What The Israeli Election Is Really All About

After more than a hundred days of largely uninspiring, uninformative, useless twaddle, and the commitment of more than 2.3 billion shekels that could have been far more usefully employed, one cannot but come to at least one irrefutable conclusion: Once all the ballots cast in this election have been counted, not one of Israel’s political leaders will be able to claim that he or she speaks for Israel—or even for a majority of Israelis.


Such is the state of the nation. It is leaderless. Worse still, it is directionless.


Amazingly, during this election campaign, the country’s largest party by membership, the Likud, did not even bother to publish a party platform outlying where it thinks the country should go.


And, according to the latest polls, after all the ballots are counted, no single party leader will be able to claim that he or she commands the unswerving support of even a quarter of the electorate. According to these polls, no party is expected to get even 30 Knesset seats—or a quarter of the seats in the legislature.


But of far greater importance, this most recent election campaign has also failed as an exercise in one of the most important aspects of democratic rule. The country’s journalists, taking their cue from the politicians and spinmeisters, as usual, focused, almost single-mindedly, and almost mindlessly on the horse race—in other words, day by day, who was leading and who was losing.


However, real democracy does not just involve choosing the country’s lawmakers and representatives. Even more importantly, election campaigns are one of the few times that members of the public are given an opportunity to hear and read detailed analyses of important issues that they are confronting. And in a properly conducted election campaign, voters are then given the opportunity to debate the relative merits of each proposed solution to each issue so that a consensus can be arrived at, or at least a majority decision can be made on what actions the public’s representatives should pursue in the future.


From the moment this election was called, the Israeli public made it plain that it wanted to focus on domestic issues such as the supply of health and educational services, the high cost of living and the growth in income disparities.


But that was no to be.


That is because, from the outset, Bibi refused to accept the very idea that the public had a right to discuss what was on its collective mind. That, by the way, is not an unusual tack for a failed national leader to take. It is far easier for a political leader to find a foreign issue on which to focus and a foreign scapegoat to blame than it is to confront major issues at home. Just ask Yvette Liberman or Vladimir Putin.


In Bibi’s case, his chosen tack was to focus on Iran and US President Obama. He succeeded beyond even his wildest dreams. Despite all the police investigations and reports about high-level political corruption, despite the mid-campaign publication of the state comptroller’s reports about the high cost of housing, despite the recent revelations about the high cost of maintaining the Netanyahu family in the manner to which it has become accustomed, and despite all the other controversial material that became public during the election campaign, Netanyahu consistently succeeded in setting the political agenda—until almost the very last moment, when he seems to have suddenly realized that most people had stopped listening to what he had to say.


Up to the very last moment Bibi’s acolytes kept criticizing the press for ignoring both Bibi and the Likud’s message. However, an independent monitoring company that provides analyses of media coverage for major corporations found that the prime minister was actually the subject of more than half the media items produced during the campaign. In other words, he got more coverage than all the other party leaders combined. His demand that the election campaign focus only on his fears for Israel’s security and his conspiracy theories that an international cabal was trying to unseat him, combined with the massive coverage by the press that he was afforded, effectively silenced public debate on any other subject.


That people eventually stopped listening to Bibi’s message, though, is significant because it is indicative of just how out of touch he was with the national zeitgeist—the prime reason he was losing voter support.


But Bibi was not alone in his unwillingness to deal with domestic issues in depth. Most of the parties refused to publish comprehensive party platform planks on the real hot-button domestic issues such as health and education policy because that would have meant that these parties were finally accepting the elementary proposition that one of their most important tasks is to enunciate what should be the nation’s policy priorities…and, how any additional government-sponsored services should be paid for. Usually, the Israel’s politicians leave such humdrum work to those taking part in coalition negotiations, lobbyists in the Knesset and bureaucrats’ seeking the easiest way out of any difficulty that they are confronted with.


The parties’ rationale appeared to be that any such decision would inevitably have alienated some segment of the electorate. As we saw from the so-called debate on Channel 2, most of the party leaders preferred to use the tax shekels they had been allotted for the campaign to insult each other instead.


To their credit, Labour’s Manuel Trajtenburg and Kulanu’s Moshe Kahalon did publish detailed, if polar-opposite proposals on how to deal with and pay for poverty-alleviating programmes. But in the absence of any subsequent debate, we never got to even think about which approach might be better or whether Trajtenberg’s social democratically-based ideas could somehow be combined with Kahlon’s market-based proposals.


As I just mentioned, the main rationale behind this sort of behavior seems to have been that, when it comes to final vote counts, Israeli politicians believe that it is more cost-effective not to alienate people by making new proposals than would be if fresh ideas that might be controversial were proposed instead. That reasoning also helps explain the parties’ focus on negative campaigning in general and the media’s focus on personalities and leaders’ foibles.


In my previous discussion about the election, I implied strongly that it was possible that this election might be a turning point in Israeli history. At the time, I laid out some of the micro-trends that are underway in the Israeli political system. This time, though, I would like to try something far more ambitious. What I would like to discuss here is a much broader issue that has been completely ignored by all the critics and all the pundits.


I want to ask, and then answer a seemingly simple question: Is there a single national issue that lies at the heart of and effectively binds all the seemingly-disparate subjects that the public initially said it wanted to debate—whether it is the deterioration in health and education services, the growing number of cases of fraud and corruption that have been brought before the courts in recent years, the increase in the influence of the country’s oligarchs and major corporations, and the growing disparities in incomes?


I believe that there is one such issue. But it would appear that even mentioning it has become so discomfiting to all the country’s politicians that each of them has found that addressing it is simply too painful—or maybe embarrassing—for words.


Put in the simplest terms possible, the issue is: Whatever happened to the social contract upon which public services and the behavioral norms of Israel’s public servants were once based?


The issue of a social contract cannot be underestimated. Countries live and die by the social contact their citizens adopt. Most of the social disorder in Europe today can be traced to the unwillingness of many Moslem immigrants to accept and abide by the existing social contracts the European countries put in place after World War II and after the disintegration of Communism.


And Israelis, of all people, should never forget that the Jews survived their years in the diaspora because of the social contract they created after the destruction of the Second Temple. Among many other things, it included such modern-sounding, sensitive subjects as quality universal education for literacy, pidyon sh’vuim (redeeming captives) and mutual aid.


The rabbis of the Talmud, and, hundreds of years later, the rabbis of the great cosmopolitan trading cities such as Saloniki and Aleppo, devoted much of their intellectual effort to dealing with matters that we today consider to be fundamental aspects of any social contract…be they education for poor children, how to care for widows and orphans, and how to ensure that accurate weights and measures are used in public markets.


In order to properly examine the current state of Israel’s social contract, I will first have to focus on two issues that have also not been mentioned …by anybody…in the election campaign. They are the impact that globalization has had on Israel, and the development of what historian Nils Gilman has called “micro-sovereignties” within the country.


Much of what I have to say about micro-sovereignties has been adapted from Gilman’s superb essay on American micro-sovereignties, titled “The Twin Insurgency” that was published last year in The American Interest magazine.


Over the past decade and more, one thing has become crystal clear to me. Both the long-existing problem of micro-sovereignties and the more recent political, social and economic challenges that have arisen as a result of globalization are challenging the underlying ethos of the entire project of Zionist state-building…and the social contract that Israel’s first Zionist leaders created long before the state was founded.


Social contracts act as a platform and a framework for national, communal action. They are based on the assumption and belief that a nation, as a whole, can come to an unwritten, but almost universally-accepted consensus on which public policies are bedrock expressions of shared values, and what should be the nation’s behavioural norms. Once those ideals, plans for action and descriptions of forbidden behavior have been enunciated, the state, which must then be treated by the contract’s adherents to be a disinterested party if the contract is to actually be implemented, is authorized to intervene in people’s lives in order to implement those policies.


The Zionists’social contract, which found its first, theoretical expression in Theodore Herzl’s Altneuland, became a practical, existential need as early as the first decade of the twentieth century.


The Zionist politicians of the time found that most of the early Jewish immigrants to Palestine were leaving not long after they arrived because their most basic needs were not being met. In reaction, all the Zionist parties at the time, regardless of their place on the political spectrum, committed themselves to the proposition that one of the central tasks of any Jewish-led government in Palestine should be to build and maintain a social infrastructure that all those Jews living in Palestine could believe was of benefit to them both as individuals and as members of a collective seeking internationally-accepted nationhood. Specifically, they promised to raise the standard of living for all—at least as compared to the Arabs—and to ensure that the state-in-becoming would also provide a cushion for those hit by misfortune.


That promise then led the Jewish Agency during the time of the British Mandate, and successive Israeli governments after the foundation of the state, to focus on the creation of human capital through the provision of what Revisionist leader Zeev Jabotinsky in the 1930s called the “Five Mems”—Mazon (an adequate supply of food), Maon (adequate housing), Malbush (clothing), Moreh (an education) and Marpeh (adequate health services). Underlying all these five, was an assumption that these goods could be provided so long as, in return, there was an acceptance by the citizenry that all social services had to be paid for—either through taxation or through services-in-kind such as taking part in public projects or enlisting in the army. Significantly, the unwritten contract held that donations by Diaspora Jews should be used for investment in infrastructure and human capital, not for day-to-day running expenses.


It is difficult for people today to recognize just how revolutionary this latter idea was at the time. Most European Jews at that time had been brought up with the idea that there was a class of Jews, the deeply religious, who were allowed to live off charity—or, what was called “halukah.”


As I will show in a moment, the Zionist’s social contract was often broken by those seeking selfish advantages. Nonetheless, it was sufficiently successful that, at least up to the 1970s, it managed to provide Israeli governments with the trust and legitimacy they needed in order to rule…and the social solidarity that the citizens needed to cope with the existential threats that the country faced.


However, today, as we have seen from all the reports and statistics that have been published recently by government bodies and NGO’s, these foundational principles of modern, Zionist society have been weakened, and for many people, are on the verge of extinction.


To my mind the reason is simple. One aspect of Jewish life in Eretz Yisrael that has been present since the first experiments in Zionist political activism began—the acceptance of and even fostering of micro-sovereignties— has now combined with new supra-political forces that are the product of economic globalization. Together they have produced a social and economic crisis of such proportions that the old social contract is now on the point of dismemberment.


At this point it is worthwhile tracing how and why this destructive process came about.


Since the time of Moses Mendelson an the beginning of the Haskalah Movement at the end of the eighteenth century, Western Jewry has been trying to cope with the need to reconcile traditional Jewish social values with modern economic and political exigencies. The social contract designed by the Zionists was once such experiment. At its heart, it assumed that things like the provision of health care, pensions and education were basic, collective, public goods whose supply should be ensured by the state.


However, beginning in the late 1970s, that approach began to be undermined. The trigger, but not the cause, was the Likud electoral victory.


After having been excluded from office for so long, access to the national treasury for the first time made Likud politicians behave like children in a candy shop. They tried to do too much, too soon—without setting national priorities first. The result was hyperinflation.


Menachem Begin was a dedicated devotee of the old social contract. But his primary interest lay in the field of foreign affairs and security. He therefore left domestic social and economic planning to the other, neophyte and often incompetent members of his cabinet.


Eventually, though, the cabinet had little choice but to employ a remedy to hyperinflation that was not unlike the powerful medications that doctors use to treat life-threatening diseases such as cancer. Like many anti-cancer drugs that are prescribed for humans today, the economic medication that was finally adopted did cure the disease of hyperinflation. However, it also left the Israeli body politic susceptible to debilitating side-effects that had to be dealt with urgently if the nation was to recover its previous vigour. Many of those side-effects, though, have gone untreated to this very day.


The cure for hyperinflation that was adopted entailed a massive reform of the country’s entire economic system. Among other things the individual reforms included a redirection of public spending away from subsidies, the eventual floatation of the shekel, and the adoption of a policy of free-trade. As well, encouraging foreign investment became a government priority, some major state enterprises were privatized, and virtually all of the companies that had been owned by the Histadrut, eventually were sold off to pay the Histadrut’s monumental debts that had been incurred because of its massive managerial incompetence, fraud and a reliance on government perks and protection.


These reforms not only shook the very foundations of the old social contract, they enabled all those who had been seeking an opportunity to make a grab for money and power to manipulate aspects of the new situation for their own benefit.


Those forces, which Nils Gilman calls “micro-sovereignties,” were not new, and had bedeviled the Zionist movement since soon after its inception. Each such group viewed itself as a unique exception to the rules that others believed were binding on all.


In many ways, micro-sovereignties behave in ways that are similar to tribes. Both put their sectoral interests ahead of the well-being of anyone not a member of the organization in question. The only real difference between the two is that micro- sovereignties place mutual sectoral interests ahead of blood-line connections as the primary social glue of their communities.


Significantly, because these bodies cannot supply all their own needs, micro-sovereignties invariably become predatory or parasitic to one degree or another.


They usually acquire their initial strength by taking monopolist control over some, important aspect of the life in the nation-state where they are centred. That monopoly, which can be either legal or illegal, is then leveraged so that the monopolists end up gaining power that is far greater than would otherwise be warranted by the size of the group’s membership.


The first Jewish micro-sovereignty to emerge in Ottoman society was the cartel of orange grove owners. It was soon joined by a new, competing movement of communes that came to be known as the kibbutzim. Those two were soon followed by the creation of yet another monopolist body, the Histadrut.


At their height, the kibbutzim were able to aggregate to themselves enormous state assets such as land, customs protection and government subsidies. And the Histadrut was able to leverage its near-monopoly over access to labour to build a huge industrial and financial empire.


But these bodies were not alone in trying to set up independent power structures. During the1930s, power in Zionist forums was divided between the liberal, bourgeois, free-market-supporting General Zionists led by Chaim Weizman and the Socialists led by David Ben Gurion.


For the first three decades of the Zionist movement, the General Zionists were in almost total control of the movement. However, the kibbutzim and the Histadrut eventually became so powerful and influential that in 1936, David Ben Gurion was able to seize power and take control of the Jewish Agency.


Out of what was perceived to be their need to protect themselves from a socialist onslaught, the anti-socialists then tried to set up micro-sovereignties of their own. The Revisionists, for example, eventually ended up establishing their own trade union and health maintenance organization.


The majority of the anti-socialists at that time, though, were industrialists and financiers who had just arrived—primarily from Hitler’s Germany, Czechoslovakia, and the industrialized parts of Poland. These capitalists were an eclectic bunch who set up among other things, the country’s first steel processing factory and its first pharmaceutical company—both of which are still in existence as Pecker Plada and Teva Pharmaceuticals. With the notable exception of a very few businesses such as the textile plants and Rickard Straus’s dairy in Nahariya, most of these enterprises were monopolies. Most importantly for our purposes, they operated under a gentlemen’s agreement not to step on each other’s toes. The micro-sovereignty of what we today call the “oligarchs” was born.


These various, competitive micro-sovereignties eventually found a modus vivendi. The condominium relationship they created was based on and policed through the use of a modified version of the more theoretical social contract that had been posited by the Zionist politicians in the 1930s. This unwritten and unspoken pact was sufficiently durable that it remained the foundation upon which the Israeli economy was managed during its first two decades of the country’s existence.


The main modification that was adopted and accepted by all the various groups was that each group was free to criticize each and every other group in public for the perks that it had acquired. However, it was considered to be highly improper for any group to openly boast about the selfish benefits that they had gained.


Throughout this period, social stability became dependent on succeeding governments agreeing to maintain a high level of opacity about the advantages they had bestowed on the various groups.


So successful was this arrangement that, even after the Likud’s first electoral victory, most of the country’s capitalist financiers and industrialists continued to vote for the Labour party.


Three successive national traumas shattered that condominium relationship. First, the Six Day War brought with it the occupation of new territories. The Labour party dithered about what to do with these newly-acquired lands. However, the National Religious Party, which had long been a kind of protectorate patronized by the socialists, very soon found a way to use that territorial acquisition as a means to assert its political independence for the first time. Its supporters began that break from the past by adopting the belief structure of Zvi Yehuda Kook, a rabbi who had previously been considered to be a minor religious figure. Kook believed that settlement of the newly-occupied territories by Jews would lead to the Jews’ final redemption. The NRP began to see itself as the agent of that Jewish redemption. To that end, within a very short time, the NRP’s members succeeded in creating an entire, new micro-sovereignty, based on land tenure in the occupied territories and paid for from the public treasury.


Second, the Yom Kippur War undermined the socialists’ control of government and eventually led to the Labour party’s defeat at the polls.


The third upheaval, as I have already mentioned, was triggered by the Likud victory in 1977.
Among many other things, immediately after that election, the new NRP found that it had acquired a monopoly that was even more power-inducing than its previous control over the official rabbinate. It could now determine whether the closely-matched Likud or the socialists would form the next government. The NRP was then able to use this monopoly power to get vast sums of government money for use by the redemption-focussed settlers who had taken control of the party.


Soon after, though, another, new and highly-competitive micro-sovereignty emerged from the backwaters of Bnei Brak and Mea Shearim in Jerusalem. The Haredim had discovered that the Keynsian welfare state that had been installed as part of the social contract which was binding the rest of the public could be turned into a huge modern example of Haluka. In what seemed to be a modern-day miracle, they, like the NRP, found that simply by supporting one or another of the secular parties that wanted to lead a coalition, they could gain access to tax monies without having to add to that taxation pool, without having to provide services-in-kind such as military service, and without having to abide by any other of the terms of the existing social contract.


All that the otherwise warring and bitterly-competitive Lithuanian-style Haredim and the Hassidic ultra-Orthodox had to do in order to make themselves attractive as potential coalition partners, was to put on a show of unity. This facade then made them appear to be large enough to be considered worthy of taking part in the auction that had already been established by the NRP.


These two new micro-sovereignties were different in many ways from any of the others that had come before. The one characteristic common to all the micro-sovereignties in Israel is that they have always had a utopian bent. This messianism, whether it takes a religious or secular form, has invariably been used by these minorities to justify their parasitic actions. Without exception, they have claimed in the past, and continue to claim, that they are in the van of society and for that reason, everyone else should be grateful for what they are doing—and service them on demand.


However, while the old micro-sovereignties did seek advantages such as customs protection or subsidies, they all operated under the presumption that, in the end, they had to pay their own way—that their contribution to the nation’s financial wealth had to be at least perceived by everyone else to be equal to or be greater than the cost to the treasury of the advantages that they were being given.


By contrast, the two new religious micro-sovereignties believed and still believe that their spiritual contribution to the nation’s wealth through settlement or Torah study was and is at least the equivalent of the financial value that had been created by older existing micro-sovereignties.


No less significantly, the two new groups also began to boast openly to their constituents about their achievements.


Not surprisingly, therefore, during the early 1980s, many more micro-sovereignties began to form. Some of the most powerful ones were created by the works committees in monopolistic government corporations; and these newcomers quickly became as adept as the existing banking cartel, the pharmacists’ cartel, and the coddled export industries at extracting outrageous privileges from the government. This Likud populism frightened many of the more traditional capitalists. And so, in one of those peculiar twists of fate in which Israel seems to specialize, even after the Likud had consolidated its position as the largest single political party by membership, many of the wealthiest capitalists continued to support the supposedly socialist Labour party, while the country’s biggest unions ended up throwing their weight behind the supposedly free market-supporting Likud.


Eventually, the burden of having to feed all these new micro-sovereignties was more than the fragile Israeli economy of the time could take. Compounding the problem was the fact that, once the Likud took office, the kibbutzim and the Histadrut were deprived of the direct and indirect support that previous Labour-led governments had given them. Once that happened, all their acts of mismanagement and their inherent weaknesses came to the fore. Soon, both these bodies most were teetering on the verge of bankruptcy and they then became a greater negative influence on the economy than they had been previously.


The immediate product of all this turmoil—hyperinflation—therefore hit even harder and faster than would have been the case if the Likud had only gorged itself in the candy store called “The Treasury.”.


The recovery from hyper-inflation required American loan guarantees to work. That gave Herb Stein, a Reaganite economist and the American delegate to the committee charged with developing and implementing the needed economic reforms, extraordinary influence.


In essence, the Reagan/Thatcher approach to economic activity that was gaining momentum at the time was based on the belief that if governments became less active in the economy, the economy would become more efficient and everyone would benefit. A major target for economists who supported these leaders’ approach to economics was what Americans have come to call “entitlements.”


In normal, everyday speech, the word “entitlement” usually means that people have the inherent right to expect that the provision of goods and services that satisfy certain human needs will be treated not merely as private forms of wealth, but as public goods and services that can and should be made available equally to all by the state.


However, in recent years, especially in the United States but increasingly in Israel, the word “entitlement” has been turned into a derogatory term by many politicians and civil servants—especially adherents of what is often called the “Chicago School of Economics” or the “Washington Consensus.” Binyamin Netanyahu is one of those fierce believers in the Washington Consensus who have convinced themselves that governments should reduce their activity in the economy, no matter what the social cost may be.


In addition, during the 1980s, Israel was being forced to cope with the impact of yet another combination of Reaganism and Thatcherism…one that was having a growing impact on economies that were competing with Israel for world markets. Both these leaders were convinced that lower taxes, especially lower income and corporate taxes, would lead to greater economic growth. However, this then led to an unprecedented battle between developing nations for foreign investment.


The problem that arose was that, if a country, such as Ireland, chose to adopt the low taxation model, foreign companies, thinking of building a new manufacturing plant overseas would naturally favour the country with lower taxes over ones—such as Israel—that had higher corporate taxes. The two countries then felt compelled to compete over which one could be more accommodating to the potential foreign investor.


All in all, the Thatcherite/ Reagan approach was the very opposite of the Keynesian ideal of building a stable middle class society through demand management of the economy, which had been in place in Western countries since World War II—and which had acted as the philosophical underpinning of the Israeli social contract. At the heart of that philosophy was the belief that all the participants in the economy had to accept certain restrictions and certain social obligations. Arguably, the most important of these was a joint commitment to search for ways to increase productivity and then share those gains in productivity between the investors and the country’ workers so that those workers could then afford to buy the goods that they were producing.


Under the new rules that Israel had begun adopting, though, this obligation virtually disappeared.


In effect, globalization, not just in Israel, has undermined and even destroyed the very idea that industries or financial institutions should become partners in the creation of national collective well-being…or that companies operating within a particular country should have an obligation of some sort to the citizens of that country. The reason for this attitude is simple. Because globalized companies today can be mobile, they feel no obligation to remain in any one country, to adhere to that country’s social contact or to take on any social responsibilities.


Maybe the best example of this process at work in Israel was what happened to the Tnuva company. The endemic inefficiencies at the kibbutzim meant that these collectives found themselves without enough money to provide for those members who were retiring. In desperation they decided to sell a majority stake in their Tnuva food processing cooperative to a British investment company named Apax. Apax’s only concern was to maximize its profits. A huge market study it commissioned found that many of the company’s products such as cottage cheese, had a captive market. The new managers then felt confident that they could raise the prices on many of these products by 30-50 percent without seeing any loss in sales or production.


Until the late 1990s, Israeli food prices were generally lower than those in Europe. Very soon, though, food costs skyrocketed. That was largely because the same, rapacious mindset that had led Apax to invest in Tnuva had led other major Israeli food enterprises to be bought out by foreigners as well. Thus, Ossem is now controlled by Nestle and Blue Band was bought by Unilever.


But the Israeli food industry is not the only group of enterprises that has been affected by the norms being imposed by globalized investors. Even Israel’s flagship, locally-created, high-tech industries are being heavily influenced by foreign investors who adhere to the principles of economic libertarianism as set out in the Washington Consensus.


For example, one fundamental belief associated with the Washington Consensus is that extreme wealth, even if it is in the hands of the few, will eventually trickle down and enhance the well-being of everyone else. But in Israel, this has simply been untrue. Huge profits have been made by individual entrepreneurs through the sale of high-tech companies. But this has essentially involved the sale of Israeli-developed patents to companies abroad. Few peripheral jobs in administration, management or production have been produced. The new owners of the patents, such as Facebook, usually see no reason to contribute to the Israeli society that produced these goods; and all too often even the R&D labs that produced the patents were closed soon after the patents were transferred abroad.




Overall, in Israel, the breakdown in the social contract has been most manifest politically by the elimination of the use of the principle of majority rule in the production of government policy decisions, and its replacement by the current system under which micro-sovereign minorities band together either openly or not…and then negotiate among themselves, sometimes in the open, but usually behind closed doors, together with pliable Knesset members on how to apportion the national cake so that it best serves their narrow interests.


In addition, the old social contract was almost totally dependent on the politicians’ capacity and willingness to foster the citizenry’s trust in the three branches of government to act in a fair manner over the long term—and to impose the principle of fairness on others. However, the adherents of the political system that has now emerged have felt a need to justify their selfish approach and many of their inherently unfair and even illegal actions, and so they have, instead, spent enormous efforts trying to undermine and delegitimize the old system. In particular the religious micro-sovereignties claim that Israeli governments and especially the secular judiciary have consistently proven themselves to be inherently untrustworthy. Therefore, the religious micro-sovereignties claim, they have a right to protect themselves and their beliefs by acting as they do—regardless of the impact that their actions may have on others in the society.


The growth in the number and size of so many non-religious micro-sovereignties has created a different, but no less equally socially-destructive set of economic problems.

For example, as income and corporate taxes fell under the influence of Netanyahu and his economically like-minded allies, Israel became ever more reliant on regressive indirect taxes, such as VAT, whose burden falls disproportionately on lower-income groups that have to spend more of their income on sheer survival than the rich (who can save or invest some of their income). Fifteen years ago, revenues from direct taxes, which are more progressive, were 1.5 times the revenue from indirect taxes. In recent years, the ratio has fallen to 1:1 and in some years indirect taxes have actually brought in more than direct taxes such as income and corporate taxes.

As the Haaretz newspaper recently pointed out, in the 1980s, Israel’s tax burden was 10 percentage points higher than the average for developed countries. By 2000, it had dropped to 35.3% of GDP, about the average for OECD countries. Since then is has declined to just 30.6%, lower than most of the OECD.

The lower tax burden has come at a cost…in the form of less government spending and fewer, increasingly poorer-quality government services. In 2013, in the average OECD country, government activity accounted for 47% of GDP. In Israel it was 40%, putting it at close to the bottom of the developed nations. This, in practical terms, has meant that there has been less money for health, education and welfare.

Another major economic distortion that the system of micro-sovereignties has created has been the advent of a crazy quilt of tax exemptions specifically designed to benefit each tiny, but powerful business-oriented minority in the country. Believe it or not, the finance ministry has estimated that if all these exemptions were eliminated, tax revenues would rise by an incredible 52.6 billion shekels per year. Even if only small part of that sum could be recovered, Israel would be able to virtually eliminate poverty, school overcrowding, hospital overcrowding and still have lots of money left over for fixing roads that produce deadly traffic accidents.

Initially only the voiceless and politically-impotent poor were affected by these developments. However, following the turn in the millennium, the middle class began to be affected too. In order to compete in the global marketplace and satisfy the demands of the increasing number of foreign investors and shareholders, Israeli companies too began feeling increasingly obligated not only to raise prices to the public, but also to ignore one of the most fundamental articles of the unwritten social contract—that productivity gains should be shared reasonably between labour and capital. Once this breach in the social contract became a chasm, the wages of the members of the middle class began to stagnate. Just yesterday, the Central Bureau of Statistics published a table showing that average salaries today are lower in terms of their real purchasing power than they were in 2001.


As a result of this development, the members of the middle class began to protest too. One result was the street demonstrations of the summer of 2013.




All this background now brings us now to the current election campaign.


Conventional wisdom says that this election is between two blocs—one that supports Netanyahu for prime minister and another that opposes him vehemently. The pundits further claim that the primary battle between these two blocs is whether the members of the public should cast their ballots on the basis of security and defence issues and thus support Netanyahu, or make social and economic issues the national priority and vote for the anti-Netanyahu camp.


I would like to assert that something far more fundamental and even revolutionary is now underway. If one looks very closely at the make-up of the two camps, one can see that the real issues that are as stake are not those upon which the pundits have focussed. For example, the Haredim are a critical component of the pro-Bibi camp. Without them Netanyahu will be unable to form a rightist coalition after the elections are over. However, the Haredim don’t give a fig about security and defence issues.


The real and only absolute division between the two camps lies elsewhere. The fact is that every member of the pro-Bibi camp supports the continued existence of micro-sovereignties, while, with the exception of some Meretz folks and a few Labour old-timers, the anti-Bibi camp is made up almost entirely of those who oppose the continued existence of national micro-sovereignties because they distort government spending priorities.


To put my thesis in the simplest terms possible: If I had to describe the central political conflict in this election in one sentence, it would be that the electoral battle we have been witnessing has not been between “left” and “right,” but rather between those who seek to renew the old social contract and those who wish to defend the political and economic worldview that has replaced it.


This conflict is not new. One of the major battlegrounds where it was played out during the past year was the Knesset Finance Committee. The young rebels in Labour who became public figures during the 2013 summer consumer revolt, specifically Stav Shafir, Itzik Shmueli and Merav Michaeli, used that forum to trying to dismantle the primary political framework upon which the micro-sovereignties (including those associated with the Labour party) had depended for so long. Their primary objective was to tackle the lack of transparency that had enabled all Israeli governments to transfer funds out of sight of the public to favoured micro-sovereignties after the budget had been formally passed by the Knesset plenum.


The iconic moment in this battle came when Shafir was videoed in a battle with Knesset Finance Committee Chairman Nissan Slomiansky as he tried to transfer millions of shekels to organizations associated with the settler movement—without a majority of the committee’s members being present.




This election, therefore, should be viewed not as an isolated event, but as one small stepping-stone in a much larger process that has been going on for hundreds of years as Jews, both in Israel and in the Diaspora, try to fashion a political and economic philosophy that is based on traditional Jewish values and practice, but which can also cope with current social and economic forces that are often very much at odds with Biblical and Talmudic tenets.


As for the future…During this election campaign, two parties, Yesh Atid and Kulanu, have promised that, if elected, they will attack the micro-sovereignties issue by demanding that adherence to basic principles of “fairness” and “equality” be imposed on all the existing micro-sovereignties.


But that may be easier said than done.


For example, while the campaign was on, Labour leader Yitzchak Herzog put a considerable effort into publicly meeting with and courting many of the Haredi leaders whose support he may need in order to form a government if asked to by President Rivlin. These religious leaders have already stated that they will not accept many of the reforms that those seeking to renew the old social contract are demanding. For example, the Haredim have already let it be known that their first demand for entering into a coalition will be the abolition of the recently-passed law making draft-dodging by the Haredim a criminal offense, just as it is for non-Haredim. Bibi has already promised that if returned to the prime ministership he will bow to these demands.


Therefore, if I were to offer a projection it would be this: In Israel, it is rare for single events, such as this election campaign, to change entrenched political and social norms. Such changes require long processes and multiple shocks to the body politic before they are implemented.


That is the reason why so little happened following the rebellion of the summer of 2013, and why so many pundits quickly claimed that the social revolt had played itself out. However, as can be seen from the current election campaign it is clear that the revolt did not die. Its supporters just simply needed time to find a different venue and a different format through which they could express themselves again.


In a sense, what we have been seeing recently, over a period of years, bears remarkable similarity to the more-than-decade-long process that led to Labour’s overthrow in the 1970s. Stripped of all its embellishments, that train of events was all about the unfairness shown toward and the arrogance shown by the micro-sovereignties supported or tolerated by Labour…just as the process we are now in, when stripped of its embellishments, is all about the unfairness that has been shown toward and the arrogance that has been exhibited by micro-sovereignties that have been supported by or tolerated by the Likud.


If that is true, it is likely the process we are now witnessing, will be just was extraordinarily messy, as full of ups and downs, and as laden with totally unanticipated consequences as was the previous process.


Clearly, the outcome of this particular election and the subsequent coalition negotiations will remain uncertain for only a short while. However, no matter what the results of these events are, they will not in any way, resolve any of the basic conflicts and problems confronting Israeli society. That is because it is highly unlikely that, given the current political balance of power, the issue of a new social contract will even be raised by the new prime minister in the near future. In the absence of a resolution of the conflict between those seeking a renewed social contract based on a national consensus and those content and even happy with rule by a federation of powerful, selfish minorities, it also now seems highly likely that the period after the next government is formed will be characterized by even more social upheaval and political uncertainty than we have witnessed to date.

Leave a Reply