To modern sentiments, few things are more troubling about Judaism than its perceived chauvinism. This is often expressed in discomfort — both among Jews and non-Jews — with the concept that G-d chose the Jewish people for greatness, that Judaism requires a belief that Jews are somehow better than everyone else. What does it mean that the Jews are "the chosen people?"
The explanation of this "chosenness" is given explicitly in the Torah, in the Talmud, and in the Midrash. In the Torah, G-d tells Abraham (Genesis 12:3): "Through you shall the nations of the world be blessed. I shall bless those who bless you, and those who curse you I shall curse." So one aspect of our chosenness is that the blessings of G-d are bestowed upon the nations of the world by way of the Jewish people. Just as the Cohenim are the conduit for blessing the Jewish people, so too is the nation of Israel the conduit for blessing the other nations. Note that nothing about this makes Jews "better" than anyone else; rather, this is a description of our special mission in the world: to be a conduit for blessing for all nations of the world. This is a mission which may (or may not) be shared by others, but it is ours whether we want it or not.
In the Talmud, the blessings for the Torah are codified and they come to us in the Siddur as "Blessed are You, G-d, who has chosen us from among the nations by giving us the Torah." We are chosen among all the nations for bringing G-d's message of goodness and righteousness to the world as set down and defined by the mitzvot in the Torah. Hence so many of our blessings say, "...Who sanctified us with His commandments..." In Hebrew, the word "sanctified" can also be rendered as "set apart." Thus we have been "set apart" from the other nations by way of our receipt of the Torah and mitzvot. It is our duty in having been so chosen to bring the Holiness inherent therein to the nations of the world that they may be blessed through us. Again, note that our chosen state requires us to be cognizant of the burdens and responsibilities we have to others.
It is interesting to note that in the Midrash, the Torah was offered to each of the other nations before it was offered to the Jewish People. When offered the Torah, each nation asked, "What is in it?" Each nation rejected the Torah based on a distaste for a particular restriction imposed on behavior by a particular mitzvah. In contrast, the Jewish people when offered the Torah responded: "All that is therein we will do and we will listen." Thus G-d's choice of us as the Chosen People is as much a result of His action and ours as it is of the action (or inaction) of the other nations.
Notable in all of these sources is that there is nothing chauvinistic about our state as the Chosen People. There is nothing about it that makes us better. Our chosen status simply makes us distinct — but no more or less distinct than any other nation that fulfills its role in the world.
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