What is going on in Israel? The Left is trying to undo Israel’s economic advances of the last decade.
It started as a tent city in Tel Aviv in mid-July protesting the lack of affordable housing in Israel and peaked on Aug. 6 when 200,000-350,000 protestors rallied across Israel.
Immediately after the rallies, The Financial Times noted that the protestors’ list of demands had grown.
What started out as a protest against housing costs has morphed into calls for a sweeping overhaul of Israel’s economy and society: The protesters want a new taxation system (lower indirect taxes, higher direct taxes), free education and childcare, an end to the privatisation of state-owned companies and more investment in social housing and public transport. There is talk of imposing price controls on basic goods and a broader desire to see an end to “neo-liberal” government policies.
The protests seemed not to fit the current Israeli economy. The Times noted, “The sudden eruption of social discontent is surprising: Israel’s economy is set to grow by an impressive 3.7 percent this year. Unemployment hovers at just over 7 percent and is even lower in the greater Tel Aviv area, the centre of the protests.” America should only have these statistics.
By way of explanation, the Times said, “What the economic indicators fail to convey, however, is the profound sense of frustration felt by members of Israel’s struggling middle class. Many have good degrees and decent jobs but still find they are unable to make ends meet.”
Not all the explanations fit the protestors’ narrative, the Times went on to say. More than 90 percent of land in Israel is still in the public domain — a key reason, some analysts say, for the dearth of cheap housing. The lack of competition and the oligopolistic structure of the Israeli economy are other factors.
Then came a rationale unique to Israelis.
The Times wrote:
The protests also draw on a very particular form of Israeli nostalgia. To most outsiders, the recent transformation of the Israeli economy from a high-inflation basket-case into a high-tech powerhouse is an unmitigated success story. Yet many Israelis, regardless of their wealth and social status, say they still long for a return to the years when the country was less materialistic and more egalitarian. Even in cosmopolitan Tel Aviv, the ideals of the kibbutz live on.
The Marxist credo, “From each according to his ability, to each according to his need,” still reverberates in a number of Israeli, if not Jewish, breasts.
Bloomberg News noted, “It isn’t clear if the demonstrations are a final expression of Israeli social welfare, or a turn against the conservative economics that have dominated Israeli policy for much of the past 15 years.”
Is this a Back to the Future moment? How good were the good-old days? Kibbutzniks were never more than 5 percent of the population. The Labor government, in power until 1977, offered citizens generous subsidies for basic foods, mass transit, and university education. But at a cost. The 1980s was a time of stagnant growth and 400 percent inflation.
Israel began transitioning toward a more market-based economy. Bloomberg attributes the current prosperity, in large part, to budget discipline, begun in 2003 when Benjamin Netanyahu was finance minister.
Wherein lays the rub. A market-based economy removes subsidies, and the protestors are demanding their return; as in America, the Israeli protestors are demanding entitlements.
Additionally, as Bloomberg points out, many Israelis are uncomfortable with the new emphasis on individual prosperity rather than the communal good, and see it as a change in Israel’s core values.
If the protestors’ demands are met, even in part, the money for the new government subsidies has to come from somewhere. Given the current situation in the Middle East, it will not come from reduced defense expenditures, as proposed in the United States.
Increasing taxation on the wealth generators in the current Israeli government economy may backfire. As the United States has learned, capital, production, jobs, and innovation can be exported in the global economy to more hospitable climes. Likewise, if it becomes too burdensome and expensive to do business in Israel, Israeli entrepreneurs may take their innovative and profitable skills elsewhere.
Writing for Pajamas Media, Asia Times Online essayist David Goldman believes that Israel’s economic protests are the best thing ever. He notes that Israel never had a national political fight over economic history because Israelis were too worried about security issues to bother about the price of cheese.
Goldman writes, “The fact that the Israeli left has chosen to take a stand on economic issues shows that the national-security consensus around Prime Minister Benjamin Netanyahu is impregnable.”
With a backhanded compliment, Goldman says the “Israeli left isn’t stupid.” With uprisings and chaos in the Arab world, there simply aren’t any Arabs with whom a rational discussion can be held about a comprehensive peace agreement. Goldman believes this is a good thing because “Israel’s strategic position has improved immeasurably in consequence of the Arab revolts.”
Goldman congratulates Israel. “The impetus behind the protest is that the pie has suddenly become much bigger,” he writes, “and the economic laggards want a bigger share of it. That’s a high-class problem to have.”