I have long been uncomfortable with the concept of the "Chosen People". To suggest that as Jews we are somehow closer to G-d than all other nations smacks of arrogance, elitism, and racial prejudice. How is that any different to anti-Semitism?
That is a fantastic question -- a question that could only come from someone who is chosen. Allow me to explain.
In the Jewish understanding, chosenness leads not to arrogance, but rather to humility. If it were some human king that chose us to be his special people, then your assumption would be correct -- we would become elitists. When a mortal power shows favoritism towards a subject, that subject will become more arrogant as a result -- the closer you are to the king, the more significant you are, and the more significant you are the higher respect you feel you deserve.
But we were chosen by G-d. And the closer you are to G-d, the more you sense your insignificance. While being buddy-buddy with a human leader inflates your ego, a relationship with G-d bursts your selfish bubble. Because G-d is an infinite being, and all delusions of petty self-importance fall away when you stand before infinity. Being close with G-d demands introspection and self-improvement, not smugness.
This is the idea of the Chosen People -- a nation of individuals who have been given the opportunity to sense G-d's closeness, hear His truth and relay his message to the world. All agree that it was the Jews that introduced the world to monotheism and a system of ethics and morals that has shaped the modern view of life and its purpose. And it is the survival of Judaism to this day that attests to the eternal value of this system.
To say that this is ethnocentric is absurd for one simple reason: anyone from any ethnic background can convert to Judaism and become chosen. Jewish chosenness is not a gene, it is a state of the soul. Anyone wishing to take it upon themselves is welcome -- as long as they are ready to have their bubble burst.
So the arrogant person is not acting chosen. The true test of chosenness is how humble you are. You, Margaret, have passed this test with flying colors. Your humility is so deep, it doesn't allow you to accept that you are chosen. While most other religious groups are quite comfortable claiming that they are the best, we Jews will do anything to say that we are nothing special. Now that's what I call a Chosen People!