Remaining distinct while mingling, being "a people that dwells alone" while not, in fact, dwelling alone, sums up the problem of Jews' social relations with the non-Jewish environment at every level.
Our prophets enjoin us to be loyal to the polities within which we live, as long as we are allowed to maintain our Jewish life.
Loyalty here means not just a passive inoffensiveness that keeps our safe haven intact; it means active participation in and identification with the life of the larger society.
It is not just the halakhic rule of deferring to the law of the land (dina demalkhuta dina) which must guide a Jew's behavior, but a deeper sense of connectedness with and concern about the place in which he lives.
This indeed is the pattern that Jewish leaders have tried to follow in all those countries that have granted Jews citizenship, even in countries with a checkered history in this regard.
At the same time, involvement in the larger society must not detract from the sense of Jewish distinctiveness and commitment.
The Jewish circle represents the innermost circle of life, the primary frame of reference, much like that of the family in its primacy.
Jewish ties do not rule out other kinds of social connections any more than family ties do, but they do take precedence.
–Rabbi Adin Steinsaltz
From "Jews and Non-Jews" in Teshuvah by Rabbi Adin Steinsaltz