Apart from Israel, the politics of every developed country in the world revolve around economics. That’s the basis of the EU, the G8, the Davos Forum, the OECD, the GCC and just about every other powerful gathering on the planet. Wars and revolutions may grab the occasional headline but it’s money that moves the people.
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When Scots voted “No” to independence from Britain on Thursday, they were thinking about the pound, not patriotism. Americans are far more concerned about Barack Obama’s plans for their healthcare than about his use of hellfire missiles in Iraq. Francois Hollande has pushed France to the forefront of the coalition against Islamic State and has presented a new Middle East peace plan to Palestinian President Mahmoud Abbas, but his approval ratings stink because the French economy is stagnating.
The Arab spring woke people up, but the collapse of Lehman Brothers and the world economic crash that followed stopped them sleeping at night. In Europe, Japan, Latin America and the U.S., Bill Clinton’s campaign motto is still the rule that drives domestic politics: It’s the economy, stupid.
But not in Israel. The mushrooming 2015 budget battle in Israel isn’t about jobs, healthcare, education or transport - it’s about defense. Everything in Israeli politics is about defense. Even the so-called Economy Minister, Naftali Bennett, is locked in a pointless dispute with Defense Minister Moshe Ya’alon over who should take credit for the decision to destroy the Hamas tunnels from Gaza. Meanwhile, the economy is crumbling.
Or is it? The headlines on the financial pages don’t say that at all. The Tel Aviv Stock Exchange hit record levels this week, so surely that must be good.
Unemployment rates are among the lowest in the OECD. Exports are booming. High tech continues to score serial successes. If it weren’t for the Gaza war, tourism would have topped last year’s record numbers. It will most likely recover in 2015. Trade with Britain, Europe and Asia is soaring. The natural gas discoveries offshore will eliminate Israel's historic need to import energy, could transform the balance of payments and create huge savings across the economy. Israel has already signed a huge $15 billion deal to supply Jordan with natural gas over the next few years.
But behind the headlines of national success there is another nation, a growing underclass of poorly-paid, insecure, ill-educated citizens about whom Israeli politicians, obsessed with security issues, simply don’t seem to care. The only route for this forgotten second state of Israeli citizens to improve their employment opportunities is through investing in education – as repeatedly pointed out by Bank of Israel governors, the OECD and even government experts like Manuel Trachtenberg. But when the IDF presented its check for the last war, the first thing the government cut were essential reforms that aim to give equality of education, and employment, to marginalized groups like the ultra-orthodox and Arab Israelis – some 35% of the population.
This week's Supreme Court decision confirming that ultra-orthodox high schools do not have to teach the core curriculum will consign another generation of students to the economic scrapheap.
Even Israelis who do have jobs wonder whether they are actually living in the same Start-Up Nation as the one governed by its new generation of cigar-toting, fine dining millionaire leaders.
I'm no economist, but some things in Israel's economic data just look wrong. The median gross monthly salary in Israel, according to the latest figures from the Central Bureau of Statistics, is just NIS 5,831. 50% of Israeli employees earn that staggeringly low amount or less. How on earth do they manage? Prices of food, clothing and housing continue to soar and are comparable with Europe, where salaries are far higher. Prices of cars, electronics and consumer goods are outrageous. A basic model of the new iPhone 6 is $200 in the United States. In Israel it will cost five times that amount.
This week, the Central Bureau of Statistics published a survey demonstrating just how scared most Israelis are about their perilous personal finances. 65% of the population say they are concerned that they will be unable to save money for the future. The survey, "Personal Well-Being in Israel: Concerns about Economic Future - Findings from the Social Survey 2013,” found that 59% of Israelis worry that they will be unable to support their children in future, 55% are concerned that as they get older they will be unable to live with dignity, and 52% worry that they will lose their economic independence and have to rely on others to support them.
17% of people believe their economic situation will get worse in the future – up from 10% in 2010. 13% of workers are “very fearful” they will lose their jobs in the next 12 months – up from 10% in 2010.
Those fears are not without foundation. This week, Ben-Gurion Airport was paralysed for several hours when workers imposed sanctions in support of 1,500 Israel Postal Service workers that the government is planning to fire and replace with contract laborers. Workers employed in this way are cheaper, have no pension, holiday pay or other benefits and their jobs are completely insecure. The Histadrut is threatening an all-out strike on the issue. They are right to do so.
Israel is not one state, but two. The second staters are those who provide insecure, poorly-paid labor for the tiny top percentile who enjoy most of the country’s economic benefits. It’s no surprise that this second, economically disenfranchised state includes almost all of the 21% of Israelis who also happen to be Arabs.
Some day, Israel will find a two-state solution with the Palestinians. Meantime, Israeli politicians need to start behaving like the leaders of a normal country, address the perilous economic situation of their citizens, and find a solution to the urgent problem of the two states drifting ever further apart within Israel’s borders.