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Traditional Judaism teaches that the exile (galut) of the Jewish people - which is something other than simply not living in Palestine - has two aspects. On the one hand it is a punishment for the sins of the Jewish people; on the other hand it is a means by which the blessing that accompanies Jewish integral observance of the Torah can be scattered like sparks of light throughout the world. The Chabad website concentrates on the sparks of light. Rabkin concentrates on the punishment.

What is the sin that was being punished?

In the broadest terms Rabkin represents it as engaging in political or, more seriously, military activism independently of divine guidance, specifically the Jewish revolt against the Romans which resulted in the destruction of the second temple and subsequently the revolt led by Simon bar Kokhba, 132-6 AD, which resulted in a huge destruction of the Jewish population of Palestine and exile from Jerusalem, though not from the country as a whole. In this reading, Judaism - in the absence of the legitimate ruler, the Messiah - is a religion of almost total passivity, apart from the obligation to observe the precepts of the Torah (Jews can legitimately risk their lives in resisting efforts to force them into breaking the precepts of the Torah, for example by worshipping idols). Thus when Jews encounter persecution they don't have a right to fight back. One could say (Rabkin doesn't) they have to turn the other cheek. In Rabkin's version they are strangers in any land in which they find themselves and therefore have no 'rights'. If they are well treated, well and good; if they are badly treated, their only options are to put up with it or move somewhere else. Thus he says of the Nazi attempt at genocide:  

'From a traditionally religious point of view based on the premise of the existence of divine justice, the tragedy of the Shoah calls out for the closest scrutiny of personal behaviour, and for individual and collective atonement. It is not an occasion for accusing executioners, and even less an attempt to explain their behaviour by political, ideological, or social factors. The executioner - whether Pharaoh, Amalek, or Hitler - in this perspective is an agent of divine punishment, an admittedly cruel means of bringing the Jews to repentance. Following this same logic, only divine providence - and not historical accident - can explain the catastrophes that have afflicted the Jews, affirmed Rabbi Elhanan Wasserman (1875–1941), disciple of Hafetz Haim and an eminent authority on Lithuanian Judaism. Born in Lithuania, then a part of the Russian empire, he trained under renowned rabbinical masters, culminating in the Talmudic Academy of Brisk (Brest-Litovsk). He served as director of several yeshivas, the best known of which was the Novardok yeshiva in Baranovichi, currently in Belarus. While on a fund-raising mission to the United States on behalf of his yeshiva, he learned of the Nazi attack on Poland. Well aware of the Nazi threat to the Jews, he refused to abandon his students and returned to Europe. He was arrested in 1941 and put to death by Lithuanian collaborators. His last words have been preserved: In Heaven it appears that they deem us to be righteous because our bodies have been chosen to atone for the Jewish people. Therefore, we must repent now, immediately. There is not much time. We must keep in mind that we will be better offerings if we repent. In this way we will save the lives of our brethren so that Jewish life may continue.' (Modern Israel, p.98)

Incidentally it's rather regrettable that the word 'holocaust' is so widely used in preference to the Hebrew word 'Shoah'. A 'holocaust' is a burnt sacrifice and as such in Biblical (Torah-Old Testament) terms it's a Good Thing. The world 'Shoah' means 'catastrophe, and as such it is parallel to the Arabic term 'Nakba', describing the destruction that befell the Palestinian people in 1948.

It's obvious that this traditional Jewish culture would be deeply alarmed by the ferocious voluntaryism that characterised the development both of Jewish Socialism and Zionism in the wake of the 1881-2 pogroms. It is also obvious that this traditional Judaism would not have regarded the non-Torah following Jews as Jews in any meaningful sense of the term. Indeed, one could suggest that in the Russian empire, Jews who, inspired by the haskalah, became interested in European culture or got involved in the revolutionary movement, ceased to regard themselves as Jews. It was the pogroms, and the relatively indulgent response of Russian and Ukrainian political circles (including the radical circles) that forced them to self identify as Jews and to think about the needs that were specific to the Jewish community. Hitler of course had a similar effect on many German Jews - Rabkin (Modern Israel, p.99) cites Orthodox Jews complaining that although Hitler was a scourge sent by God to bring the Jews back to the Torah they were instead turning to all sorts of non-religious cultural and sporting activities: 'Rabbi Schwab lamented in Germany in 1934: They have set up athletic associations and even an honest-to-goodness “cultural league,” so that, God forbid, we should not “get back into the ghetto again.” … True, we are depressed, but we are not contrite. We are downcast but not humbled, least of all in our relationship with God. … If this is so, is it still the people of God?'