Tel Aviv Dizengoff Center
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In February, prime ministerial adviser and advertising executive Gil Samsonov published a brief article in Maariv, thundering against a trend spreading throughout the printed and online press. The trend is to gripe about the deteriorating lot of the middle class, the rise in prices and economic policy in general.

Look at the figures for Israel's economic growth, Samsonov urged. For all the stories about "waves of price increases" in the past year, the consumer price index has been trending along the same path for a decade, rising by 2.5% to 3.5% a year.

He's right. Israel's macroeconomic figures for 2010 are good, and in the past year, the state of the middle class has not deteriorated in any significant way.

Not in the past year, it hasn't. But over a number of years, it has significantly deteriorated.

The wave of stories in the press about the retreat of the middle class originates with a coalition of the wealthy and politicians, hoping to leverage the events in Egypt and the increase in gasoline and water prices to weaken Prime Minister Benjamin Netanyahu.

But the rising frustration and anger among Israelis is real and is very likely to intensify. At least four reasons come to mind for why the Israeli public isn't thrilled about the economic output figures for 2010.

 

1 Economic growth does not in and of itself make the people happy. The long of memory will remember the bitterness many felt in 2000, at the height of the Internet and high-tech bubble (meaning, before it burst ): Israeli growth rates were phenomenal. But standing outside with their noses pressed to the virtual walls of the startup bubble were hundreds of thousands of people looking in with envy at the merry world of the Internet. They weren't happy.

The public's happiness depends on a great many parameters, and economic growth isn't one of them. In an era when a tiny handful of people are building up tremendous wealth, it's no surprise that everybody else's frustration is growing.

 

2 The Israeli economy has become more transparent. If 10 or 20 years ago the rich had the horse sense to keep their luxuries out of public view, the nouveau riche who have sprouted up in Israel have no such gentility. They flaunt it. Look at the market for new cars. The number of luxury cars on the roads can compete comfortably with the number in Europe's capitals, even though here, luxury cars cost roughly double to 150% more than in Europe. But Israel's nouveau riche don't think twice about forking over as much as NIS 700,000 for wheels - amounts that only the super rich in Europe or the United States would pay. Monster cars of the sort, especially the ferocious SUVs the nouveau riche love, are alienating.

 

3 The increase in property prices is also alienating for the hundreds of thousands of young families that can't afford homes. Home prices have doubled in the last five years in plenty of places in Israel. An increase that fast and violent inevitably creates vast frustration among people who remember the decade from 1995 to 2005, when housing prices didn't budge. The feeling that the market "got away from them" and that they'll never be able to afford a home is intensely provoking.

 

4 Israelis have started to grasp that much of the wealth created in Israel didn't really go to talented people or skilled managers, but to a tiny group of super-rich people and their executives who control cartels, monopolies and companies that feed off the government. They have started to grasp that much of that wealth isn't the fruit of capitalism; it's more like an oligarchic or dictatorial system where only a privileged class laps up the cream produced by economic growth.

Despite the anger and frustration over the middle class' erosion, the price increases and the fury at the cartels and monopolies - both government and private - the degree of happiness and zest for life in Israel 2011 is among the highest in the world.

Israelis have a degree of joie de vivre, vitality and energy that is very rare around the world. Unhappily, nobody can assure that this state of mind will continue in 10 or 20 years. Social gaps, the accrual of wealth by the few and opportunities made available only inside closed cliques - along with the Internet age's growing transparency - could create negative, ugly dynamics in Israeli society.

Nobel laureate Michael Spence visited Israel two months ago and told me he was deeply disturbed by what he foresees happening around the world in 20 years. His deepest concern is that for the first time in 10 years, Americans feel that the lot of their children will be worse than their own.

Are we in Israel reaching that point, at which we feel that our children will have fewer opportunities than we did?