Kahlon Might Not Be Kingmaker but He Still Has a Few Tricks Up His Sleeve

While Netanyahu needs no kingmakers in this election, he still might well need Moshe Kahlon. And if Kahlon follows through on his plans, the effects on Israelis’ daily lives could be groundbreaking.

Asher Schechter
Asher Schechter
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Moshe Kahlon (center), head of the Kulanu Party, waves to supporters at party HQ after election, March 18, 2015
Moshe Kahlon (center), head of the Kulanu Party, waves to supporters at party HQ after election, March 18, 2015Credit: Reuters
Asher Schechter
Asher Schechter

In a Facebook post during the campaign, Prime Minister Benjamin Netanyahu stressed the importance of the Iranian issue over socioeconomic issues like the cost of living.

“When we talk about housing prices, about the cost of living, I do not for a second forget about life itself,” Netanyahu wrote, responding to a State Comptroller report on Israel’s housing crisis that criticized him that day.

The statement was ridiculed, subject to countless parodies and memes. Netanyahu was seen as ignoring pressing issues — housing, food prices and corruption — that trouble many Israelis more than Iran or the Palestinians.

And with Netanyahu’s decisive victory, the hopes of those who thought socioeconomic issues would overtake security in this election seemed dashed.

Observers thought that in a close race between Netanyahu and the Zionist Camp’s Isaac Herzog, the Kulanu Party leader and former Likud minister Moshe Kahlon might have been the deciding factor. And Kahlon ran a campaign focused carefully on domestic matters.

Well, consumers might still take heart. While Netanyahu needed no kingmakers, he still might well need Kahlon. And if Kahlon follows through on his plans, the effects on the economy and Israelis’ daily lives could be groundbreaking.

Son of Libyan immigrants

Kahlon won 10 seats on Tuesday, having run on a platform focused on lowering the cost of living, reforming housing and banking, and tackling Big Business.

Kingmaker or not, he is a lock to be Israel’s next finance minister, succeeding Israel’s former kingmaker (and perhaps its next foreign minister), Yair Lapid.

Kahlon, 54, was born in Hadera to parents who emigrated to Israel from Libya.

He entered the Knesset in 2003 and quickly rose through the Likud ranks, becoming known as a sharp but not extraordinary politician. But in 2009 he caught his big break, when Netanyahu appointed him communications minister.

Back then, Israel’s cellphone market was dominated by three big operators, controlled by some of Israel’s richest and most powerful tycoons. Cellphone-service costs were outrageous, and almost identical, and for 20 years the cartel raked in profits.

Kahlon changed all that, passing reforms that opened up the market to competition. He needed more than a year, squabbling with lobbyists, politicians and journalists backing the tycoons in one way or another.

Senior army officers even entered the fray, warning that opening the cellphone market to competition would hurt the Iron Dome anti-missile project and risk Israel’s security.

A bold and brave step

But Kahlon’s reform passed and had an enormous impact: Service costs dropped by as much as 90%, and the resulting revenue drop was a major contributor to the fall of two of Israel’s biggest tycoons, Nochi Dankner (formerly of Cellcom) and Ilan Ben Dov (formerly of Partner).

Kahlon’s effort was a bold and brave step, the biggest — and so far only — victory in the battle against Israel’s soaring cost of living. It proved that an Israeli politician can go up against powerful interest groups and thrive and that living costs can be slashed reasonably quickly.

All this made Kahlon the man of the hour, the person who best represented Israel’s sharpened focus since the big social protests of 2011, Those demonstrations were directed at wealth concentration, housing prices and inequality.

His brand was so strong that in 2011 Netanyahu instructed the rest of his ministers to be “like Kahlon.”

In 2013 he left the Communications Ministry and took a break from politics. Since then, he’s been biding his time.

He attended a management program at Harvard and almost became head of the Israel Land Administration, which manages more than 90% of Israel’s land. He didn’t take the job because of internal politicking.

During the campaign, Kahlon largely avoided issues related to security or the Palestinians, focusing on housing and banking reform. When the Palestinian issue arose, Kahlon made clear that he is staunchly right-wing, albeit pragmatic.

“I am from the real Likud, the one that knows how to make peace and hand over territories,” he said at the start of the campaign.

That statement led many left-wing Israelis to (misguidedly) hope that if the race between Netanyahu and Herzog ended too close to call, Kahlon would tip the scales in favor of the left.

Focus on consumers

Ultimately, Kahlon preferred to avoid the Palestinian issue altogether. Relying on his success as a minister, Kahlon promised to tackle the issue many Israelis had said most troubles them: the cost of living.

Kahlon promised to break up the duopoly that controls 60% of Israel’s banking market and 800 billion shekels ($200 million) in financial assets. He pledged to try to reduce inequality and to launch a comprehensive reform that would drastically lower housing prices.

From early on, nearly every party and faction in Israeli politics tried to align itself with Kahlon. Yair Lapid and Avigdor Lieberman offered to make alliances and Netanyahu offered him the finance portfolio in advance. But Kahlon stayed mum and protected his brand.

If Kahlon makes good on even some of those promises, he could again sharply benefit Israel’s consumers. But banking — rife with overcharges and tightly concentrated — is not the cellphone market, and his battle to open up that system will be substantially more difficult.

Kahlon won 10 seats while early polls estimated Kulanu at 12. That still makes him one of Netanyahu’s biggest potential coalition partners and, again, a shoo-in for the Finance Ministry.

He could be everything Lapid wasn’t: a revolutionary finance minister, a-la Greece’s Yanis Varoufakis, who could challenge the established order of Israel’s economy.

Oddly enough, the victory of Netanyahu’s security-dominated agenda just might bring about the socioeconomic changes many Israelis want.

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