Herzog reform agenda still crucial

November 24, 2016 23:26

In voting for another Netanyahu-led government, Israelis once again chose guns over butter. Progress made in the polls made by Zionist Union leader Isaac "Buji" Herzog, who tapped into dissatisfaction over economic inequality in Israel, was in the final analysis overwhelmed by fears over national security.

In many ways, Israel has an economy to be proud of. The latest forecasts from the Paris-based OECD shows that, after weakening in 2014, the Israeli economy is expected to bounce back this year with a three per cent expansion in output. This would place it among the fastest growing of the advanced nations, bolstered by hi-tech brilliance.

Growth in 2015 will be supported by a weaker exchange rate, lower interest rates and a pause in austerity.

Despite such stellar forecasts, Mr Herzog and his party were able to tap into a rich vein of dissent. OECD data shows that, among advanced countries, Israel has one of the greatest gaps between the wealthy and the poor.

At the top end, some 20 or so prosperous Israeli families control the banks, supermarkets, property, gas stations and the utilities that underpin the lives of ordinary households. At the lower end, there are high levels of poverty among Charedi families, Bedouin Arabs and some new immigrants.

A great failing of the last Netanyahu government was its inefficiency in dealing with this inequality and the factors that provoked the "cottage cheese" revolution and the huge social protests in 2011.

Mr Herzog recognised the potency of the domestic economy as an issue. In a parallel with Britain's Labour Party, he identified a "cost-of-living" crisis in Israel and demanded social justice.

He proposed to reverse austerity, release state land for housing development and vowed competition in consumer markets. That would mean breaking up some family-controlled enterprises.

Much of what Mr Herzog promised reflected the goals outlined by a committee, headed by economist Professor Manuel Trajtenberg, set up in response to the "cottage cheese" revolution. They have never been fully implemented. Israel, like London, has a housing market divorced from domestic incomes. Vast inflows of foreign capital from Russia and, more recently, France, have driven residential prices ever higher as diaspora Jews buy their insurance against antisemitism.

This means that young Israeli couples struggle to leave the family nest and set up on their own. This has been a factor that attracts young families to subsidised settlement housing.

Among reasons to support a "grand coalition" in the new government would be to prevent the best of the Zionist Union reform agenda being swallowed up by an administration that places the minority interests of the religious parties above the interests of the broader population.

November 24, 2016 23:26

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