02 August 2011

Understanding Israeli right and left, new dichotomy and the future

This post is mainly for my friends abroad, wherever they are, who may have trouble projecting their beliefs and experiences onto our small but peculiar country. And another thing: I am not a supporter of socialist economy, of suffocating government control, of Big Brother dictating everything from our reading material to the price and style of our underwear. My sympathies belong to Libertarians on many issues, economy included. So far capitalism, with all its inherent and acquired problems, proved itself to be a more successful economic structure (or, rather, the lack of one), and I am yet to see its replacement that would prove superior.

But, my Libertarian and conservative friends, be aware of this post possibly going against the grain of your beliefs, at least where this country is concerned.

So what is going on? And why?

It started in a small way, with the cottage cheese boycott. Was it the surprising success of the Facebook-led "uprising" or other reasons, but the unrest spread and continues to spread, expanding into new domains and involving more and more citizens, hitherto inert and apathetic. The headlines from leading newspapers describe the situation pretty well:

And what is the government response so far? Panic, lack of single voice and chaos for now.
The main reason for the protests and for the unrest glares in the face of any observer: for too many years our successive governments, enamored with the free market ideas, lost control of the growing greed of the economic powers that be. The profits grew, the said powers using and abusing the easiest way to increase them - by increasing the retail prices. This "entrepreneurial" activity was, on one hand, facilitated by governmental lack of attention and, on the other hand, by almost total lack of competition in a country of our size and quietly arranged agreement on prices between the few possible competitors (cartels, you are right).

In a country where weight of the direct and indirect taxation is one of the highest in the world (some say the highest, coming up to 75-78% of income), where corporate taxes are amazingly low (According to unofficial estimates, Teva's corporate tax rate is practically zero.), the middle class bears the brunt of feeding the healthy appetite of the government and has to bear the piracy of runaway prices of practically everything. From cottage cheese and milk via babies' pampers to cars and, especially, housing.

One can say that, in a way, our government enjoys the "best" of two worlds: uncontrolled (by now uncontrollable) free market and Big Brother style suffocating taxation system.

It's very symptomatic that Stanley Fischer, Bank of Israel Governor (our equivalent of Mr Bernanke and his teacher, by the way) confessed to be surprised by the unrest. Indeed, Israeli macro-economy survived almost painlessly the last crisis, when most of the world (China and few other economies possibly excluded) suffered and still suffers recession, high unemployment, currency devaluation etc. The GDP growth, the low unemployment, the balanced (more or less) budget, the foreign currency reserves - in short, most KPIs (Key Performance Indicators) that comprise our government's "dashboard" look peachy and allow Bibi much posturing with frequent winks to his first time as our minister of finance.

Unfortunately, that dashboard made our government(s) deaf and blind for many years to the growing pain experienced by its main source of income, power, brains and ability to defend the country - the above mentioned middle class.

The new dichotomy

There is something important about Israeli internal politics that many (or even most) foreigners don't know or don't understand. The accepted definitions of left and right, where left is normally associated with socialist worldview and right with a conservative, capitalist one, where left is comprised of and is supported by the poor or, at least, lower income part of the population; and the right by the well-to-do and rich - all this is wrong where Israeli politics are concerned. For too many years to count, most of the left and most of the right defined themselves according to their attitude towards Palestinian question and the peace process. It may sound absurd, but for years our Labor party faithfully represented interests of many tycoons, while Likud included and represented lots of low-income members and supporters.

Here I can take a break, piggy-backing on two remarkable articles: an editorial from JP The new Right-Left dichotomy and a matching Haaretz article by Avirama Golan The protest wave has changed the face of Israel's political map. Why remarkable? Because it's a rarest case when these two media outfits publish articles on a ground-breaking political event in Israel that agree on something. Of course, excepting the usual grumbling one issues about the extreme left and the other about the settlers - but that was in the nature of a stifled burp after a rich meal and doesn't really signify anything.

Where one (JP) observes:
One out of five Israelis lives under the poverty line, including tens of thousands who work, the second highest poverty rate among OECD countries after Mexico’s. Also, 39% of Israelis said they find it difficult or very difficult to live on what they earn, significantly higher than the OECD average of 25%.
the other (Haaretz) adds:
...the demonstrations have seen voters from Likud, Meretz and Hadash standing shoulder to shoulder; protesters with skullcaps and secular people, Jews and Arabs.
The non-partisan nature of the unrest is undeniable, and this new dichotomy will be certainly exploited by existing political entities that will try to present themselves as saviors and valiant fighters for the better future. For now, the pols behave predictably:
They [the left] are demanding more state spending on social welfare, a freeze on tax cuts, and other steps to increase state involvement in the economy. In contrast, Netanyahu and Finance Minister Yuval Steinitz and others on the economic Right argue that more needs to be done to foster competition and to cut red tape to allow market forces to lower prices and improve efficiency.
Hopefully both sides will come to their senses before it's too late.

And Bibi?

Nor being a supporter of the man, I have to confess that I was rather supportive at the time of his relentless efforts to create an unfettered, intervention-free true free market economy. Up to a point.

To be fair, no one has a quick solution to the crisis brewing for so many years, there just isn't a miracle cure that will resolve everything by tomorrow. But currently Bibi is in panic, zigging and zagging as usual, lacking a coherent message that will half satisfy the angry middle class. It is during days like these that the truth of the old observation about Bibi's inability to stand up to pressures is confirmed to the hilt.

Read this devastating article (again, and remarkably, from JP):
Netanyahu takes more of an interest in economics than Shamir ever did, but just as Shamir was hostage to his Greater Land of Israel ideology (which Netanyahu shares, despite his occasional remarks for PR purposes regarding “two states for two peoples”), Netanyahu is hostage to his extreme, neoconservative free-market beliefs.
So far Bibi proved the truth of this article, sticking to his guns:
The state should stop poverty, but cannot limit success and the pursuit of happiness.
Apparently under Bibi's management pursuit of happiness seems to succeed more than stopping poverty, as his "own" newspaper shows:
And prosperity is not trickling down. If in 1990 the top 1% of Israeli breadwinners earned 8.5% of the country’s income, in 2009 they earned 12.8%
Will he listen to the voice of his electorate? Hard to say.

But what is there to do?

First of all, to remember an old observation, made by one of the Israel's founding fathers. I don't have the source handy, but its meaning was: "If it were only about economics, Israel wouldn't have been created". It was true sixty plus years ago, it is still true today.

The interpretation of this saying is fairly straightforward, hard as it is for me, a supporter of libertarian worldview to swallow: the socioeconomic setup in this country must provide a sufficient level of welfare, must insure that people want to stay here not only because of Zionist beliefs but also because staying here is affordable - which is becoming increasingly and demonstrably untrue lately.

In other words: as long as we here are in a "circle your wagons" situation vis-a-vis our neighborhood, as long as continuing survival is the first priority, with economy a distant second at best, our socioeconomic aspirations, no matter how lofty, should be put aside.

And if this means more government involvement (yes, I know, I know, its' anathema to Bibi) and (instead of patiently letting the free market forces to build more competition and reduce the prices*) more price control and anti-cartel activity - so be it. And even if it means that, having in mind the fiasco of trickle-down theory, some squeeze-down pressure should be applied - call me a commie**, but better do it.

(*) Which phenomenon, as it was already mentioned, doesn't really happen here.
(**) Better don't call me a commie. It could be hazardous to your health.

Before it is too late.

Taking into account that the middle class is the one with superior mobility, it is a proof of love and exceptional loyalty to the country, the place and to the idea that most of these people don't choose to migrate to better pastures. But this might change if the prices and taxation continue moving in the direction they are moving today.

There is some hope when even a JP editorial says:
Nevertheless, the emergence of serious debate on the economy has given a new dimension of meaning to Left and Right. This is an eminently positive development that might give birth to an Israeli version of The Third Way that manages to combine the compassion and social solidarity of the Left with the liberalism and respect for personal freedom and initiative on the Right.
Amen to that.

P.S. And just for comic relief: Caroline Glick who blames (in spite of all these other opinions her own newspaper presents) leftist media and commies. Ehehe...


Dick Stanley said...

With income taxes already so high, the only obvious solutions are to raise corporate taxes and/or find the government corruption/inefficiency blocking improvement and eliminate it. Sometimes just the threat is enough to start things moving in the right direction. But poverty may be unsolvable. It certainly has been in the U.S., though Social Security and Medicare/Medicaid have ameliorated it.

SnoopyTheGoon said...

Our finance minister and Fischer are afraid to death even to mention corporate taxes. As for government cleaning up its act - you know how it goes...

Quite a situation, in short.

jams o donnell said...

Thanks for this post Snoopy.  It reminds us non-Israelis that there are other, pressing things going on in the country

Dick Stanley said...

Presume you saw the Tommy Lapid column in, I believe it was JP, about this "silent majority's" protest. Etgar Keret has a similar take in Tablet:


Anonymous said...

<span>"It may sound absurd, but for years our Labor party faithfully represented interests of many tycoons, while Likud included and represented lots of low-income members and supporters."</span>
Don't flatter yourself.  This isn't absurd to an American, because this was exactly the situation with Democrats and Republicans, until Obama and the Tea Party rescued us.  You all are sunk if you believe that the middle class are being hurt by greater wealth.  Take a look at New York State and California  - entirely run by people who have bought in to this notion - compared to Texas and other states.  That's Israel's future unless you can break free of the New York Times/Haaretz way of thinking.

Terry, Eilat - Israel said...

Oligarchy or crony capitalism is NOT capitalism, it's a mutant outgrowth of socialism.  Israel is NOT a free market economy.

SnoopyTheGoon said...

It could be a correct diagnosis, Terry, but hardly changes the outcome and the remedy. Cartels must be broken up.

Terry, Eilat - Israel said...

SnoopyTheGoon - Not just the cartels & semi-monopolies but the monstrous gov't. bureaucracies as well.  Israel must be the world's first multi-party bolshevik state.

SnoopyTheGoon said...

I am not sure I agree with this point, Terry. The Israeli bureaucracy is not much different from the European ones or, for that matter, American. And I guess that you have never lived in a bolshevik state in your life...

Terry, Eilat - Israel said...

SnoopyTheGoon.  Actually, I'm originally from an Arab country so I know a little bit about crony capitalism & stifling bureaucracy.  I would like to recommend to you a post at Zionist Conspiracy by Steven Plaut titled ''Pining for Bolshevism''  -  I think the situation in Israel worse than the EU or US re: bureaucracy & it's relation to crony capitalism (cartels & semi-monopolies).  Anyway, read the article - I think it's outstanding.