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Government laughs in the face of economic desperation

 A review of the year of social protests – just hours before the demonstration planned against the government’s budget – yields bad news: The government has offered shallow solutions and deepened the roots of economic inequality. 

Last year’s social paradox

During last summer’s social protests, outsiders and curious journalists repeatedly asked me how to explain that Israel has such excellent economic indicators, but so much discontent.

Not being much of an economist, but knowing something about public opinion, I looked at how people experienced their lives here – micro versus macroeconomics. Despite apparently excellent macro indicators, most individual families weren’t feeling the love unless they were very rich. I checked and confirmed the finding that Israel is one of the most unequal societies in the OECD and recalled that some happiness studies indicate that economic inequality may generate greater unhappiness despite growth.

I was also somewhat critical of last summer’s social protest. The bulk of the protesters at the start seemed to be comfortable middle and upper-middle class types, or else self-entitled youngsters from the most privileged portion of Israeli society – Ashkenazi Jews from the center of the country who had served in the army. I felt that they were fighting in the name of social justice mainly because they wanted a greater piece of the consumerist, capitalist pie. There was little indication that they were really willing to address root causes.

Since I belong unquestionably to the privileged sector, hard work has enabled me to reach relative economic comfort – as a result, I did not share in the sense of economic desperation. And because my deep-roots approach to addressing economic oppression of others was considered too radical, “politicized,” or non-strategic, I personally felt quite marginal at the protests.

However, the movement spread and evolved, touching the more marginalized and even sparking the imagination of many Arab citizens. Once the summer ended,  the protest generated new forms of social consciousness and empowerment, including spin-off groups, proto-parties, new networks, initiatives, web activists, and ideas by all sorts of people. It seemed that many regular struggling citizens were finding hope and new roads to civic engagement.

Perhaps after the explosion of emotion, I thought, those people would hunker down for hard work, and register some concrete victories. Perhaps the government would implement some of the recommendations of the Trajtenberg Committee it established as a gesture to the protesters. Even a poor leadership, I reasoned, might implement some positive measures, and I lauded Communications Minister Moshe Kahlon’s bold move to break the cellular company monopoly.

A year went by.

What changed?

By May this year, the government had taken some steps. It established a committee to break up the concentration of wealth in the private sector, and began implementing some of the Trajtenberg recommendations. I wondered if Israelis were feeling any better about wealth distribution. This isn’t Tunisia, after all, and desperate fruit vendors weren’t setting themselves on fire. I took a poll for the Jerusalem Report; but the overwhelming majority (81 percent of the Jewish population) still believed that wealth in Israel was unfairly distributed.

I gathered that most citizens were not benefiting from the changes. The Trajtenberg recommendation that the state guarantee free education from three years old became a flagship for the government, because the ministers actually agreed on its implementation. But it wasn’t actually an innovation, just an existing law that (like so many others) wasn’t previously enforced. Other parts of the report simply fell by the wayside.

The wealth-concentration committee made recommendations too, about regulating the massive holding companies that control such a large portion of Israel’s wealth. But that had little direct effect on the lives of consumers.

Meanwhile, the global financial crisis began creeping in. Last month, my accountant asked me why 2012 has so far been such a slow year for me. I said it was partly my choice to invest more time in advancing my PhD rather than working; which included low-paid, time-cruncher teaching positions. But also, I told him, my civil-society clients can’t afford the research they want; instead they fund minimalist projects for which I’ve dropped my rates. That means I’m working as hard as usual, but earning less. Other clients planned projects, but the budgets fell through. My accountant nodded and related that all of the freelancers he serves have seen similar slowdowns, for similar reasons this year.

Desperation for all

Moshe Silman, who set himself on fire in protest just a few weeks ago, and died a week later, didn’t see any change on the horizon. It’s impossible to know which part of his suffering was the direct result of systemic injustice, or a sad story of one individual with too many problems for one anonymous bureaucracy to see. But the fact is that he was poor and indebted, and the state went after him. The state treated him not as a person to be economically rehabilitated but as a criminal element; it wielded a system of punishment and abuse in which his last dollars were worth more than his life. If it had shown mercy rather than blows, if he had been treated as a man who had fallen and sought to rise again rather than as an enemy of the state, it is conceivable that he may have become productive once again. He might eventually have contributed to state coffers again, unlike large swaths of the population that refuse to do so on principle.

Here’s one modest thing that I would have liked to see come out of the social protest: a government or quasi-governmental program for the economically fallen. There are NGOs who try to help – Pa’amonim, Yedid – and maybe others. But imagine they had a partner in the state. Imagine the state decided that it’s in our interest to reinvest in the unfortunate, not kill them. The start-up nation could devote its brilliance to rehabilitating its people.

That didn’t happen. Instead, more people began self-immolating in protest at economic desperation; another one died this week.

My business slowed further (or rather, the clients keep coming, but with ever-lower budgets) and I began to cut back on optional spending, then all spending where possible.  Still, I made plans to devote myself to the final year of my doctorate, and for the first time ever, asked for financial assistance.

It turns out that my university doesn’t have enough grants this year to fund all the PhD students with the practically symbolic $1000/month stipends normally offered.

So when the government announced that it planned to transfer NIS 100 million to Ariel University Center to transform it from a college to a university, I felt a debilitating wave of anger.

The government offers solutions

As I moved into strict budgeting for my weekly food and commodities, along with numerous people I know who were as established as I thought I once was, the government dropped the bomb – a full range of austerity measures, budget cuts and tax hikes to staunch the deficit.

The Prime Minister who prides himself on the myth of Israel as the economic miracle, shattered his own myth overnight (although Mitt Romney still believes it).

The state is no longer thriving. In fact, we’re in dire financial straits. So dire, that all other possible sources of cash have been mined and there’s simply no choice left but to turn to the people: the middle class, the working class, the poor, the economically alienated and marginalized.

The plan is full of blunt instruments: raising income tax (except for the absolute poorest and the absolute wealthiest) and a rise in VAT, which is none other than a flat tax. To his credit, Likud MK Kahlon (who is also Welfare Minister) voted against the package.

The plan involves taxes on consumer goods that, like it or not, are largely consumed by the poor: cigarettes and beer. I hate the thought of opposing cigarette taxes. If this had come as part of a multi-pronged governmental campaign to decrease smoking rates, I’d be the first to support it. But I cannot think of one leader, including the Health Minister, who has made any sort of anti-smoking public statement lately. Oh wait, Netanyahu is the Health Minister. Indeed, welcome smoking bans were introduced for restaurants, bars and cafes a few years ago. But smoking still tends to be higher among the poor. I’m willing to bet nobody’s implementing those bans in the Arab sector, and I also believe that smoking is higher among Arabs. After all, someone must pay to balance the budget.

So did the government really turn over all stones before turning to the weakest to bail out its debt?

Last weekend, the country’s economists, financial reporters, editors and columnists, lined up to tell us that this was not the case.

Economic commentator Nehemiah Shtrasler wrote in Haaretz that the Prime Minister himself ruined the economic miracle by doling out money without cutting, for example, the defense budget. It’s not just kumbaya-lefties saying that – Trajtenberg recommended it as a source for financing the provisions in his report. Instead, the defense budget burst its banks, so to speak, every year under Netanyahu (Yossi Gurvitz writes on this,  in Hebrew). At the last minute, a “surprise” defense cut was added to the package. But then, just a few days later, it seems that the Prime Minister canceled that cut after all.

An editor at Haaretz’s financial paper The Marker noted in a television interview that the government could have taxed luxury items, or the bonuses of the country’s top executives. Shtrasler also observed that the modest two percent tax on the rich isn’t expected to contribute much, and he viewed it mainly as a symbol of their participation.

And where was the money doled out? Well, the government continues to provide funding for ultra-orthodox yeshivot – a double economic whammy of direct funding, and the cultivation of a community that does not work or pay income taxes, but lives off national insurance.

Last year the government spent NIS 1.6 billion on the settlements – and Finance Minister Steinitz proudly told the religious publication Makor Rishon that this was an increase. The Prime Minister called that funding “negligible.”

In January, the financial paper “Calcalist” reported that the Finance Minister oversaw a raise in the salaries of municipal rabbis (in a closed-door, secret-protocol meeting that required no Knesset approval). It wasn’t a 10 or 20 percent raise. A rabbi who was earning NIS 18,900/month, more than double the average full-time salary, now earns over NIS 29,000 – a 54 percent raise. Rabbis who were earning NIS 7,500 saw a 143 percent raise. The total budget invested in state-funded religious services (all ultra-orthodox) in 2011 was NIS 620 million. Ironically, Calcalist reports (Hebrew) that even the Haredi sector largely uses its own private religious services. In American terms, this would be called “pork.”

Where else could the government have raised the money? One of the leaders of the social protest, Alon-Lee Green, posted a neat chart listing a range of alternative revenue sources that would have yielded a similar total to the needed funds. They include raising corporate tax rate incrementally from 25 to 31 percent as it once was, raising capital gains taxes, expanding taxes on the wealthiest – all items I’ve heard endorsed by reputable economists here.

Disclaimer: I am not an economist, I don’t believe in magic solutions, and I do approve of balanced budgets. But what are the country’s priorities?

Building the state, or mourning its destruction?

In the Jewish state, isn’t education a universal value that binds us far more than any one interpretation of religion? Isn’t there any funding for higher education that does not involve military or terror studies, or ultra-orthodox males? Do I really have to watch news items about crumbling concrete and exposed electrical sockets in public elementary schools, where sharp corroded iron beams stick out and water fountains don’t work? Surely if there is money to fund yeshivot, there is money to repair the nauseating bathroom facilities of the school in Sde Yaakov – which reminded me of the outhouses at a school I visited in rural Romania a decade ago.  If we are investing upwards of one billion NIS in the West Bank, does it have to be for a system of separation and discrimination?

Did the Prime Minister really have to announce the package the day before the weekend of Tisha b’Av, holiday of mourning? I can’t help but think that the timing was planned to head off the angriest immediate reactions. Or did the government simply hope to get two for the price of one with the holiday, thinking that people would mourn their economic woes together with the destruction of the Temple – and vent all the anger before the next elections?

And as the social protest gathers this evening, I wonder: did it work? Will the anger dissipate in a sea of perpetual despair? Will the public continue to view the revived protest as “politicized,” a phantom accusation of a failed government against the discontent of its subjects, as it laughs in their faces? Will people continue to be hypnotized by the Prime Minister’s chants of “Iran,” “existential threat,” and “we had no choice”? Can’t we do better?

Article has been updated, 4 August.

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    1. Social Darwinism was a major component of Zionist ideology right from the start.

      Reply to Comment
    2. Jehudah

      “Social Darwinism was a major component of Zionist ideology right from the start”.
      The start was more than 3,000 years ago, when Zion, also known as Jerusalem, was set up by the Jewish king, King David, as the spiritual and administrative center of the kingdom and its people. Ever since, Zion and the country in the midst of which it is located, became the focal point of Jewish affinity to and yearning for. No wonder that Zion has been the capital city of the Jewish people and its sovereign political entities both in ancient and in modern time, and Zionism, first and foremost, has been that sense of affinity to Zion. How is this sense related to “social Darwinism” is not entirely clear to this poster.

      Reply to Comment
    3. “Did the Prime Minister really have to announce the package the day before the weekend of Tisha b’Av, holiday of mourning?”

      Dahlia, don’t you think perhaps it was a sign of his and others’ cynicism? I can almost hear Bibi’s mirthless laugh in my ear as he decided to launch the cuts the day before Tisha b’Av, with that self-serving sneer of a smirk on his face. Or have I been watching too much Eretz Nehederet?

      Reply to Comment
    4. Last year at this time you had a massive proclamation of distress. From what you say herein, circumstances are getting worse; in particular, those hoping for upward mobility (unlike many others who have given up on such a dream) are beginning to see decline and consumer stagnation instead. It is too early to know if your parliamentary system can respond. One might expect that, as the stagnation/decline continue, the allocation arguments you make will gain traction. But I do not see how a multi-party parliamentary system (unlike, say, the UK with two major, one minor player) as Israel can easily accomodate the floating distress. Do people vote for a party or against other parties? I know it is a mix, especially with the embedded religious parties which insure government handouts. But I do not understand the support base of Likud, Labor, Kadima. Nor do I see a way alternative thought can enter the major parties from the bottom up (as in the Tea Party which has indeed assumed much ideological control over the Republican Party at the House and Senate levels). I have a sense, unfounded, that the Israeli political system, post national unity governments, somehow actively discourages organizational challenges. National Unity, post suicide bombing war of 2000-4, seems to have disabled bottom up group formation, if it was ever there.
      The settler movement is a dynamo, directing money and thought in a clear direction. What alternatives exist, or can exist?

      Reply to Comment
    5. Jan

      @Jehudah – don’t you ever give up? Zion, as you call it, was not the capital city of the Jews for close to 2000 years. Just because Jews “yearned” for Zion, a city that was not theirs for many generations, does not make it theirs.

      On the other hand there are millions of Palesinians (yes, they are Palestinians) born on the land that the Jews claim exclusively for themselves who yearn to return to the land of their birth. Yet they are barred from returning in spite of UN Res. 194 which demands their return.

      I warrant that neither you nor the vast number of Jewish Israelis have any personal history in Palestine prior to the start of the Zionist project in the late 1800s but yet you and I and any Jew in the world can “return” to a land where they have no personal history. Jehudah I would be very surprised if you had been born in Israel…..more likely in the US.

      BTW, if “Zion” was, as you wrote, the capital city of the Jews why did not more Jews emigrate to “Zion” over the centuries. Why did Jews like my great grandparents come to the US and not to “Zion.” If there are so many Jews around the world “yearning” for Zion why are they not flocking to Israel? That is because what you write is a crock.

      Reply to Comment