious about reform, but the executives drawing huge salaries stay in place.
Keeping stories of corruption and inefficiency from the American Jewish public is an obsession for the UJA. It maintains a firm grip on the American Jewish press by outright ownership or heavy subsidization through advertising. It plants stories in the Jewish papers about UJA activities that appeal to donors but have nothing to do with the reality in Israel.
"The Jewish press has kept American Jews totally ignorant about Israel," says Joel Bainerman, a former economics editor for The Jerusalem Post who frequently speaks to American audiences. "They're shocked when I explain the extent of the official corruption and even more shocked when I tell them what role American money is playing in the downfall of Israel's morality. No one has even hinted to them that there may be a relation between access to huge amounts of unearned cash and hanky-panky."
In its efforts to draw a rosy picture of Israel, the UJA finds no shortage of flacks. It pays writers well, and virtually every English-language writer in Israel has worked for the organization at one time or another. I'm no exception—I worked for the UJA in the mid-'80s for more than a year. Shale Siegel, an ex-officer who was then the UJA's editor, warned me: "Don't make the mistake of believing you're actually going to be writing. You'll arrange words the way we want them. Most writers don't last more than half a year, so don't think this is long-term employment."
I liked him, and so did most of the writers. But the sheer fabrication stabbed at the conscience so deeply that most did quit within months. One writer had her fill when, she says, "I had to quote a kid saying he wanted to grow up to be a doctor. The kid wanted to drive a bus, but that doesn't tug at the heartstrings. So I changed 'bus driver' to 'doctor' for them."
The UJA wants to depict Israel as a sort of Long Island set in the Middle East. The fact that Israel's answer to the Democrats, the Labor Party, has not won a national election in 14 years does not deter the UJA from hiring as speakers such has-beens as Abba Eban and Teddy Kollek, who are well paid for dinner engagements. Most American Jews have no idea how despised Labor Party leader Shimon Peres is in Israel, nor do they have any clue as to the scope of the corruption that brought the demise of Labor and is slowly eating away at the credibility of the ruling Likud coalition.
When a UJA group lands in Israel, it is treated to a show designed to reinforce false images. Although Sephardic music, by performers such as Ofra Chazeh, has almost totally replaced the European melodies, Americans are entertained with decades-old hora songs. Although the kibbutz movement is $4 billion in debt and some two-thirds of its young people are abandoning it, Americans are taken to a rare successful kibbutz to witness the reclaiming of the land.
On Project Renewal visits, the prettiest girls in town hand out roses, and later the townspeople, safely cordoned off from the Americans, join the dedication ceremony. Speakers, including the mayor and other politicians, mostly from Labor, express gratitude for the Americans' generosity, and then a cute children's choir performs a few songs of praise.
The UJA groups are called "missions." There are Singles' Missions, Dentists' Missions, and, my favorite, the Hollywood Artists' Mission. By the time I interviewed Jack Lemmon, he had been moved to tears by the UJA-orchestrated schmaltz. The UJA likes to take missions to an air force or army base, give them a tour or demonstration, and invite them to a lecture by a middle-level officer. The visitors leave convinced they have been privy to top-level military information.
All the inconvenient facts of Israeli life remain hidden. If money is needed to aid new Soviet immigrants, no one will find out about the bungling and political infighting that is preventing new construction to house these people. If funds are needed to upgrade housing, no one will discover that the housing is falling apart because of shoddy construction, payoffs, and inferior materials. Critical thinking is smothered, lest it ruin the big night when pledges are gathered for donations.
The big donors are invited on the President's or Prime Minister's Missions. The honored participants share dinner with Israel's president or prime minister, hear a speech, and donate. Live Aid raised $90 million from a billion music lovers. I've seen half that raised in an hour at the close of a Prime Minister's Mission.
American donors are motivated partly by a desire to contribute to Israel's well-being. But another element is prestige. Big donors become the unelected spokespeople of American Jews. They get to talk to major Israeli politicians and then get debriefed by members of Congress back home. They get interviewed on Israeli policy by the American media, which tend to equate money with expertise on Middle Eastern affairs. All this raises their status within their communities.
But American Jews have begun to recognize that they are being manipulated. The members of the missions look older each year, as younger activists become harder to find. Some projects fail. In 1990, the UJA tried to raise money to bring indigent Soviet Jews from a transit camp in Rome to the United States. These Jews held Israeli visas, though they had no intention of going to Israel. This deception was one reason very little money was raised to bring them to the United States.
Many UJA workers are not committed to Israel as such; rather, they are professional fund-raisers. A failed campaign can cost them their jobs. Yet for all the slick selling, they are not winning converts. In 1973, they raised $1 billion; in recent years, the annual average has been about half that. The old tricks are not having the results they used to.
This year saw a brief revival. The Iraqi missile attacks, combined with the wave of Soviet immigrants, pushed total revenue for 1990–91 to $1.2 billion. But not one penny that arrives in Israel will help create jobs. A lot of the money will be used to build homes for immigrants. This work will be supervised by Housing Minister Ariel Sharon, who, according to a recent state controller's report, runs a ministry loaded with high-paying but useless posts for friends and supporters.
Herman Branover, a professor of engineering at Beersheva University, estimates that 10,000 engineers and almost as many doctors will arrive from the Soviet Union this year. In order to earn a living, many of the doctors will have to be retrained in Western methods. Branover estimates that 2,000 of the engineers will bring original ideas with them that will die unless backing is found for development and the engineers are trained in Western patent and marketing methods.
Here is an area where the UJA and other philanthropic organizations could make a real difference. Until now they have built tennis courts, day-care centers, old-age homes, and the like. Opening a college for Soviet engineers might actually lead to the development of products, construction of factories, and creation of jobs. Of course, these people would wean themselves from any need for charity, and that's bad for the fund-raising business. "Charity organizations don't want people to better themselves without their help," Bainerman says. "They make Israelis apathetic, and, the worst crime of all, they feed a politico-economic system that is strangling the whole country."
But there are changes that could make American donations work. First, the UJA and anyone else associated with the Jewish Agency should divorce itself from that organization and create a completely private charity accountable to every donor. Money should not be allowed to disappear into the Israeli bureaucracy anymore.
Second, the UJA and allied organizations should sell off assets such as dental clinics, kindergartens, and nursing homes. This would raise money, and it would employ Israelis with the initiative to buy the properties. And, finally, if the UJA is really interested in immigration to Israel, providing small-business loans to prospective immigrants would be a better investment than paying unproductive emissaries. Instead of a tax-deductible Project Renewal, the UJA should establish a Project Industrial, aimed at creating real income. Donors would have to trade tax write-offs for dividends. "Whenever I lecture abroad," says Bainerman, "I tell the people the biggest favor American Jews could do for Israel is to stop giving charity and start investing in industry."
About 800 years ago, the great Jewish scholar Maimonides described eight levels of charity. The lowest, he said, is tossing a coin to a beggar. The highest is enabling the beggar to become self-reliant by finding him a job, taking him in as a partner, or lending him the capital to start his own business.
That wisdom applies to the Soviet Union and Eastern Europe as well as Israel. For socialists who want to become capitalists, the first lesson should be that capitalists do not throw money away. By investing instead of subsidizing, Americans can ensure that their money is spent according to the discipline of the marketplace, rather than the whim of a bureaucrat. Instead of being squandered, it would help create more wealth. The output—in profits, jobs, goods, and services would be greater than the input. Investment is the kind of aid that makes recipients into donors, beggars into employers. Maimonides would have approved.
Barry Chamish is the author of The Fall of Israel, which will be published in Great Britain in November.
This article originally appeared in print under the headline "Giving 'Til It Hurts".