Israel election focuses on everything but the real issues

Israel needs change – but will it get any? EPA/Jim Hollander

While all talk in Israel is of the coming election, it is fair to say that many people are more indifferent to the outcome than in previous elections. The socio-economic climate, Israel’s chequered foreign relations and the general erosion of the middle class have added to this sense of apathy.

The most recent elections, in 2013, in which the new party Yesh Atid won 19 seats out of 120 on its promise of representing middle-class voters, carried a certain promise. But, despite forming a coalition with Likud, the government’s failure to provide the wider public with the reassurance that someone is taking care of its interests has contributed to a broad sense of political malaise throughout large part of the electorate.

These elections were originally due to take place in 2017 – but the prime minister, Benjamin Netanyahu, brought them on by firing the finance minister, Yair Lapid, and the justice minister, Tzipi Livni, levelling accusations against them of plotting a putsch against him.

It is widely thought that Netanyahu was mainly motivated by the progress of a bill that would outlaw free newspapers, also known as the Israel Hayom Law, after the freesheet owned by casino tycoon Sheldon Adelson, one of Netanyahu’s most prominent patrons.

Netanyahu, in turn, accused Arnon Moses, the publisher of the Israel’s biggest circulating daily, Yedioth, of attempting to bring down his Likud dominated government. This discourse illustrates how control over market shares or media shapes the genuine forces governing the political economy and the Israeli democracy.

Tzipi Livni and her Zionist Union colleague Isaac Herzog face challenging times. EPA/Atef Safadi

Livni subsequently joined forces with Labour leader, Isaac Herzog, on a joint ticket for the next Knesset (Hamachane Hatzioni or Zionist Union).

So the election is crystallising into a fight between these two big beasts of Israeli politics – but as the two sides attack each other over the usual suspects – security and each others’ personalities – neither side has had the courage or the civil commitment to broach the issues that pose the greatest threat to Israel’s stability.

Don’t mention the economy

By this I mean the core problems of the political economy: the concentration of the financial sector and the low productivity of the public sector. Two big banks control two-thirds of public deposits, while five big insurance companies manage most of the public’s savings. These financial actors are tightly linked to each other, in a way that creates entrenchment and instability – and poses an actual threat to economic growth as well as to the democratic system as a whole.

By the same token, the public sector is marred by an irresponsible and archaic employment structure, a lack of strategic planning and competitive measurement, and a cumbersome bureaucracy.

As a result, Israel’s economy and regulatory apparatus, which has become increasingly captured by special interest groups over the past two decades, enabled the rise of an Israeli oligarchy comprising just ten pyramidal business groups, controlled by individuals or families – and affiliated professionals, such as accountants, lobbyists, lawyers, managers, consultants and other businessmen and business groups.

This oligarchy, whose power is embedded by the big banks, controls substantial shares of the market economy and the public’s financial assets, managing tight relations with state agents. It is further linked to other powerful monopolies in the public sector.

Summer 2011 was a watershed moment in Israel’s political economic climate. A wave of social unrest broke out on the Israeli streets, driven by the rising cost of living. This public struggle was joined for the first time by the mass media, academics, and various economic and political actors.

Over the next three years, this demand for change has gradually been echoing in the regulatory framework. Economic regulation has been slowly shifting focus, from protecting the concentrated power of the oligarchy, by means of preserving market entrenchment and hindering competition, to new regulations and enforcement efforts geared toward serving the dispersed public. Despite the shift of paradigm among the public, Israel’s economic regulation still does not fully conform with the wider interest.

Populism without substance

The two big parties follow the old economic templates of welfare and competition. They do not unpack the root causes that have resulted in the impossible housing prices and cost of living (the highest in the OECD compared to incomes), increasing inequality and outrageous poverty rate.

They thus ride populist undercurrents without providing real answers without challenging the real questions, concerning the ability of the middle class to survive, let alone to sustain the “start-up nation” myth. It is not surprising, considering they are tied to the oligarchic power structures by various economic agreements, political commitments, personal relations and various other considerations.

Israel’s politicians, if they aim to lead a real change, must be brave enough to move out of their comfort zone, and confront these issues. But from the absence of such genuine discourse in the campaign – and from the focus of Netanyahu’s speech to US congress, which showed he would rather talk about Iran than confront his country’s real problems – it seems they have other plans.

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