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In his keynote address at last week's Herzliya Conference, Ehud Barak summoned up the most dramatic case for changing the status quo: "If, and as long as between the Jordan and the sea, there is only one political entity, named Israel, it will end up being either non-Jewish or non-democratic ... If the Palestinians vote in elections, it is a binational state, and if they don't, it is an apartheid state."

This quote is particularly remarkable for the specific wording chosen by Israel's defense minister: He (perhaps unintentionally) suggested that the existing situation could already be described as apartheid.

Considering the Labor Party's collapse, one may dismiss its leader's comments, but Barak's speech does matter, not because of its author, but because it articulates the core narrative of the centrist-pragmatic trend in Israeli-Jewish politics - from Likud realists like ministers Dan Meridor and Michael Eitan, to Kadima and the remnants of Labor and Meretz. Let's call it the "retractionist camp" - ready to support a withdrawal from the occupied territories that meets the minimum necessary requirement for the creation of a dignified and viable sovereign Palestinian state alongside Israel, and therefore a sustainable two-state solution.

They show realist tendencies, but there is a powerful disconnect (one that was pervasive in Barak's speech) between most of this camp's diagnosis of the situation (an "end of the world as we know it" threat of apartheid or binationalism) and their prescription for addressing it: resume negotiations, blame the Palestinians, more of the same. It's like telling someone they have life-threatening yet treatable cancer and prescribing two aspirins a day.

If the situation is so dire, then bolder steps are surely called for. There are any number of game-changing options to consider. Maybe it is possible to engage Hamas (as is happening in the ongoing Shalit negotiations), to lift the Gaza siege, and to accept Palestinian unity instead of vetoing it, so as to facilitate an empowered negotiating and implementing address. After all, Israel spoke to the PLO before its charter was amended, and the United States engaged Sunni ex-insurgents in Iraq and is encouraging dialogue with the Taliban in Afghanistan. Alternatively, Israel could encourage internationalization of the conflict, handing the territories over to an international protectorate and international forces, or could embrace Salam Fayyad's two-year plan for statehood and scale back its Area C presence, or even withdraw to the 1967 lines while negotiating over a way settlers could reside under Palestinian sovereignty. Perhaps a Quartet-driven or imposed plan could be encouraged. Anything but business as usual.

Yet most of those in the camp that favors retracting Israel's occupation - let's call them "soft retractionists" - eschew such bold positions. Their opponents, the "retentionists," support retaining all, most or at least enough control of the territories to render impossible a real two-state outcome (indeed, a commitment to retain all of Jerusalem under exclusive Israeli sovereignty is enough to negate a workable two-state option). Again, most retentionists belong in the "soft" category - they are ready to use the language of two states, and support negotiations, economic peace, even a partial easing of the West Bank internal closure. At the heart of both the retractionist and retentionist camps, in their "soft" manifestations, is a basic element of denial. Soft retentionists pretend that ongoing occupation can coexist with preservation of Israel's democratic character, its security, international acceptance, and a consensus about it in the Jewish world. Making noise about peace and throwing money at public relations will do the trick. Soft retractionists pretend that the occupation can be undone without a fundamental change in approach, and in particular while maintaining existing incentive and disincentive structures (which produced and preserve the current realities).

But while the respective "soft" narratives are more pleasant to the ear, and easier to market, both are not only wrong but also increasingly irrelevant to Israel's future. The real struggle for the country is between what are commonly labeled as the extremes.

Hard retentionists know they will have to rewrite the rules of democracy, and plead a special exemption clause for "Jewish democracy" and for the elevation of Jewish-only rights. Palestinians are to be dehumanized, human and civil rights groups and international humanitarian law excoriated and a vocabulary created for laundering and justifying an apartheid reality.

Hard retractionists will need to stand up for (long-ridiculed) Jewish values, ethics and morality, for the unloved "other" in society, hold up a mirror to the nations' warts, and ultimately support international campaigns that distinguish between Israel proper and the occupied territories.

Both camps have a vision for the country's future: the Jewish Republic of Israel - equal parts ethnocracy, theocracy and garrison state on the retentionist side, while for the retractionists, well, something that lives up to the words of Israel's Declaration of Independence.

Retentionist cooperation with racist European Islamophobes and American dispensationalist evangelists (for whom Jews have a particularly unenticing role to play during the anticipated Rapture and Second Coming) is considered legitimate and necessary and is embraced by the mainstream. But when retractionists make common cause with the global civil and human rights community, they are vilified as traitors by the mainstream.

The dominant discourse in Israel massively stacks the odds against the hard retractionists. The soft retractionists continue to feed that discourse even though it undermines the very outcome they know is necessary. Their frequent silence, no less than the settlers' noise, is drowning out Israeli democracy. The hard retentionists are very well represented in the Knesset, while the hard retractionists can barely rely on a tiny and shrinking number of Jewish MKs.

It is the human and civil rights community, the New Israel Fund, the demonstrators at Sheikh Jarrah and the few brave public figures who have joined them - including David Grossman, Moshe Halbertal and Ron Pundak - who are now the standard-bearers and source of hope in this decisive phase of the struggle for Israel's future.

Daniel Levy is a senior fellow at the New America and Century Foundations.