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Israel's Summer of Discontent

Protestors Demanding Fairer Redistribution Of National Wealth & Closing Of Gap Between Haves & Haven-Nots In Israeli Society

Mounting Wave Of Social Protest Forcing Prime Minister Netanyahu To Take Urgent Economic Steps & Restore Credibility With Many Middle Class Families

IsraCast Assessment: Prime Minister Netanyahu Should Appoint Emergency Council Headed By Cabinet Minister Kahlon To Draft Urgent Proposals To Improve The Lot Of Middle Class Israelis Who Are Being Impoverished By Current System

Bibi Netanyahu

 Public opinion polls show over 80% of Israelis support the thousands of mostly young hard-working middle class citizens who have organized in tent camps throughout the country protesting their slide into poverty. Prime Minister Binyamin Netanyahu and his coalition government have been stunned by the popular revolt that erupted over the exorbinate price of cottage cheese but has now spread to the tax code, education, health, you name it. IsraCast analyst David Essing says Netanyahu is now scrambling to placate the protestors who demand action and they want it now.

 'The rich are getting richer and the poor are getting poorer!' That is what is driving the current wave of economic and social unrest that is now sweeping Israel. It cuts across all parties and the protestors say they are not out to topple Netanyahu but to get a fairer shake from those who control and direct the state's economic life. What is so appealing about the protestors is that they are 'the salt of the earth '. In general, they are educated, industrious and thrifty young couples often with children who have been finding it harder and harder to make ends meet. So much so they have given up on ever owning their own apartment in light of the sky-rocketing housing prices and have to shell out a large part of their monthly income for rent which has also been going through the roof.

It is no coincidence that the protest started in Tel Aviv the mecca of jobs for most of these young families. Unlike many other modern cities around the world there is no efficient transportation network that would enable commuters to live in distant towns, (where prices have also been escalating in recent years). For example, four room apartments sell for the equivalent of $450,000 with an average monthly salary of $2,500. It is a fact of Israeli life that many young couples are not able to buy or save up for their own home without significant financial support from their parents, in the range of tens of thousands of dollars, to fund the down payment and/or the mortgage. So in recent years, the Israeli dream of working hard for the family and getting ahead has turned into a financial nightmare. (And the vast majority of these young Israelis, unlike many ultra-orthodox citizens have not shirked their military service in the IDF.)

Now the blame for this sorry state of affairs cannot he left solely at Netanyahu's doorstep, the deterioration in the Israeli welfare state has been going on for the past several decades. In fact, Israel has been given higher marks than most other countries for its handling of the international financial crisis having weathered that storm and emerging with unemployment dropping to 5.7% the lowest since 1984. However, Israel's economic boom has bypassed many working families. For example, last year 13.4% of those families were classified as living under the poverty line, nearly double the number of 7.6% in 1995. In addition, income tax rates favor the wealthy compared to the average Israeli. Moreover, as an advocate of Milton Friedman, Netanyahu has championed the free enterprise system and privatized many publicly owned assets in recent years. One byproduct seems to have been the growth of unofficial cartels controlled by several rich families, something that Bank of Israel Governor Stanley Fischer once hinted could have a long term negative influence on the economy.

In any case, the PM himself agrees with the protestors that something must be done urgently to remedy the housing crisis. He has placed the blame at the publicly run Israel Lands Corporation that controls the sale of public land to building contractors. Netanyahu has introduced proposals to cut the red tape which prevents more land being available for building apartments. But ironically, the ILC has been implementing Netanyau's own economic philosophy of 'maximizing profits' and selling to the highest bidder. But obviously the building contractors simply tack on the high cost of the land purchase to the price of the housing unit, in this case to the young couples.

What's to be done as the protests have now spread to some thirty towns? The jinni is out of the bottle and the PM must find some credible solutions. Obviously it is impossible to build tens of thousands of low price housing units overnight - it is estimated to take about two years. And although successive governments are responsible for what most Israelis see as an intolerable situation, the crisis has crested during Netanyahu 's watch and he is now expected to provide credible answers. Meanwhile, the protestors are unlikely to be mollified by promises that future economic measures will trickle down to them as well. This is also part of the problem. Other sectors of Israeli society that can muster political clout such as the ultra-orthodox heredeem and the settlers have gained what many view as unwarranted funding from the public coffers.

At the protest tent site in Tel Aviv, a comedian impersonating the PM, held up a big sign reading: 1. settlers 2. ultra-orthodox 3. all the rest and declared: 'From now on I promise you to drastically change my order of priorities!'. The comedian then turned his placard around and it read 1.ultra-orthodox 2.settlers 3.all the rest. While some Right-wingers have charged that the entire protest movement is a Leftist inspired plot to topple Netanyahu, the protestors reply that they are non-party and simply want to rectify the unfair situation - they want a new deal and they want it now.

What has gone wrong over the years? The founding fathers of modern Israel were of a decidedly socialist bent. Mapai, the former Labor party led by David Ben Gurion, galvanized the state's human resources to serve the national interest - it was truly an era of 'Ask not what your country can do for you but what you can do for your country!' long before John Kennedy's memorable declaration. The Histadrut Workers Federation, a Mapai organ, regulated wages and although this was not a terribly efficient system everyone was more or less in the same economic boat and there was no glaring gap between rich and poor. Even the haves of the first several decades did not have all that much. Wave after wave of new immigrants were 'absorbed' into homes paid willingly by the taxes of veteran Israelis. The most impressive was perhaps the in gathering of hundreds of thousands of Russian Jews who came with nothing but a few battered suitcases and were settled into homes and jobs from where the newcomers went on to contribute immensely to the state. (Israel was one of the first democracies to introduce a universal health care plan for all citizens). But the economic pendulum that tilted to the far Left of socialism has been steadily moving over the past twenty years to what many view as the far Right of capitalism - what President Shimon Peres once branded as 'piggish capitalism'. This in a state that demands so much from part of its citizens - those who are willing to risk their lives in its defense, while others who do not are granted state stipends to study in religious seminaries. The public debate now rages over the question should there be a return to the Israeli welfare state or to continue on the free enterprise system promulgated in recent years by nearly all the parties, including even Labor at times.

Netanyahu's options: The PM's plan to cut red tape in housing was rejected outright by the protestors and a credibility gap exists not only with Netanyahu but most politicians in general. In order to prove he means business the PM could appoint an ad hoc emergency economic council headed by Likud Cabinet Minister Moshe Kahlon, who has gained immense popularity for cutting down to size the big cellular telephone companies by reducing their excessive rates. (At the start of the current crisis, it was even rumored that Netanyahu was mulling over the idea of firing Finance Minister Yuval Steinitz and appointing Kahlon in his stead.) Kahlon has a reputation as a straight shooter, a self- made man who rose to the cabinet by dint of his merit after his humble beginning in a poor family. Such a council could include the Finance Minister and other senior officials as well as reps from the protestors in order to formulate proposals such as reducing value added tax on food and baby products, housing grants for first apartment buyers, revisions in the tax code that would allow young couples to deduct childcare expenses from their income tax, etc. These steps could be implemented relatively swiftly and swing the economic pendulum back to the golden mean between 'piggish capitalism' and 'stifling socialism'.

The protestors are trying to steer clear of any party affiliation in order to preserve the mass appeal of their movement. How they will translate their momentum into political power remains to be seen. In fact, Kadima and other opposition politicians have refrained from trying to make political capital at the camp sites realizing the protestors ire is directed at the entire political establishment. Opposition leader Tzipi Livni has blamed Netanyahu's privatization policies as the original sin that has exacerbated the conditions of many middle class families. Livni has several options: let Netanyahu stew in his own juice, although his Right wing coalition partners realize that they must all hang together or they'll hang separately in an early election. In other words an early election is highly unlikely. On the other hand, the social-economic factor has come to the fore and barring unseen developments it will play a greater role in future electoral considerations. On this score, come September the Palestinian issue might again dominate, if there are wide scale disturbances after the UN General Assembly votes for Palestinian statehood on the lines of 1967. The Opposition leader could declare that her Kadima party will support any government measures to aid those Israeli families who have been left out in the cold. However, the Knesset is now headed for its summer recess a time of political doldrums for Israel's parliament. Generally speaking the Labor party, the one time bastion of socialist ideology along the lines of a European welfare state, could benefit politically and particularly Knesset firebrand Shelli Yachimovitch, who has campaigned relentlessly for the under priviledged and against the tycoons and what she terms: 'unbridled capitalism'.

David Essing

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