Civil society has been variously defined as a sphere of private, largely economic social activity autonomous of the state, and as a sphere of voluntary public activity, autonomous of both the state and the market. Sometimes the term "civil society" is used to describe not that particular social sphere, but the entire society where such a sphere exists (Seligman in this issue). During the 1990s it was generally believed that Israeli society was evolving from a state-dominated, highly mobilized frontier society towards a civil society in the former, narrower sense of the term. The further evolution of Israeli society towards civil society, in the broader sense, was seen as an open question (Peled and Ophir, 2001). This historical evolution was understood to involve massive restructuring of the economy as well as political, legal and cultural liberalization. One expected outcome of this process was political accommodation with the Palestinians. Today, almost five years after the collapse of the Oslo peace process, we can assess the evolution of civil society in Israel and its impact on Israeli-Palestinian relations.

Liberalization and the Evolution of Civil Society

Until the mid-1980s, the Israeli state, forged in the context of a colonial frontier struggle with the Palestinians, was a highly intrusive but formally democratic state, engaged in intensive mobilization and control of societal resources, both directly and through the Histadrut (General Labor Federation). Aside from being an umbrella labor organization, the Histadrut, a pillar of pre-statehood Zionist colonization, possessed an economic empire encompassing, at its height, agricultural, manufacturing, construction, marketing, transportation and financial concerns, as well as a whole network of social service organizations. Until the 1990s, this conglomerate controlled about 25 percent of the economy and employed about 25 percent of the labor force. About an equal share of the economy, plus virtually all land, was owned directly by the state. As long as the Labor Party was in power (1933-1977), this political-economic structure played a crucial role in maintaining the political and cultural hegemony of the Labor Zionist movement, thus ensuring the privileged position of a large segment of the veteran Ashkenazi community.
Ironically, it was this privileged sector of society that since the mid-1960s has been pressuring the state to liberalize the economy and make room for civil society. The motivation behind this pressure was a desire to join the process of economic globalization on the side of the winners. A political party formed by this sector in 1976, the Democratic Movement for Change (a precursor of the present-day Shinui party), brought Labor down and enabled Likud to take power in 1977. As soon as Likud assumed control of the government, it launched an economic liberalization program designed to dismantle the political-economic structure that was the mainstay of Labor's power. However, since it failed to capture the Histadrut, which refused to cooperate with it in imposing wage cuts and massive lay-offs in the public sector, Likud's economic policy brought the economy to the brink of hyperinflation (450 percent a year in 1985). As an unintended consequence, perhaps, the high inflation rates contributed to the weakening of Labor's economic institutions and in this way hastened the downfall of the Histadrut. In 1985 a national unity government, in which Labor and Likud shared power, instituted the Emergency Economic Stabilization Plan (EESP) that halted the inflation and laid the groundwork for successful liberalization of the economy.
When Labor returned to power on its own, in 1992, a momentous struggle developed between its neo-liberal wing (aided by Labor's smaller, more clearly liberal sister party, Meretz) and its welfare-oriented wing, whose power base was in the Histadrut. The aim of the neo-liberal Laborites, headed by Yossi Beilin and Haim Ramon, was to dismantle the Histadrut and the public-sector economy in general, and to undermine the welfare state, in order to enable the economy to be thoroughly liberalized. The major issue over which this clash between the two wings of the party took place was the Histadrut's extensive health-care system, which provided health-care services to about 70 percent of the population. After a brief struggle, the health-care system was nationalized in 1995, causing the Histadrut membership to decline by two-thirds and opening the way for a private health-care industry to develop.
Naturally, liberalization was not limited to the economic sphere alone. Important political changes were also introduced. These changes can be grouped under three headings: electoral reform, human-rights legislation, and the strengthening of professional, non-elective institutions at the expense of democratically elected ones.
In the electoral system, two important changes were instituted: intra-party primary elections and personal election of the prime minister by the entire electorate (making the prime minister a semi-president, U.S. style). The effect of these changes was to weaken the major political parties and, paradoxically, the prime minister as well, and to increase the influence of large donors who could help finance electoral campaigns. By the end of the 1990s, these reforms were largely undone, as part of the anti-liberal reaction that had swept the country, politically and culturally - but not economically.
In the human-rights field, two important Basic Laws (enjoying constitutional status) were enacted: "Human Dignity and Freedom" and "Freedom of Occupation." By some interpretations, these two laws together amounted to no less than a "constitutional revolution," in that they allowed, for the first time, for judicial review of primary legislation. However, the rights guaranteed by these laws have to be interpreted, according to Israel's Supreme Court, in light of the country's values as a "Jewish and democratic state." This has limited their applicability in the areas of religious freedom and the rights of Israel's Palestinian citizens, not to mention those of non-citizen Palestinians. No less significantly, the rights guaranteed by these two laws are civil and political rights only, including the right to property, but not social rights. Thus these laws aid, rather than hinder, the undermining of Israel's relatively progressive labor relations and social welfare legislation, that have come under attack in the process of economic liberalization.
The introduction of judicial review of primary legislation, or, more accurately, the assumption by the Supreme Court of that right, signified a major power shift from the elected legislative branch to the non-elected judiciary. This was one manifestation of the trend, in Israel as elsewhere, of political power shifting from elected to elite institutions, as an aspect of liberalization. Another major institution that became much more powerful in that period was the Bank of Israel, whose authority to determine interest rates made it a powerful actor in the determination of economic policy.
On the cultural front, liberalization entailed, first and foremost, secularization of Jewish Israeli society. All four elements of the status quo that had traditionally governed the relations between the state and religious Jews in Israel - the monopoly of Rabbinic courts in matters of family law, observance of the Sabbath and of kashrut (kosher laws) in the public sphere, and the exemption of yeshiva students from military service - had been challenged by liberal, secular Jews. These challengers had found important allies in the Supreme Court and in the one million immigrants from the former USSR, many of whom are not Jewish according to the Orthodox religious definition. (For a survey of broader cultural changes, see Ram, in this issue).
Economic, political and cultural liberalization was not sufficient, however, to ensure that Israel would benefit from the process of economic globalization. The international opportunities open to Israeli businesses, both in terms of their own operations abroad and in terms of foreign investments in Israel, had been limited because of the Arab-Israeli conflict. The secondary Arab boycott and general considerations of economic and political expediency made cooperation with Israeli firms risky for many foreign companies. For 20 years the occupied territories provided a partial substitute for the international market and a clandestine trade outlet to the Arab world. But the economic benefits of the occupation - a cheap and reliable labor force and a captive market - were sharply reduced already by the first intifada. By the late 1980s, the costs of the occupation to the Israeli economy had come to overshadow its benefits.
For these reasons, settling the Israeli-Palestinian conflict - meaning, in effect, reaching some accommodation with the PLO - became an economic necessity for Israel. The intimate connection between economic liberalization and political moves designed to reduce the intensity of the Arab-Israeli conflict had already been established: In 1977, while launching its liberalization program, the first Likud government also launched the peace process with Egypt; in 1985, the same national unity government that adopted the EESP also withdrew Israel's forces from much of Lebanon. And indeed, after the Oslo agreement, many foreign markets that had been closed to Israeli firms, in the Middle East and beyond, opened up, leading to unprecedented economic prosperity in the country. By the same token, foreign direct investment in the Israeli economy, that had been virtually non-existent before, reached $1.5 - 2 billion a year. The support granted the Oslo process by the majority of the Israeli middle class was motivated, then, by two principal considerations: their interest in downsizing the state and opening up a space for civil society, and their desire to integrate into the international economy (Shafir and Peled 2000; Shafir and Peled 2002).

Civil Society, Uncivil State

Proponents of civil society have assumed, naively perhaps, that a civil society, concerned with economic prosperity or the promotion of post-materialist values, would be less likely to engage in violent conflict. The time period since the outbreak of the al-Aqsa intifada has witnessed a strange phenomenon in this respect: While its conflict with the Palestinians has reached new heights of violence and brutality, the Israeli state continued, even accelerated its withdrawal from the economy through economic liberalization. And while the liberalization of other spheres of society has been halted or even reversed, voluntary public activity has been flourishing, much of it in response to the vacuum left by the withdrawal of the state (Ben-Eliezer, in this issue).
One area where this phenomenon is painfully apparent is the area of welfare services. Israel's welfare regime had survived the first fifteen years of liberalization (1985-2000) relatively unscathed. As a result, during that period transfer payments and welfare services had a considerable effect on the alleviation of poverty. Surprisingly, however, it was the renewal of violent conflict with the Palestinians that enabled Ariel Sharon's government to undertake a major retrenchment of the welfare state, leaving hundreds of thousands of welfare recipients to fend for themselves (Shalev, 2003). What enabled the government to do so, under conditions where social solidarity and cohesion seemed to be more necessary than ever, was the untold number of non-governmental organizations (NGOs) that have stepped in to provide essential commodities and services to the needy.
Adam Seligman, a prominent student of civil society, has noted, sarcastically, that civil society may indeed be a panacea to society's ills, if we could only decide what the term meant. On either one of the two meanings I alluded to above, civil society in Israel has been thriving. This has not prevented the Israeli state from pursuing a policy of brutal repression against the Palestinians, nor from assaulting the economic well-being of most of its own citizens.

References

Yoav Peled and Adi Ophir, eds., 2001. Israel: From Mobilized to Civil Society? Jerusalem: the Van Leer Institute and Tel Aviv: Hakibbutz Hameuchad (Hebrew).
Gershon Shafir and Yoav Peled, eds., 2000. The New Israel: Peacemaking and Liberalization, Boulder, CO: Westview.
Gershon Shafir and Yoav Peled, 2002. Being Israeli: The Dynamics of Multiple Citizenship, Cambridge: Cambridge University Press.
Michael Shalev, 2003. "Placing Class Politics in Context: Why Is Israel's Welfare State So Consensual?" a paper presented at the conference "Changing European Societies: The Role for Social Policy," Copenhagen, 13-15 November.