Israel’s Tahrir [1]: Will the Revolution End “Bibinomics”?

Ok… a little bird told me there was this teeny, modest wavelet of demonstrations in Israel, so maybe it’s time I write something about it.

(snark, snark; actually my mom, two of my siblings and a couple of nieces were among those 4-5% of Israel’s population, over 300,000 people, taking to the streets on Saturday night)

There is so much to write, and things are moving so fast. Seemingly out of nowhere, this protest wave has snowballed, or – considering the season and physical location – sweatballed, right into prime minister Netanyahu’s (hereafter, “Bibi’s”) face.

But of course, this is anything but “out of nowhere.” In an open-ended diary series, I will try to explore some key processes and issues at the heart of this wave, with an emphasis on those that have remained largely unexplored in mainstream reporting and analysis and/or in English-language media.

To forestall some predictable comments, as was repeatedly mentioned, indeed the Occupation regime and its ills has not taken center stage in the protests. Occupation is not denied, but is also not emphasized. And yet, the July 14 movement (home page, Hebrew) is a genuine Left-themed phenomenon. It will take at least an entire diary to explain how and why this apparent contradiction is possible; but not this diary. For now, you can look up Dimi Reider’s excellent analysis piece. Or in 2 sentences: masses of citizens will only be mobilized by a message that speaks to their hearts and to their firsthand experience. Appealing for justice on behalf of those still perceived as an enemy or a threat, does not come close to meeting this condition. This does not mean that “leftist protest organizers were cynically crafting a message to manipulate the public” (this, incidentally, was the government’s very first knee-jerk spin to try and defuse the movement). Rather, just like in the Arab world, this is a case of a long-overdue uprising just waiting for the right spark.

With this I proceed towards the substance of the first diary. I will try to be more concise than usual. Since the movement’s main messages are economic, I start with “Bibinomics” – which is far and away Bibi’s signature policy issue, the one field in which he has distorted and demolished Israeli reality beyond recognition – and, consequently, also his greatest political liability.

How Israelis Fell in Love with Neoliberalism

Bibi had it easy: before he even launched his political career, neoliberalism was already state religion in Israel.

From its 1948 birth, Israel was dominated by socialist parties and institutions. Even though this socialism was self-contradictorily secondary to the national cause (which mandated e.g., systematic discrimination along lines of national identity), still among Israeli Jews the daily life in the 1950’s 60’s and even deep into the 1970’s, was that of a socialist Super-Nanny state. No, not in the tradition of Western Europe, but far more like the Eastern European model with its corruption, ineptitude and hypocrisy.

For example, common Israelis waited 10+ years to get a phone line from the government ministry running the system, while watching cronies hop-skip the line and hearing how in America you can get a line on the day you order it. Or, the single state-run TV channel broadcast in B&W until the early 80s, and used a special technological “Eraserchik” to de-color the wildly popular color programs imported from the US and England – so that the masses won’t waste their savings on decadent entertainment gadgets (some enterpreneurs made a killing selling color TV’s equipped with “Anti-Eraserchiks”; Oz Shelach has a hillarious skit on this in his book Picnic Grounds). Israelis living in Israel were forbidden from having a foreign account or even hold foreign currency; in 1977 PM Rabin was forced to resign when a US account on his wife’s name, a leftover from his ambassador days, was discovered.

By the 1970’s nearly all Israelis regardless of social milieu were ripe and ready to embrace anything that will deliver them from this backwardness and suffocation. Seeking an alternative, they kicked the socialist parties from power in 1977. And the only economic alternative in town seemed to be unchecked American capitalism.

To this perception contributed the fact that young Israeli academics were flocking to the US for graduate and postgraduate training. The economists among them absorbed neolibralism as Gospel truth. The rest just experienced the ridiculously more prosperous lifestyle and standard of living, without knowing the full picture (e.g., how capitalism failed in the 1930’s, and how the post-war prosperity was linked to welfare-state policies). To seal the deal, Jewish American economist Milton Friedman, the guru of modern neoliberalism, was having an extremely influential media presence explaining economics to the American public – from his own perspective, of course. And those young impressionable students from Israel listened.

In short, the academic pipeline was channeling back to Israel its best and the brightest who, despite coming from predominantly-socialist homes, have become ardent Friedmanite advocates. For my dad, mid-1960’s America where he did his Ph.D. (I was born at that time, if u look for the secret source of my US passport) was love at first site. As we were growing up, there was hardly a dinner or living-room conversation in which he didn’t lambast the ills of Israeli socialism and corruption, and praise the merits of the American free market with its spirit of fair play.

Political “Left” = Economic Right?

So when the first Likud center-right government came to power, they had a field day deregulating the economy. The results were swift: despite a peace agreement that brought tourism and a huge aid package, within a handful of years the stock exchange went through two bubbles and their crashes. Triple-digit inflation commenced in 1979 and no one could stop it. The farming sector, seen as part of the socialist base, was radically de-subsidized, sending it into a tailspin that continues to this day. The 1982 invasion of Lebanon drained the treasury, and the second stock crash in 1983 bankrupted all major banks (they were manipulating their own stocks), forcing the state to buy them. The double whammy led to 445% inflation in 1984, and to genuine fears that Israel will default on its debt.

Unfortunately, rather than attribute the outcome to the new economic system, most Israelis saw it as the result of Likud inexperience, corruption (indeed in this respect they have repeatedly outdone even Labor’s feats) and military adventure – or, from the Right, attributed to obstructionism of the Left using whatever institutions it still controlled to block some neoliberal policies.

The early elections called in 1984 were indecisive, and the resulting bipartisan goverment managed to stabilize the economy; by 1986, inflation was back down to 20% for the first time in 13 years. Inflation was finally tamed by beginning to dismantle the still-fledgling Israeli welfare state, and implementing Fridmanite neoliberalism as the law of the land – with the Treasury’s Budget Department and Israel Bank (Israel’s “Federal Reserve”) as its prophets and enforcers.

And it was the American-trained, America-inspired cadre of economists affiliated with the Labor Party who coceived the transition and saw it through.

From that point on, the term “Left” in Israeli politics has become associated only with policies towards the Palestinians – but even that label was misleading. The polarization has always been primarily about social and ethnic background: well-to-do secular Ashkenazis to the “Left”, less-wealthy Mizrahis and Orthodox (and later on, also Russians) to the “Right”. In any case, the terms have become devoid of any economic meaning. The main “Left” party, Labor, became the agent of neoliberal policies, while the main “Right” party, Likud, totally embraced the pro-Occupation agenda and did not have any coherent economic program to speak of.

That is, until Bibi came to power.

Bibi’s Economic Terrorism

Into this confused, neoliberal-friendly and rather naive econo-political terrain stepped a hardcore American-raised neocon and radical neoliberal. For him, carrying out his agenda was as easy as taking candy from a baby. All the damage Bibi has done to Israeli-Palestinian relationships pales in comparison to the destruction he has wreaked on Israel’s economy. I won’t detail it all – but just give one single horrific example, to give you a taste.

In 1995 Rabin’s government, in an isolated act contrary to the general neoliberal tide, passed a universal, government-funded and price-regulated healthcare law to unify the funding for the patchwork of independent HMOs providing coverage. In 1996 Bibi was elected PM, and within a few months he completely exempted employers from paying their share into funding the new system! According to Ynet’s economic columnist Sever Plotsker (not suspect of being a leftie, by a long shot) writing in 2005 (Hebrew link), Israel is the only country where businesses are exempt in this way. Thankfully, this being an American progressive blog I do not need to explain how terribly wrong this is, and also how much it is part of the wettest dreams of America’s Tea Party types. Needless to say, the move sent Israel’s healthcare system into perpetual tailspin and beggar status vis-a-vis the treasury. And the public and political system hardly noticed. Who cares about economics? Bibi didn’t even campaign on the economy; he campaigned on terrorism and on his opposition to the Oslo process. The public had no idea what an economic predator they are letting into the chicken coop.

After less than 3 years in office Bibi was voted out, but Labor’s Barak coming into power after him was not nearly as quick in re-enacting the employer tax as Bibi was in nixing it. Barak set up a committee which of course recommended re-taxing; then he took his time some more, and poof! He was voted out in 2001. By early 2003 Bibi was back in the government…. as finance minister. To this day, Israeli employers still receive a healthy workforce for free, and the healthcare system is perpetually bankrupt.

By his “second coming”, the economic elites and the Treasury/Israel-Bank fanatics have recognized what an immense asset Bibi is for them. So they began to praise his economic prowess as finance minister, and to promote the myth that his policies are good for Israel. This backing has given Bibi a wide-open field to do as he please; and so he’s done.

His deeds can be summarized (typically of his ilk) as a massive transfer of wealth from the lower and middle classes to the rich, and extensive deregulation and privatization. With a stern face, he inflicted austerity after austerity on the masses, privatizing even the unemployment services. And then back in the PM seat, he set up one of the most ridiculously bloated governments in Israel’s history. All the while, he has continued to pour billions into the wasteful and politically controversial Occupation-Settlement project, economic considerations be damned. “Bibinomics” are a display of self-contradictory hypocrisy at its crudest ugliness. But many of Israel’s economic analysts have continued to sing Bibi’s praise.

Bibi’s impact and fabricated image as an “economic savior” in recent years have been so deep, that even in his times out of office the “Bibinomics” have continued. All told, Israel has now suffered from 15 uninterrupted years of this plague. As someone who actually already paid attention back in 1996 when the health system was robbed, and protested in the street against “Bibinomics” from their inception, I say to those who praise him: Bullshit. All Bibi knows, like Bush’s economists knew over here, is how to manipulate indicators in order to mask the systemic problems his policies create and exacerbate. A case in point is the “miracle” of Israel currently – to date – avoiding the brunt of the world economic crisis. This “miracle” lacks a credible economic explanation; but with Bibi’s halo so established, and with the end-result so convenient in the short term, no one is really checking. This issue might require a separate diary, but let me just say now that I strongly suspect this temporary “success” is due to a mixture of deception and speculation, with Israel Bank chancellor Stanley Fisher playing full accomplice.

Part and parcel of this “success” is the fact that the global housing bubble, burst everywhere, has somehow continued in Israel with a vengeance – to the point that drove fed-up middle class youngsters to set up tent cities and spark this protest movement. Again, no credible explanation for the housing bubble’s continuation. Israel’s population increase has slowed in recent years; settlers are not yet flocking back into “Israel proper”; and clearly, less and less buyers are able to shoulder the exorbitant prices. But they still keep on rising, which in classic “Shock Doctrine” fashion provided Bibi with the pretext to pass this public-lands reform last week, essentially spitting in the face of protesters – a reform that (among other ills) simply hands over public real estate to his contractor cronies.

Thanks to Bibi, however, the Israeli public is finally educating itself on the economy. Neoliberalism has finally lost its appeal. “Bibinomics” have never been popular; Bibi gets the public to support him and to allow his economic terrorism to continue, by using the Palestinian issue, the Iranian issue or social rifts within Israeli society to distract them. He has been very good at this, until this month. Even the devastating 2010 wildfires – an inevitable result of the defunding of ground firefighting and the privatization of aerial firefighting – have somehow slipped by without repercussions for Bibi and his policies.

I hope to God that the July 14 movement will finally end “Bibinomics”. That alone would be an awesome feat.

It won’t be easy: they are facing a stacked political deck. The privatized media are thoroughly monopolistic and beholden to Big Money. And Bibi, a seasoned political tactician, is playing every trick on and off the book. The latest one is a committee just launched today, with no less than 22 “experts”. Needless to say, despite a few fig-leafs this committee is packed with neoliberal and even at least one neocon hack (the head of “Reut Institute”) whose main job in life is promoting anti-Arab and right-wing propaganda. No representation for the protest movement, of course.

The committee is instructed to report back in… late September. Not late August, not even early September. Why a month and a half from now? Because in late September begin the High Holidays, when Israel essentially shuts down for a month. After the holidays, according to a quote from a Bibi advisor, the fall rains will finally start and drive those pesky tent cities away.

(slightly edited version of a text originally posted on Daily Kos)