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Kahlon Learns the Hard Way: Rockets Beat Cottage Cheese

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Moshe Kahlon
FM Moshe Kahlon, who misinterpreted the middle class angst.Credit: Oren Ben Hakoon

You can’t help but feel pity for Moshe Kahlon, who is about to become Israel’s previous finance minister.

Kahlon is an honest politician who brought Israelis super-cheap cellphone service and promised a pro-consumer economic agenda when his Kulanu Party captured 10 Knesset seats in the 2015 elections.

Broadly speaking, Kahlon kept his promises. He engineered banking reform, reduced duties on consumer goods, gave working parents extra tax benefits and fought mightily to stem the rise in housing prices. He wasn’t always successful, but the fact is, Kahlon delivered far more than most elected officials ever do on their campaign promises.

And what is his reward? The latest polls show Kulanu’s electoral support at best falling to half its current Knesset strength and at worst, failing to garner enough votes to enter the Knesset at all. The only other party with a primarily “social” agenda, Orly Levi-Abekasis’s Gesher, is also struggling to get a place in the Knesset at all.

The conventional wisdom is that in an election revolving around the personality of Benjamin Netanyahu and empty clichés about who is “left” and “right,” the typical Israeli voter isn't thinking about his or her pocketbook.

Kahlon has belatedly acknowledged that by dropping the social slogan “Kahlon is the only one who cares” to “The sane right.”

In an election where “right” and “sanity” are not natural partners, that doesn't come across as a winning strategy.

Kahlon is a modern Israeli version of the tragic hero of ancient Greece: a good person with decent intentions brought down by a fatal flaw. Kahlon’s flaw was that he believed that the Israeli middle class is being crushed by the cost high of living and would naturally throw its support to the politician who eased their burdens.

And indeed four years ago, in 2015, Kahlon and his party Kulanu rode what they believed to be the “social” wave, but my guess is that he misread the political map -- it wasn’t his policies that attracted votes. It was the fact that he was a fresh face, and a way for people disgusted with the corruption of establishment politics to register a protest. (Yair Lapid and Naftali Bennett filled that role in the 2012 elections, and Moshe Feiglin is doing it on a smaller scale today).

Who moved the cost of my cheese

Elected officials who identify themselves with a social agenda tend to think of it as one big cause. But in fact there are two agendas -- one for the poor and another for the middle class. These agendas not only differ widely on many points: they often collide, for instance on the issue of distributing school aid to help poorer communities at the expense of wealthier ones that can fund their schools locally.

Israel’s poor really do have problems that need government solutions. Even if they have gone down in recent years, Israeli levels of poverty and inequality remain high compared to other developed economies.

But Israel’s poor are disproportionately Haredim, Arabs and people living in the geographical periphery. They support parties which represent them as communities, not the ones with a social platform that aims to help them.

Kahlon seems to have recognized that, and Kulanu’s social program was directed at the middle class. But it was a lost cause politically from the get-go, because Israel's middle class isn't actually suffering from privation.

It is true that in the summer of 2011, hundreds of thousands of middle-class Israelis took to the streets to protest against the high cost of living and against the government for failing to provide quality services. The whole thing faded out after a few weeks, but political and business circles remain unsettled to this day. Even businesses with high-profile products, like the cottage cheese that set off that summer of protests, think twice before they dare raise a price.

The reality, however, is that food prices in Israel have actually gone down in the last few years. Home prices have soared, but most Israelis have equity in a home and are celebrating its growing value. Wages are climbing and unemployment is at a record low. Online shopping has enabled Israeli middle class consumers to buy things cheaply abroad from Amazon and Alibaba. And, as air fares have dropped, they do even more shopping when they travel to Europe and America.

The shock of the great 2008 financial crisis that continues to reverberate across Europe and America and helped give rise to populist politics and nativism never happened in Israel. On the whole, Israelis are more satisfied with life than their peers in the Organization for Economic Cooperation and Development. They are even among the world’s happiest people.

No doubt middle class voters are pleased with Kahlon’s tax cuts and other measures, but not enough to make him their political hero -- the man and the party they would vote for over all the many alternatives. Kahlon made their already good life a little better but didn’t rescue them from anything.

The real issue, as this week’s rocket attacks once again demonstrated, is national security, not the price of daycare.

The ignominious end of the Kahlon era shouldn’t be mourned. Kahlon’s populist policies may have been pleasing, but we’re now starting to see their costs in the form of a growing budget deficit. A social agenda doesn’t come for free, and politicians who pursue one incautiously, as Kahlon often did, risk undoing the very things that made for a thriving economy in the first place.  

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