Taking Stock / The Well-connected and Their Free Ride

Last summer's social protests could have created deeper public debate, and deeper change.

Last summer Israel was swept up in a wave of social justice protests, but instead of stimulating a profound public discussion they became a missed opportunity.

Yes, the activists involved in this summer's protests are disappointed that petty politics have shut out most of their leaders. Yes, attendance has been pitiful compared to last year. But evidence of a shift in the public agenda shows that the summer of 2011 has made a lasting impression on Israel's collective consciousness.

A Haaretz poll from last week showed that the popularity of both Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz has sunk pretty low, to 31 percent and 19 percent, respectively.

There is more to this than disappointment with the leaders' economic measures. The main factor behind this summer of discontent is that for the first time in years the public agenda is mostly socioeconomic. Politicians can bellow about Iran and terrorism, but that just makes the problem worse. The public wants answers regarding the high cost of education, health care and living in general in Israel.

Labor Party chairwoman Shelly Yacimovich, Defense Minister Ehud Barak, opposition leader Shaul Mofaz and television golden boy-turned politician Yair Lapid - none of them pose a real threat to Netanyahu's power. The public does not see this pack of politicians as capable of bringing about true change. The only threats to Netanyahu are inflated housing prices, the high cost of living, the fact that he rejected the recommendations of his own Committee on Increasing Competitiveness in the Economy and his failure to improve public services.

The big achievement of last summer's protest movement was the economic and social agenda it brought to Israel. The politicians and the generals sitting around the cabinet table can no longer hide behind smokescreens of diplomacy and defense. Each day more Israelis citizens wake up to the fact that small cabals of businessmen, politicians and defense officials are stealing their future. Yossi the plumber has called, and he wants his future back.

The protest movement failed. It failed because it talked big on economics but did not give a voice to average Israelis, people who live their lives without the protection of union leaders' monopolies or our defense minister's budget.

The budget cuts and tax hikes harken back to the old days, when people without the right connections watched on helplessly as their services were cut and their taxes rose while the people who could pull strings moved further away from the rest of the nation.

What we should be talking about is bolstering the free market, which is the force behind quality of life and rising standards of living. We should also be getting to know our small- and medium-sized businesses, exporters and others who create value rather than siphoning it away.

The Finance Ministry's budget division and the Bank of Israel's research department could have jump-started this dialogue. But political pressure, together with fears of financial crisis forced them to focus on taxes, the annual budget and the size of the deficit.

Barak is known for his social advocacy. From time to time, he descends from his penthouse du jour, sallying forth to lecture the government about social and economic affairs. He recently made time on his busy schedule to give a well-organized lecture about how the economic theories of Netanyahu and Steinitz are bankrupt. He said the government must now start spending, and exercise cold caution to avoid European-style failures brought on by harsh austerity measures.

But he isn't seeing the whole picture. While the United States and certain European countries can afford to increase their budget deficits, Israel - a small economy with enormous government debt - could begin a frighteningly quick downward spiral. This is what happened in 2002, when the budget deficit shot up toward 8%.

But more important, even if someone is willing to adopt a broad government policy in order to deal with the economic slowdown, the last place they should want to invest government funds is in the defense budget. In Israel the defense establishment is a manufacturer of inequality. The salary and pension arrangements in the defense establishment are divorced from the rest of the economy. A major or low-ranking, noncombat officer who retires at the age of 46 can expect a pension that is four, five or even seven times that of a software engineer with a Ph.D. who works in a technology firm.

The actuarial liability for defense employees' pensions has ballooned over the past decade, from NIS 80 billion to NIS 250 billion. There are no financial reserves behind these numbers. The money to pay them will come from the taxes that your children, assuming they stay in Israel, will pay in the future.

In 2011, hundreds of thousands of Israelis finally realized what a destructive influence the axis of wealth, power and the press has upon competition, democracy, productivity, integrity and social cohesion in Israel. But they have yet to realize that alongside the dark alliance between wealth and power and the monopolies, there is a third junta that sets the economic and social agenda in Israel. This junta is headed by Ehud Barak, alongside whom are hundreds of retired generals scattered throughout politics, the public sector and the business sector.