Saturday, July 30, 2011

The Streets Of Tel Aviv: Bursting The Bubble?

More than a hundred thousand young Israelis, in every major city, took to the streets on Saturday night to protest the prohibitively high cost of living, especially the very high cost of housing. Last week, a tent city went up on Rothschild Boulevard—supposedly, the epicenter of the Tel Aviv bubble—and tens of thousands began marching in sympathy. A sense of grievance is spreading like last year’s fires in the Carmel forests.

Columnists and television pundits pronounce this the biggest domestic crisis the Netanyahu government has faced, or is likely to face. It is coming just as he is trying to rally Israelis en masse to resist a U.N. General Assembly vote to endorse a Palestinian state in the 1967 borders—a vote that will itself produce mass street demonstrations in occupied territory. (Jailed Palestinian leader Marwan Barghouti has called Palestinians to the streets. Not to be outdone, President Abbas has too.)

The lingering question—which will determine the complexion of the Israeli protest, and perhaps the fate of Israel’s place in the region—is how much young people in the streets of Tel Aviv believe that the former problem, the difficulties of making ends meet, is a function of the Israeli government’s failure to address the latter problem, that is, failure to make peace with Palestine.

How much do Israel’s economic stresses, long incipient, but gushing up in response to housing costs, result from the kind of government and ideology Netanyahu administers and represents? Can this connection be popularly believed?

The question is particularly important because, for the first time in a long time, young people who would ordinarily vote for the parties of the right—lower middle class scions of Moroccan immigrant families, Russian immigrants, and so forth—are marching with peacenik descendents of old Labor party families.

Something new is forming on Israel’s political landscape, and Israel’s left senses an opportunity. My young friends who started the “Solidarity” movement, protesting the dispossession of Palestinians in Sheikh Jarrah in East Jerusalem, have thrown in with the housing protests. Are the goals really capable of being merged?

I BELIEVE THE answer is yes, hell yes, but connecting the dots will not be simple. There is a communitarian tinge to the idea that the government has ignored the problems of the poor, the struggling middle class, the young, but such sentiments can quickly morph into fierce nationalist ideas—you know, that the government, unlike in old pioneering times, is letting down “amcha,” a colloquial way of saying the common people, but which literally means “your people.”

Menachem Begin built the Likud exploiting just such resentments. The suburb-settlements built for Jews in East Jerusalem—Neve Yaacov, Ramot, Gilo—were a sop to the poorest Jews who also happened to be Likud voters. A third of young Israeli children live under the poverty line, but almost half of those are Arabs. If Netanyahu offered to give big housing subsidies exclusively to young Jewish Israelis, say, as a reward for army service, would the new street coalition hold together?

The politics are hard to predict; it is not impossible that the Arab spring has inspired an Israeli summer. Haaretz has taken pains to report the Jews and Arabs are finally demonstrating together.

What seems easier to predict, in any case, is that without peace the economic strains on Israel will grow. Even more important, the wealth Israelis will forgo for not making peace, the opportunity cost, will increasingly be seen as enormous—if a leadership emerges to make the case.

GROWING INEQUALITIES ARE not, in themselves, an indication of economic failure or are even preventable. The Israeli economy, driven as it is by high technology export businesses in software, value added components, advanced medical devices, etc., is bound to have a social profile more like Silicon Valley than a manufacturing city like Wolfsburg, Germany.

Technology start-ups that succeed in global markets make young entrepreneurs very rich very fast and out of all proportion to their neighbors. Two former students of mine, just over the past year, sold the little businesses they started for $20-30 million, I could work at a university for a lifetime and not accumulate their share of these “exits.”

The real question is whether, as the very rich get richer, the incomes of ordinary people are growing and their quality of life is improving. Are Israelis getting the kinds of services we need for the taxes we are paying? Can we afford essential things like higher education, medical care, and, yes, housing, from what we earn? Is there growth in sectors like construction and housing, tourism, food processing, retail—sectors in which people who are not high-tech entrepreneurs can start steady businesses that are not fancy shots at a global jackpot?

This is where planet Netanyahu and the absence of peace bite together. The streets need to learn some hard truths:

* The settlement project was, and is, insufferably expensive. It is commonly understood that upwards of $20 billion have been spent on settlement and infrastructure in occupied territory, not including the costs of securing them, which are continuing. Meanwhile, traffic in Tel Aviv and the coastal plain more generally has graduated from heavy to infuriating. Mass transit in major metropolitan areas is constantly postponed.

* The industries that Palestinians are going to focus on, and draw regional investment to, in the event of peace are precisely the ones Israeli “amcha” are most likely to benefit from—again, tourism, construction, retail, food processing. Israel and Palestine are one business ecosystem. Israel could generate another $8 billion in GDP just from doubling its number of tourists from 3 to 6 million a year. (Florence get 12 million.)

* One sixth of the government budget goes to defense and is creeping up to incorporate new weapons systems. Social services are constantly being trimmed back. The ratio of national debt to GDP is stuck around 80%, not unmanageable as long as interest rates remain low and growth rates remain high, say, 4-5% year; but if Israel were to enter periods of lower growth, as now seems inevitable with global recession and political isolation, it will be impossible to outpace the social tensions we now see, or discontent in the Israeli Arab community.

* Educational infrastructure is in serious decline. High school classrooms average 30-40 students. University budgets have been slashed in recent years, causing the closing of departments, especially in the humanities, and Israeli scholars by the hundreds have sought jobs overseas. Yet the Netanyahu government is focusing on the nationalism of the curricula, indoctrination, not the expansion of the development of critical thinking.

* The health care system is in crisis because government subsidized hospitals and health maintenance organizations cannot pay doctors a living wage. The latter have been on strike for two months. When you figure hours worked, young doctors make less on average than babysitters. Yet Israeli medical training is world-class; medical tourism, especially from neighboring Arab countries and the Gulf, could rejuvenate the Israeli medical profession overnight.

* Participation in the Israeli workforce is among the lowest of OECD countries, perhaps 56%, as compared with 68% in Japan. This is largely because of the long-standing policy of the Israeli right to keep ultra-Orthodox yeshiva students on the dole.

* A major impediment to reducing the cost of land is the Israel Land Authority, a throw-back to the old Zionist Jewish National Fund (whose lands are about a fifth of the ILA’s holdings). The ILA still controls roughly 90 percent of Israel’s land, which it manages, by mandate, for “the Jewish people.” Privatization and auctioning of land is inevitable if the cost of housing is to be brought down. But this would mean that Arab citizens would be able to gain much more land for development, anathema to the Israeli right.

* Ginning up the cost of flats themselves, especially in Tel Aviv’s and Jerusalem’s core, are absentee owners: wealthy Diaspora Jews who—excited by the Israeli right’s pandering, and encouraged to think of Israel as a kind of metaphysical theme park—drive out younger Israeli buyers and renters.

* Strong recent evidence suggests that all of these things together, added to the incessant war tension, have so degraded the quality of life in Israel that as many as a million Israeli Jews live abroad today, mainly in the U.S. Many of these people are highly educated and could be founding companies at home.

* Last, not at all least, is Netanyahu’s free-wheeling approach to market regulation—so much like that of American Republicans, and masked by ultra-nationalist distractions—which has led to the enormous concentration of ownership in Israel, The wealthiest 16 families own 20 percent of the top 500 companies: Ofer, Dankner, Arison, Tshuva. Some family-based conglomerates have been taking super-profits from, in effect, monopolies in banking, telecom, food retailing, media, and so forth. But they are also over-leveraged, and highly invested in real estate. Burst the housing bubble—by releasing a great deal more ILA land, for example—and some will be under water. The impact on Israel could be something like the collapse of Lehman Brothers in the U.S.

Ideally, the demonstrators in the streets would know all these things. I suspect they know some of them and sense that, in any case, Netanyahu is not to be trusted.

One thing is certain: the idea that the young of Tel Aviv live in a bubble is finally, clearly nonsense. They have always been the Israelis with globalist commercial experiences and cosmopolitan instincts, a sense of how Israel fits into world. It is Netanyahu and the right, settlers and the orthodox and Russian Putinists, who have lived in a bubble. The streets of Tel Aviv may burst it before the streets of Ramallah plan to.