Benjamin Netanyahu has to consider himself a lucky man in at least one respect: He has led Israel through three elections, two lockdowns and zero state budgets over the last two years, more than enough shocks to challenge the most versatile of economies, yet the economy has held up relatively well through it all.
The coronavirus pandemic has certainly taken a heavy economic toll on Israel too, but the downturn hasn’t been especially pronounced by global standards. Unemployment is high and small businesses are failing, but Israelis are spending as if the recession was on a distant planet. It’s no wonder Netanyahu seems to be blithely leading Israel into a third lockdown, a fourth election and yet another six months or more without a state budget.
Now that the Knesset has dispersed and elections have been set in motion, it’s a little too late to offer the prime minister a warning, but here it is anyhow.
Netanyahu likes to think of himself as a modern incarnation of Winston Churchill, a fearless leader and strategic politician. But these days it would be more apt to see him as an incarnation of Mao Tse Tung.
Mao was also a fearless leader and strategist par excellence, but as the years went by, he became obsessed with holding onto power at all costs. When it looked like challengers were emerging, in part due to his misguided policies in the Great Leap Forward, Mao unleashed the Cultural Revolution in 1966.
What followed was a decade of anarchy and immense economic and cultural destruction, but it enabled Mao to stay in the driver’s seat by keeping his rivals off balance until finally old age caught up with him.
Netanyahu doesn’t have the power to send hordes of inflamed youth into the streets nor, to be fair, is he crazy enough to want to. But Bibi does have the likes of Orly Lev, his son Yair and acolytes like Amir Ohana to foment divisive and angry politics, a kind of Cultural Revolution-lite.
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The political stalemate and the chaos between elections and during the brief tenure of the national unity government have all have worked to keep Netanyahu in power. Through thick and thin, he continues to occupy the prime minister’s office. He is not only Israel’s longest-serving prime minister, but he is also Israel’s longest-serving caretaker prime minister. And, if the economy is holding up, despite all the chaos at the top, what’s not to like from his point of view?
I have generally been bullish on Israel’s ability to withstand the shocks of the last two years. The high-tech sector has thrived throughout, in large part because it is almost an economy unto itself. Israel’s other metrics pre-coronavirus, such as its current account surplus, low unemployment and modest debt levels, had been strong, too. It’s a view that is shared by the credit rating agencies.
Where we differ is that Standard & Poor’s at least remains bullish even after the news of the fourth election. The most S&P is willing to concede is that “that the continued political brinkmanship and the possibility of another inconclusive election result could increase medium-term fiscal risks.”
By now, however, everyone should realize that the election is destined to be inconclusive and that political brinkmanship is going to continue long past Election Day on March 23.
Right minds and fish wrapping
It’s almost three months between now and Election Day, so what the polls reveal about voter intentions isn’t very much. It’s safe to say, however, that neither the Bibi camp nor the anti-Bibi camp will emerge with a thumping majority but that the Likud will, as usual, emerge as the largest party and the chief caller of shots. But would any party leader in his right mind think seriously about forming a national unity coalition with Bibi, or for that matter making any deal at all? They’ve seen what agreements mean to Netanyahu – so much paper to wrap tomorrow’s fish.
The resulting political instability can only benefit Bibi, who can stay on as caretaker prime minister while a fifth election is called. It sounds implausible? So did a third and fourth election way back when.
The high-tech sector should be able to shrug off these political shenanigans, but the rest of the economy can’t keep getting slapped around by a perpetual election cycle and a coronavirus pandemic that is as virulent as ever despite the start of vaccinations.
We’re already seeing signs of fatigue in the sluggish recovery of the labor market after the second lockdown and forecasts that tens of thousands of businesses will fail next year. Employers aren’t terribly optimistic about 2021 even with the vaccine, and that’s no surprise because even if the coronavirus is reined in, Israel will still be grappling with Netanyahu’s political instability.
The time between now and Election Day isn’t enough for the economy to completely unravel. But the combination of a lockdown that may very well extend beyond its planned two weeks and plunging business and consumer confidence in the government isn’t going to weigh on Netanyahu as Israelis go to the polls.
Bibi’s economic luck seems to be running out, and he seems to know that. It seems his great hope is that a massive rollout of the vaccine will convince people that the government is conquering the coronavirus and that they forgive or forget their sufferings of the past year. Good luck with that.