With almost no difficulty, the Israeli government managed to pass
one of the worst budgets we have ever known. The social cost is
extremely harsh: the unemployed, the poor, the elderly,
single-parent families, children, the sick and many others will pay
the price for economic cuts, which also herald a desire to
eliminate the welfare state in Israel while in no way guaranteeing
the minimal conditions necessary for economic growth in the near
future.
Anyone who thinks this is a budget for the entire year is either
wrong or trying to mislead people. The Finance Ministry is
manipulating the data, the deficit is greater than that which is
declared, while the deep economic crisis also expresses itself in a
reduction in tax income. This increases the "hole" in the budget,
and will require the presentation of a revised budget within a few
months. The government's policy towards peace and security only
suggests a sharpening of the conflict, with all that that implies
in the economic sphere, not just in terms of the security budget,
which will continue to swallow large sums of money, but also in
terms of Israeli and Palestinian lives and a substantial drop in
investment and tourism.
Clear Connection
A few months ago, the idea might have appeared to be innovative.
But today, many people understand there is a clear connection
between what is going on in the Occupied Territories and Israel's
economic situation. While the Palestinians are paying the heaviest
price, and their economy is to a great degree paralyzed, the
deepening recession reminds Israelis that they too are paying a
heavy economic price for the current policy.
Israel's economic problems are not due solely to what is happening
in the Occupied Territories or to terror attacks in the cities. The
war has also exacerbated some of the underlying problems that
characterize the Israeli economy. Except for the first nine months
of 2000, there has been no economic growth in Israel for the past
five years. This lack of growth is no accident. It is a result of
the dominant economic policy in the country. The philosophy of the
International Monetary Fund (monetary efficiency, balanced budgets,
etc.) has become the primary guideline for economic and social
activity in Israel. And whatever the architects of our economic
policy didn't learn from the IMF, they learned from former British
Prime Minister Margaret Thatcher (with her rampant privatization,
cuts in social services, etc.).
Both Right & Left for a Market Economy
In Israel, when people speak about "left" and "right," they are
mainly refering to different approaches to the Israeli-Palestinian
conflict. There is almost no social or economic content to the
term, as it is usually understood around the world. The familiar
rhetoric about "looking after the poor" can't hide one basic fact:
a decisive majority of the political parties today are part of the
social right.
Whether one is referring to the "right" of Lieberman and the Likud,
or the "left" of Labor and Meretz, all advocate one or another
rather extreme version of the "market economy." Both the Israeli
public, and the parties that represent it, overwhelmingly belong to
the church of believers in the free market. The exceptions are
rare.
The wonders of the free market have included the direct import of
some of the illusions cultivated in the "global village," and first
and foremost the bubble or deception of hi-tech as the new economic
panacea. The businessmen marketed this sweet illusion to an eager
public, while "toying" with the money and savings of many until the
famous bursting of the bubble. Thus it was possible to go to
unemployment- stricken areas and to promise 30- and 40-year-olds,
who had just been fired, that the technological revolution meant
that prosperity in such towns as Kiryat Shemona, Ofakim and N'tivot
was "just around the corner." And, if they didn't benefit from it,
their sons and daughters - those who were continuing to receive a
bad education - would be a part of the revolution.
Alongside this enchanting fraud, which was accompanied by a number
of incredible stories about young people who suddenly earned
hundreds of millions of dollars, a machine began to function that
was supposed to integrate us into the global economy. The
IMF-Thatcherite recipes were well known. Professor Joseph
Steiglitz, a Nobel Laureate in Economics and until quite recently
the chief economist of the World Bank, said that: these were
recipes the Americans would have refused to apply in America
because they increase social gaps, produce greater poverty and, in
Steiglitz's words, are primarily beneficial to some of the Wall
Street rich.
Since the 80s, the market economy thesis has gained a foothold in
Israel, a tendency that sharply increased during Benjamin
Netanyahu's regime. The combination of the Netanyahu government's
fiscal policy with the monetary policy of the World Bank was
exacerbated by the lack of peace. The region has become less
attractive to foreign investors and to economic initiatives. With
the outbreak of the second Intifada in September, 2000, this
tendency increased. Tourism collapsed, investments declined and the
cost of war was reflected in an increase in the security
budget.
The Unemployment Example
The cuts in the 2003 budget reflect a continuation of the tendency
of the last few years. Since the days of the Netanyahu government,
through Ehud Barak and Ariel Sharon, the acceptance of the IMF
guidelines was accompanied by cuts in the rights of the unemployed.
Today, the Israeli unemployed are much worse off than the
unemployed in all other Western countries.
They are always guilty - they are parasites, corrupt, exploiters,
etc. The crusade against them has been so successful that the
majority ignores the fact that the enemy is unemployment, not the
unemployed. Yet, when places of work were created, those "people
who didn't want to work" quickly found their way into the work
force. And when peace appeared on the doorstep and optimism
thrived, quite a few new work places were created, the economy grew
and there was a significant reduction in unemployment.
Data on unemployment in Israel demonstrates the connection between
the political situation and economic activity: After 1992, the
economy grew in the wake of the peace process and the absorption of
a wave of immigration. Unemployment declined from a high of 11
percent in 1992, following the wave of mass immigration in 1990-91
down to 6 percent in 1996.
Since then, the political process has frozen, along with the
Israeli economy. Unemployment has continued to rise and, according
to estimations by the Bank of Israel and the Finance Ministry, it
will continue to increase unless a way is found to return to
political negotiations and hope for the future.
The high economic growth during the period of the Oslo Accords and
peace with Jordan produced a significant drop in unemployment. But
with Netanyahu's rise to power and the bloody "tunnel affair" clash
in Jerusalem, within a short time the dynamics of the free market
began to take their toll.
Since the 90s, another process has also taken place. The first
Intifada and the (previous) Gulf War seriously reduced the number
of Palestinian workers in Israel. This had a severe impact on the
Palestinian economy, and the phenomenon was exacerbated by the
outbreak of the second intifada in September, 2000. Palestinian
workers were quickly replaced by foreign workers, who today
constitute 11 percent of the work force in Israel. They are
cheaper, have fewer rights even than the Palestinian workers, and
employers in various sectors are gaining billions of shekels at
their expense. Their presence has an impact on the entire work
structure in Israel. Salaries and social benefits are affected by a
combination of their presence, their salaries and growing
unemployment
The high level of unemployment is only part of the picture. Many
have despaired of finding work. In the Arab communities in Israel,
young people aged 18 to 21 aren't considered unemployed. Some
people are only employed part time. As unemployment grows, the time
it takes to find work has increased compared to the beginning of
the 90s. The number of unemployed who have been looking for work
for more than a year rose from six and a half percent in 1996 to 12
percent in 2000 and 11.8 percent in 2001.
At the same time, new jobs aren't being created. A comparison of
the second quarter in 2001 with the same quarter in 2002 shows
that, in industry, 30,000 jobs have been eliminated, while 8,000
jobs have disappeared in the hospitality and food sectors.
Poverty and inequality are getting worse and all calculations
indicate the new budget will hurt the elderly, the unemployed,
single-parent families and people with guaranteed incomes (from
social security) hardest. The figures are even more severe for the
Arabs in Israel: about 42 percent of Arab families live below the
poverty line (and constitute 28 percent of the poor families).
Every second Arab child lives in poverty (compared to every fourth
child in the general population). The level of unemployment in the
Arab population is also higher than the Israeli average (in 1996,
it was lower than the average). Between 1996 and 200l, Jewish
unemployment rose 53 percent while Arab unemployment rose 126
percent. This corresponds to other data on unemployment growth
among those with a lower education and salary.
General Decline in Economic Activity
The decline in economic activity in Israel has been continuing for
more than two years, and all aspects of the economic situation are
getting worse; not just unemployment. This is partially due to the
external influence of globalization, to which must be added the
severe consequences of the ongoing conflict with the Palestinians
and the lack of hope for a political solution on the horizon. The
industrial manufacturing index, which was 134 points in June, 2000,
declined to 123 points in June, 2002. The turnover index in
commerce and services, which reached 141 points at the beginning of
2001, had declined by June, 2002, to 135 points. An equally gloomy
picture can be obtained from the import-export sector, which has
contracted significantly. Exports, which reached $1,800 million a
month in June, 2000, declined to $1,500 million a month in June,
2002. Imports also declined from $2,100 million to $1,900 million
during the same period. Tourism - a sector that had a large work
force - quickly reflected the situation. Three million overnights
of foreign tourists in 2000 had fallen to only 500,000 by mid 2002.
It is easy to understand why thousands of workers were fired from
this sector. These are just some of the figures that reflect the
depth and breadth of the economic slowdown in Israel.
Between Economics and Peace
As mentioned before, some of the ills of the Israeli economy are
due to an obedient acceptance of the medicine prescribed by
followers of the IMF and the free market. This was done within the
context of a major blow to the components of the Israeli welfare
state. But one point has to be reiterated. There is no possibility
for economic recovery without a liberation from the war
environment. No one should be under any illusion - the security
budget is growing - and this includes massive investment in the
settlements during periods when both the Likud and Labor are in
power - an important component of the economic crisis. No one likes
to travel or invest in a war-stricken area.
The current Israeli government lacks any genuine desire to arrive
at a political settlement, and is only using military tools to deal
with the conflict. Without a political roadmap that will bring an
end to the occupation and see the establishment of an independent
Palestinian state, there is no possibility of arriving at
meaningful solutions in the economic sphere. As for the peace camp,
which poses a clear alternative to government policy in the
diplomatic sphere - if it continues to avoid the need for building
a more just society, and continues to be a foolish disciple of the
free-market economy, it will not be able to act as a genuine agent
for change within Israeli society. Pathetic calls for cosmetic
changes in the settlement budget are justifiably considered
hypocritical and unserious. Anyone who wants to achieve serious
socio-economic change will have to try to change the mainstream
economic beliefs of most of the players in the political arena.