Executive Summary

The False Link Between Peace and the Cost of Living

By making the cost of living in Israel contingent on peace, Breaking the Impasse gives the government an excuse not to act on economic reform.

“Without an agreement we will never succeed in lowering the cost of living.” It's hard to miss the billboards when you drive anywhere in the greater Tel Aviv area. The message is sponsored by a group called Breaking the Impasse, which wants to restart public discussion of the peace process and put pressure on Prime Minister Benjamin Netanyahu to break the deadlock and reach an agreement with the Palestinians.

Among Breaking the Impasse’s members are leading Israeli businesspeople, including high-tech entrepreneur Yossi Vardi; discount supermarket magnate Rami Levy; Amdocs founder Morris Kahn, former Microsoft vice president Moshe Lichtman, and Ormat Industries cofounder (along with her husband) Yehudit Bronicki. The group also includes military figures and academics, such as Danny Rothschild, Itamar Rabonovich and Ruth Cheshin. The Palestinian business component of the group is led by Palestinian industrialist and statesman Munib al Masri.

The goals of the members of Breaking the Impasse are undoubtedly appropriate, but they seem to have unintentionally created a corrupt alliance between those who don't want a peace agreement and those who don't want to lower the cost of living. It’s as if they came to bestow a blessing, but wound up delivering a curse. By protesting the government's inability to advance the peace process, they are creating an excuse as to why the government can't lower the cost of living.

Most Israelis are in favor of a peace agreement, and the sooner the better. But they're against being misled.

Breaking the Impasse was envious of the success of the social justice protests three years ago and decided to hitch a free ride on them. The problem is the peace-agreement product has been sold to Israelis for two decades now, always leaving them disappointed customers. After years of the political-security agenda dominating the conversation, the public has somehow managed to change the subject. Then along comes Breaking the Impasse to tell everyone they will never succeed in raising their standard of living without a peace agreement.

Buy peace, get lower rent free

Peace and reforming the system of government have captured the public's attention for years. Both issues are important, even critical, for Israel to realize its potential. But they both also serve as a barrier to debate on any other agenda.

Anyone who makes other issues conditional on peace or a different system of government is effectively kicking the can down the road. He doesn't want to act now, to fix what needs fixing. He's waiting for peace, or an agreement — or the Messiah. It's a proven recipe for freezing socioeconomic reforms, which means retreating in the fight for a higher standard of living.

Breaking the Impasse is trying to combine the cost of living with two other problems that trouble Israelis. The political-security situation is nothing new. It has accompanied the State of Israel since its establishment, and even before that. But in recent years something has changed. Suddenly, a different debate has begun here, not about politics or security but about the quality life in this country, the cost of living and social equality. This civil discussion has taken the place of the traditional security debate, even though Prime Minister Benjamin Netanyahu, with the help of an aggressive sales and marketing man, spoke only about Iran in the most recent election campaign. It didn’t help him.

The cost of living is a painful and practical matter that has been in the headlines for the past three years and sent hundreds of thousands of people into the streets to protest in the summer of 2011. The protests created a number of new and refreshing channels for discussion on the structure of Israeli society, the balance of social forces, the social gaps, the structure of the economy, the tax system and many other issues. We waited for years for the evening news to open with cottage cheese prices rather than a terror attack or another meeting with Palestinian President Mahmoud Abbas that might or might now happen or yield results, followed by the auto-pilot burst of responses from the right and left on the “process” or the “talks.”

The question is what is really troubling the list of Breaking the Impasse's backers? The socioeconomic discussion that has developed here or the political freeze? They seem to be stealing the social justice movement's thunder, harnessing the pain in Israelis pockets to bring the peace process back into political fashion. Rami Levi, who brought us chicken for a shekel, now says a saner cost of living comes as part of a “buy one, get one free” sale. Dealing with the cost of living only comes with a peace agreement. But in promoting this deal, he is exempting the government from acting in to lower the cost of living through other channels.

The list of economic reforms that don’t require peace is long and includes almost every sector of the economy. Is a peace treaty required to sell more land and lower housing prices? Are the murderous interest rates charged by credit card companies dependent on Abbas? Are U.S. Secretary of State John Kerry’s efforts relevant to the high price of food? And what about the management fees we pay on our pension accounts? Do we have to wait until chief Palestinian negotiator Saeb Erekat softens up on the question of Jerusalem?

Excuses, excuses

The members of Breaking the Impasses are saying that in practice without a peace agreement we can’t improve the efficiency of the electric power industry; without an agreement we can’t reduce the number of kosher inspectors that make food prices so high; without an agreement we can’t sell more land or approve measures to reinforce homes against earthquakes or launch urban renewal projects to increase the supply of housing, and without an agreement we can't reform the Israel Broadcasting Authority and lower the television license fees or deal with the ports and lower the price of imports.

Their formula is a proven prescription for economic and social paralysis and doing nothing. It is also a childish lie. You could just as easily say that without a peace agreement, you won't pay taxes; without an agreement you're not going to school, without an agreement you won’t take out the garbage.

If members of Breaking the Impasse were honest with themselves, they would have said slightly more reasonable and convincing things about a peace agreement. They should have said that a peace agreement could bring a wave of investments, job creation, a possible future cut in the defense budget and the transfer of these monies to social uses — but not to lowering the cost of living.

A peace agreement can bring a peace premium in the stock market, a rise in private consumption and more tourism to Israel. In some ways, this could even raise the cost of living. But what is more important is not to give the government the legitimacy to postpone dealing with the high cost of living until peace comes.

David Bachar