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The Dispensationalist view of Israel and the Church is shown through quotations of the the leaders of the movement like Darby, Scofield, Ryrie, and Chafer. Williams in this book states that the Dispensationalist view of Israel and the Church is necessitated by their view of the Church as an essentially transcendent, heavenly and invisible entity. Since the Church is heavenly, the way to harmonize such an idea with the very "earthly" promises found in the OT to Israel is to "put these things in their respective places [and] arrange them in order (p. 89). And therefore "the Darbyist metaphysical distinction between Israel and the church is the sine qua non of classical dispensational theology" (p. 90). Israel thus
... is ordained by God as the center of all His dealings with the earth. All God does in the history of the world, He does with Israel in view. Israel belongs to the eath and participates fully in its affairs. She is never associated with heaven in the Bible. She is, rather, always related to the earth. ... Israel is above all others in the reckoning of God. She is always at the center of the divine counsels regarding the earth, and she continues as the elect earthly people of God forever. (p. 90)
As for the church, she is
a parenthesis in the plan of God. Stricly speaking then, the church has no place in the divine plan. By the term parenthesis Scofield and Chafer meant that the church is not to be found in the pages of the Old Testament and that the church constitutes an interim in the midst of God's dealigs with Israel. The church is a temporary arrangement inhabiting the time between the Old Testament Jewish kingdom and the millennial Jewish kingdom. This view of the church as a parenthesis is the ineitable result of the contention that the covenants which promise Israel a land, a kingdom, and an eteral king are unconditional and yet await fulfilment. The church is but a stop-gap between the historical kingdom of David and his successors, which ended long ago, and the Davidic kingdom of the future which was promised to Israel by God, and will yet be established by the returning Messiah when the church is removed from the world. (p. 107)
This of course carries with it many implications, some of which are not biblical. One such implication is that Israel is saved by God not by faith in Christ's sacrifice but by works, since Israel is totally metaphysically separate from the Church and thus Christ's atoning sacrifice is not supposed to factor into Israel's salvation. This charge of course is denied by the Dispensationalists, but this is more because they recognize such a position as heresy rather than they being logically consistent with their stated theological paradigm.
Anyway, the probem of Israel is a hot issue, with Dispensationalists typically calling Covenant Theology "replacement theology" and therefore we who embraced it do not love the Jews and are "anti-Semitic". When facing this charge, we must avoid a knee-jerk approach. The fact is that many Reformed folks have throughout history paid lip service to their professed non-discrimination against Jews and are quite anti-Semitic in their words and actions (Think of Martin Muther's polemic against the Jews for example). And even to this day, many non-Dispensational Christians are willing to believe the Palestinian propaganda machine in demonizing the nation of Israel and think that Israel is the aggresor and is "oppressing the Palestinians". So the charge of anti-Semitism is valid to some of the professed adherents of Covenantal Theology among others. Of course, this does not mean that the Dispensationalists are true Jew lovers. Consistent Dispensationalists like John Hagee deny that Jews need to be saved by the Gospel as they are already saved because they are Israel. Since the Scriptures states that ALL need to believe in Jesus Christ in order to be saved, there being no difference between Jew and Gentile (Jn. 3:16; Rom. 10:12-15), such a heretical view is in fact truly anti-Semitic, as it condemns unbelieveing Jews to an eternity apart from Christ.
It would be good here to differentiate between the two beliefs called Zionism and Christian Zionism. Zionism is just the support of the state of Israel and love for the Jews. 'Christian Zionism' on the other hand links Christianity and Zionism into a strange hybrid. As defined by consistent Dispensationalists like John Hagee, this has become heresy; a strong delusion indeed.
The biblical view is that of expansion, that Israel as the Covenant people in the OT has expanded to the Church in the New Covenant which is made up of elect Jews and Gentile alike. The key passage for this issue that should be looked at is of course Rom. 11:11-24, which reads
So I ask, did they stumble in order that they might fall? By no means! Rather through their trespass salvation has come to the Gentiles, so as to make Israel jealous. Now if their trespass means riches for the world, and if their failure means riches for the Gentiles, how much more will their full inclusion mean!
Now I am speaking to you Gentiles. Inasmuch then as I am an apostle to the Gentiles, I magnify my ministry in order somehow to make my fellow Jews jealous, and thus save some of them. For if their rejection means the reconciliation of the world, what will their acceptance mean but life from the dead? If the dough offered as firstfruits is holy, so is the whole lump, and if the root is holy, so are the branches.
But if some of the branches were broken off, and you, although a wild olive shoot, were grafted in among the others and now share in the nourishing root of the olive tree, do not be arrogant toward the branches. If you are, remember it is not you who support the root, but the root that supports you. Then you will say, “Branches were broken off so that I might be grafted in.” That is true. They were broken off because of their unbelief, but you stand fast through faith. So do not become proud, but fear. For if God did not spare the natural branches, neither will he spare you. Note then the kindness and the severity of God: severity toward those who have fallen, but God's kindness to you, provided you continue in his kindness. Otherwise you too will be cut off. And even they, if they do not continue in their unbelief, will be grafted in, for God has the power to graft them in again. For if you were cut from what is by nature a wild olive tree, and grafted, contrary to nature, into a cultivated olive tree, how much more will these, the natural branches, be grafted back into their own olive tree. (Rom. 11:11-24)
When we read this passage, we can know that Jews who reject Christ are likened to native branches of an olive tree that are broken off because of their unbelief, while Gentile believers are likened to wild branches grafted into the olive tree. The olive tree represent the true Israel of God; the true Covenant people of the Church of God. The means of rejection is unbelief, while of ingrafting is faith (Rom. 11:20). Therefore, we can see that Israel is the fallen Covenant people. Therefore, all Jews today are born Covenant breakers, by rejecting the Covenant of Grace prefigured in the OT. As Paul states, they are beloved for the sake of their forefathers as regards election (Rom. 11:28b).
So the biblical understanding of modern Israel is not that they have "fulfilled the purposes of God and are therefore now the same as other ethnic groups". Rather, they are Covenant breakers facing the wrath of God for their sins. Under Covenant Theology, which is 'Expansion Theology' rather than 'Replacement Theology', they are regarded similarly to backslidden Christians and unbelieving children of believers. Unbelieveing Jews are to be called to repent of their unbelief and turn to Jesus Christ, who is prophesized in the Old Testament which they have, whom they have rejected.
So therefore, contra the claims of Dispensationlism, Covenantal Theology is not anti-Semitic. Rather, we who hold to Covenantal Theology should love the Jews and expressed such a love in evangelism. For as Paul said, "to them belong the adoption, the glory, the covenants, the giving of the law, the worship, and the promises. To them belong the patriarchs, and from their race, according to the flesh, is the Christ who is God over all, blessed forever. Amen." (Rom. 9:4b-5). Yet they are cut off because of their unbelief in Christ, and therefore we are to call them back to the true faith they have rejected since the time of Christ.
As a matter of fact, therefore, I do believe that there is a distinction between Israel and the Church, but not metaphysically like the Dispensationalists. The distinction rather is one based on the Covenant. Israel consists of the Church during the Old Covenant era while they became Covenant breakers who are therefore cut off from the Covenant (broken branches) in the New Covenant era. Also, it is not a total distinction but a partial functional one. In the spirit of Puritan revivalist post-millenialism, it is my contention that the Scriptures do teach an end-time revival in which Israel as a corporate body would turn to faith in Christ, a teaching that can be seen in Rom. 11:25-31, which states
Lest you be wise in your own sight, I want you to understand this mystery, brothers: a partial hardening has come upon Israel, until the fullness of the Gentiles has come in. And in this way all Israel will be saved, as it is written,
“The Deliverer will come from Zion, He will banish ungodliness from Jacob”; “and this will be my covenant with them when I take away their sins.”
As regards the gospel, they are enemies of God for your sake. But as regards election, they are beloved for the sake of their forefathers. For the gifts and the calling of God are irrevocable. For just as you were at one time disobedient to God but now have received mercy because of their disobedience, so they too have now been disobedient in order that by the mercy shown to you they also may now receive mercy. (Rom. 11:25-31)
Verses 25 to 26 seems to indicate that God has partially hardened Israel in order that the fullness of the Gentiles would come in, after which all Israel would be saved. Verses 31 further shows that such a hardening works out for God's glory, so that God's mercy would be seen in salvation to be not based on ethnicity (in that Jews would boast they are saved because they are the descendents of Abraham), but rather by grace alone (Sola Gratia).
In conclusion, it can be seen that the proper biblical response to the issue of Israel is NOT Dispensationalism or its consistent position in the heresy called 'Christian Zionism'. Rather, Covenantal Theology with its notion of the expansion of the Covenant to the Gentiles is the answer — leading to true love for the Jews in evangelizing them to the fulfilment of their formerly rejected biblical heritage in faith in Christ as their Lord and Savior. And to this we must do, not to follow the heresy of Christian Zionism into supporting the Jews unconditionally while not evangelizing them, or to follow and believe the anti-Semitic propaganda spat out by the Palestinians and their symphatizers.