By SETH J. FRANTZMAN
Every week brings disturbing economic news for Israeli society. Although the general trend is reportedly positive, for average Israelis, economic survival is becoming increasingly difficult. A report issued by the Knesset Research and Information Center recently revealed that Israelis pay more in university tuition (NIS 10,000) than most EU residents.
Another report at the education committee showed that Israelis are forced to spend NIS 1,165 more than they earn each month during their years in higher education. Students who work only earn NIS 2,197 a month, while they face outlays of NIS 1,400 as a minimum for housing. Only 6.6 percent of students have dorm rooms, which are often decrepit and noisy, and only 5% receive financial aid. And as bad as these numbers are, tuition statistics are just a drop in the proverbial bucket.
OVER HALF of employed Israelis earn NIS 5,812 a month. While this places Israel in 24th place globally in terms of earnings, costs are often much higher than in Western states. For example, in the US the median income is $30,300, but the median cost of a house is $152,000. In Israel the median cost of a new house was NIS 1.38 million ($383,000) in June 2013. In other words, Americans make twice as much as Israelis and pay half as much for a home. EU income and housing prices are similar. In Greece, where incomes are similar to Israel, housing prices are only 115,000 euros for fancy urban or vacation properties. And it isn’t just real estate. Almost everything else in Israel is more expensive, whether it is sunscreen ($40), olive oil (three times the cost in the EU), honey, or fruits and vegetables, with no correlation to whether it is made in Israel or not. In fact, because of local lobby groups most locally made items are more expensive in Israel than abroad, while import prices are made artificially high to “protect” Israeli producers.
Identifying the problem is relatively easy, but the solution is cloudy. During the 2011 protests many Israelis called for a “welfare state” and massive expansion of government. Some have chosen to leave the country and have been castigated for it. But a third solution exists: A revolution aimed at rescuing the state from its economic failure. A Second Zionist Revolution: Economic Zionism.
IN THE history of Zionism there have been many movements. Initially there was the Political Zionism of Theodor Herzl which sought permission for a state, and the Practical Zionism of Leon Pinkser which sought to establish settlements in Ottoman Palestine. Their ideas were inherited by the Labor Zionists, who sought to combine Zionism with socialism, and the Revisionist Zionists, who favored capitalism. Others pioneered less radical movements, like Cultural Zionism, fanciful ideas like Territorial Zionism and more radical ideas like Revolutionary Zionism. Finally it is all capped off by Religious Zionism. Since the establishment of the state we have been mired in the notion that Zionism has “succeeded,” but the truth is that since 1948 Zionism has atrophied. The revolution has been forgotten.
Now in the throes of the potential failure of Zionism – and make no mistake: the fact that the average Israeli cannot afford to live in Israel constitutes such a failure – a new notion must arise that can unite the country and build on its accomplishments. This new idea is Economic Zionism, which proposes an economic basis for the success of the state, based on the economic success of its people.
HERZL IS often not credited with his economic vision, perhaps because the Socialist Zionists sought to alter his vision and destroy the economic basis of a state of private entrepreneurial citizens. Herzl proclaimed in Der Judenstadt (1896) that “Private property, which is the economic basis of independence, shall be developed freely and be respected by us.
Our first unskilled laborers will at once have the opportunity to work their way up to private proprietorship.” In Altneuland he foresaw a country with Jews living in dignified “small and charming houses intended for only one family” with “architecture which was fascinatingly varied.” He believed that young men would serve two years of national service and be rewarded with free education through university. There was a Zionist party, called the General Zionists, that fought for a country based on capitalism and individual rights and property, but it was marginalized in the first years of the state and merged with a Yemenite party and Herut to form the forerunner of Likud.
The Labor Zionists who dominated Israel in its first 30 years of existence did untold damage to the country through their concentration of assets in national monopolies and their national planning. The lasting effects are clear; port workers and Israel Electric Corporation employees make salaries of NIS 38,000-NIS 44,000 a month, because of their monopolies; the national airline, El Al, has a monopoly on many routes which mean the nation’s travelers are held hostage, paying up to 10 times what Europeans and others pay for flights.
Wealth has been concentrated into the hands of several dozen tycoon “families” that control most of the economy. The development of an economic Zionist ethos means rejecting the old paradigms and slaughtering many of the state’s sacred cows. But it also promises to finally end the tragic ethnic divides that have brought shame on the Jewish people.
Since the state’s foundation politicians and cultural elites have mongered a racist mentality that has turned each group in Israeli society into a caricature, whether it is “haredim,” “Mizrahim,“ “Russians” or “Arabs.” Geographic and educational segregation have resulted in a fractured society. It is no coincidence that the elections in Jerusalem were characterized as “tribal” and the “victory of secular Ashkenazim over Russians and Mizrahim.” But these divisions are artificial; all the groups in Israeli society desire economic success and to live with dignity. Perhaps a focus on finances, rather than on religion or ethnicity, can bridge the gaps and encourage social cohesion and mobility.
A REVOLUTION in our economic thinking must be built on six pillars of change. First, the land of Israel must be opened up to private ownership. Currently the state owns 93% of the land, and has managed it disastrously, allowing more than a million dunams to fall into the hands of squatters. The concentration of land makes housing prices artificially high and strangles private initiatives such as solar farms, which take decades to plan in Israel despite ample resources. Similarly, community acceptance committees should be abolished as they create artificial disparities by protecting tiny elite groups’ access to land – which mostly goes unused, such as the more than a million dunams in the hands of kibbutzim and moshavim.
Second, barriers to trade must be abolished. Eight million Israeli consumers are being held hostage to tiny interest groups, such as the olive oil makers, with the result that millions must pay more to benefit the profits of a few who use their power over “fruit and vegetable boards” to artificially raise prices on imports through outrageous tariffs. Free trade will make automobiles more readily available (currently Israelis pay more than most people in the world) and reduce prices of common household items.
Third, army service must be reformed. Because of low pay (NIS 300 a month), it has become economically destructive for the poor, who run up massive debts during their IDF service. 14,000 Israelis spend time in military prison a year, mostly because they go AWOL to work.
Army service is viewed as a “burden” and as cudgel with which to integrate Israel’s splintered groups, which is not its purpose. Pay for soldiers should be increased tenfold, soldiers should be provided free higher education, and the overall system should be reduced in size.
Fourth, the “integration” mentality vis a vis immigrants and minority groups should be reversed. Instead of the destruction of their culture and their assimilation into the poorest rungs of society in “development towns” being viewed as successful “integration,” Israel should seek to provide opportunities for immigrants based on their existing skills.
Instead of viewing Arab and haredi demographic growth as a “threat” to Israel, they should be viewed as a vast reservoir of talent, waiting to be tapped. In the past Israel took in Ethiopian herders and farmers but forbade them to live in agricultural moshavim and kibbutzim. It took in highly educated Russians but mocked them, forcing them to work as security guards.
This mentality is destroying the country’s potential. Many immigrants describe lives in their former Ethiopia, Russia or Iraq as dignified and talk of being made to feel like “peasants” in Israel; a sad testimony to Labor Zionism’s attempt to “proletarianize” the Jewish people. Jews occupied niches in their economies abroad, but in Israel the state became the niche, crushing the Jewish people with its paternalism and economic concentration. Freeing the Jewish people to be Jews again requires reducing the state apparatus, the integrative monoculture and the vested interests to the maximum degree possible.
Fifth, the reduction of foreign aid to the Palestinians and Israel must be a goal of both groups in the peace process. This foreign aid creates artificial surpluses and scarcities in Israel, as well as dependency, as it has in the Palestinian territories. Israelis and Palestinians are the highest educated groups in the Middle East per capita, and the conflict is holding them back. Taking down economic roadblocks to Palestinian growth and weaning Palestinians of the “need” to work in Israel will create opportunities for economic peace. At the same time money funneled into “peace” groups should be redirected toward education and skills training; the goal of peace groups is to stay in business by encouraging conflict.
Sixth, Israel is stuck patting itself on the back, but behind the facade of the “start up nation” is a darker side: Billion-dollar failures such as that of Better Place, corruption, nepotism, “proteksia,” grey-market employment and economic strife. As Israel atrophies, the Gulf Arab economies, Singapore and many other states are passing it by. Israel doesn’t need to just be “better than Jordan,” it should aspire to be the best, period, which was precisely what Herzl had in mind when he noted that “the Jewish settlers who streamed into the country had brought with them the experience of the whole civilized world.”