Netanyahu’s Rotting Israel Won't Be Cured by Gas Riches

Bibi got his gas deal by sordid political dealings. Israel needs good government, but what it has is largely a cabinet of loudmouths, ideologues, rabbis and apparatchiks, who'd never have made it through vetting committees.

Reuters

Benjamin Netanyahu probably didn't see the irony this week when he maneuvered his minister Aryeh Dery out of the Economy Ministry and cleared the way for the government to approve the "gas framework."

On the one hand, Bibi was crowing about the importance of the natural gas bonanza discovered in the sea to the Israeli economy, and the bounties that will arrive in the next few years from in investments, cheaper and cleaner energy, money for schools and hospitals, and more exports.

On the other hand, Netanyahu was engaged in yet another sordid political maneuver in order to assure us the benefits of gas, that achieved nothing but to undermine confidence in the Israeli government and its ability to manage the economy to begin with.

How sordid? Dery was in charge of the Economy Ministry to begin with not because he has an economic vision or credentials, but because that was the political spoils available to him. Now he's being replaced by Netanyahu, who will now not only be prime minister, minister for foreign affairs, communications and regional cooperation but economy minister, too. All three are important ministries that deserve a full-time boss, certainly not one whose day job is running the country.

Meanwhile, a job has to be found for Dery commensurate with his standing. So a few hundred million shekels are taken from one ministry and control of one or two jobs-rich government agency taken from another and, voila, Dery now has a ministry he can get his teeth into (an expanded "social" portfolio"). The public interest has nothing to do with any of these calculations.

Cheaper gas only takes you so far

Gas is important, though not as critically important as Bibi is making it out to be. Israel’s energy-import bill has been slashed thanks to the domestic supply that began to kick in two years ago. Prices are lower, although they could have been lower still if the government hadn’t so badly mismanaged structuring the regulatory regime. The prospect of exporting gas to Jordan, Egypt and even the Palestinian Authority will help cement Israel’s strategic importance in the region.  Eventually, too, the government will collect taxes and royalties from the companies producing the gas that will hopefully be put to good use.

But gas can go only so far. Israel is not like Saudi Arabia, an economy that revolves around the extraction of hydrocarbons and produces little of anything else. The Saudis, for now at least, can afford that because oil profits are enough to keep millions of Saudis employed doing very little while the state showers them with jobs, subsidies and handouts.

Alex Levac

Thankfully, Israel’s proven gas reserves aren’t enough to create a rentier economy like Saudi Arabia’s. Even with gas, Israelis will have to work for a living, which means the economy has to create jobs. Few will come directly from the gas industry, which is a tiny employer. More jobs will come from cheaper gas, which will cut energy costs, enabling manufacturers to become more globally competitive, export more and hire more. It may even create wholly new industries from clean, inexpensive gas.

But the great majority of the Israeli economy won’t be much affected by gas. The decision to start up a high-tech company, risk your personal savings by opening a restaurant, have the audacity to create a global financial services company from Tel Aviv or pursue an advanced degree because it will enhance your career prospects – all the things that make a real economy go round -- won’t be influenced by energy prices but by the economic and political environmental Israel offers.

And, what kind of environment is Israel offering them? Our endless security crises weigh on the economy, but at least those are beyond our control unless you (with a heavy dose of optimism) think they can be negotiated away in short order by an agreement with the Palestinians.

But Israel’s politics of government in perpetual flux and the sordid deals made to keep politicians happy until the next crises is entirely a domestic affair that is for us Israelis to perpetuate or not.

Magically morphing government

The political rot under Bibi is deep and spreading. The Israel Democracy Institute looked at 19 democracies to see how many cabinet changes were undertaken during their current governments’ first six months in office.

Israel was the hands-down winner, with six. One other country had three, three others had one and the rest none, which makes sense. After all, how unstable could a government be just after it has been elected?

Well, there is one. Ironically, the instability was created by none other than Bibi himself, who called elections this year just 25 months into his previous government, for no other reason than the delusional hope that he could get a coalition core to his liking. He did, by eliminating the center left and inserting the ultra-Orthodox parties in their place, but with just a one-seat majority he is weaker and more harassed than ever.

Arye Dery.
Alex Kolomoisky

In all events, the cabinet is in the main a collection of loudmouths, political ideologues, rabbis and apparatchiks, all perpetually in election mode, and with good reason. With a few exceptions -- like Moshe Yaalon in defense and maybe Naftali Bennett in education, who can point to a record of achievement whatever their ideology -- it is hard to imagine many of them getting the jobs if they had been vetted by a selection committee rather than through the greasy pole of political maneuvering.

Israel’s problem is not just governments in perpetual motion. Transparency International, which measures perception of official corruption, ranked Israel last year just 37th among 175 countries for malfeasance and 24th among the 34 developed economies belonging to the Organization for Economic Cooperation and Development.  The World Bank’s Doing Business ranking of how business-friendly a government is puts Israel in 53rd place, two places behind Russia and only two ahead of Mongolia. Israel underinvests in its schools and universities, its hospital and its infrastructure.  

What is going to achieve more to assure us a prosperous, thriving economy – pumping more gas, or making sure he we have an efficient, honest, competent and transparent government?

Bibi wouldn’t like to see this presented as a binary choice. He wants both. But if you look down at Bibi’s feet, you can see which way they’re voting.