Israel's economy

Tuesday -- Jobs over dogma


Back in 1934, US president Calvin Coolidge remarked, "When a great many people are unable to find work, unemployment results." Though economics continues to make great analytical strides, the current global economic crisis leaves us Israelis with more questions - and fears - than answers.

There's been a 70-percent surge in applications for unemployment benefits compared to last year at this time. A record 20,000 workers joined the unemployment rolls in March. From well-paid electrical engineers living along the coastal plain to warehouse workers in the periphery, more than 100,000 men and women have lost their jobs in the past six months. Unemployment stands at 6.8 percent. Thousands more jobs in manufacturing are at risk. Prime Minister Binyamin Netanyahu cautions there may be worse to come.

And yet, a ray of hope: Some 12,000 unemployed have found new work, while the average gross salary has held steady at NIS 8,197.

The Kadima government was unable to get the Knesset to pass a budget, and that will hamper Netanyahu's efforts to tackle unemployment promptly. However, he and Finance Minister Yuval Steinitz have decided to make lemonade out of lemons by pushing the Knesset to agree on a two-year budget, combining 2009 and 2010, in order to stabilize the situation. The catch is that it will take until mid-July to develop a biannual financial plan - and critics, including Bank of Israel Governor Stanley Fischer, argue Israel doesn't have that kind of time. The new government counters that, with the Pessah holidays and the legislature's recess in the offing, there is insufficient time for the Finance Ministry and Knesset to complete the necessary work for a two-year budget any sooner.

While we have great respect for Fischer - as does Netanyahu, his former pupil - it strikes us that a two-year budget, serving more as template than straitjacket, will enhance the country's economic stability and restrict the proclivity of politicians for impromptu, questionable expenditures. A multi-year budget also gives permanent Treasury professionals added influence - a generally good thing so long as someone as economically savvy as Netanyahu is at the helm. In short, it may be worth the wait.

NETANYAHU wants to use the budget as a tool for cushioning the impact on Israelis of the global economic crisis; to do that he will be looking to cut NIS 10 billion in government expenditures in order to augment the National Insurance Institute and provide monies to meet rising unemployment benefit demands. He intends to spend on infrastructure, and bolster businesses in the periphery. He reportedly wants to cancel certain tax exemptions, while freezing public-sector salaries. He's promised to coordinate such moves with the Histadrut Labor Federation.

He also wants to shift more public land into the private domain.

Netanyahu and Steinitz want to lower taxes even though the Bank of Israel opposes such a move. With the budget deficit at NIS 3.3 billion and projected to rise to NIS 40 billion by year's end, Bank officials argue that with revenues down, now is not the time to cut taxes.

While, in the main, we support the premise of shrinking government expenditures and lowering taxes, timing is everything. Netanyahu will want to bring Fischer on board before making such a move.

In a conversation with the Post and in a recent Wall Street Journal article, Amotz Asa-El argued that Netanyahu has not necessarily abandoned his fundamental free-market economic ideology, but sees his most pressing task as buying time until the global economy recovers. By meanwhile collecting allies and co-opting rivals, he hopes to soften the blows that await thousands of workers as jobs, salaries and purchasing power all shrink. The emerging zeitgeist worldwide, Asa-El explains, is to put economic dogma on hold and go with what works.

Stung by critics of his tough-minded 2003 tenure at Finance, Netanyahu needs to find a middle ground that discourages a culture of dependency while guaranteeing a safety net especially for those least able to withstand the current economic turbulence.

In the words of Franklin D. Roosevelt: "In our personal ambitions, we are individualists. But in our seeking for economic and political progress as a nation, we all go up - or else all go down as one people."

That North Korean missile

Monday - Learning from Pyongyang


There's a lesson to be learned about North Korea's launching over the weekend of a Taepodong II rocket - and it isn't just that the more treacherous the crisis, the less likely it is that multilateralism will provide a solution.

The launching was yet another step in North Korea's march toward building and perfecting a nuclear-tipped intercontinental ballistic missile.

World leaders were as worried as they were impotent while North Korean technicians pumped fuel into the rocket, which can hit Japan and possibly Alaska and Hawaii as well.

In launching the missile, North Korea violated UN Security Council Resolution 1718, passed after the regime's October 9, 2006 test detonation of a nuclear device which violated the Non-Proliferation Treaty. The council demanded that "the DPRK not conduct any further nuclear test or launch of a ballistic missile."

The Democratic People's Republic of Korea - which is neither democratic, nor run by its people, nor a republic - claimed it had launched a "communications satellite," and not a ballistic missile. That's a distinction without a difference. In any event, the North American Aerospace Defense Command said the satellite did not make it into orbit.

At Japan's behest, the Security Council was scheduled to hold an emergency session on Sunday evening. But little more than a strongly worded statement was expected to come out of it. China and Russia would use their veto should tougher sanctions be proposed - and, anyway, analysts argue that economic leverage has negligible impact. What matters is that China is opposed to regime change, even were it possible.

Though we live in a multi-polar world where Pax America is passé, the West, Japan and South Korea appear to take their lead from Washington. The Obama administration says that North Korea's behavior will be punished appropriately. Well, whatever that means, it does not include a frontal confrontation. Not with the US economy in a tailspin and America's volunteer army stretched in Iraq and Afghanistan-Pakistan.

Every despotic regime is despotic in its own way. B.R. Myers, who teaches North Korean studies in South Korea, says that the DPRK leadership, appealing to the emotions of a "systematically infantilized" population, exploits a fountainhead of xenophobia to rally its masses around the leader. Myers says the message is: "Foreigners bad, Koreans good, Leader best." Koreans have been brainwashed to feel unrestrained compassion, even pity, for the Leader's burden.

North Korea's behavior is of particular interest to Israel. Pyongyang has proliferated nuclear knowhow to Iran, Syria and Pakistan. Iranian experts attend all major North Korean launchings, and there is cross-pollination of Iranian money and DPRK technology.

NORTH KOREA is a unique case. But beyond Korea's benighted borders, the overarching lesson to Western leaders is: Don't threaten what you can't deliver.

This is because despotic regimes like North Korea - but also Iran and Hamas in Gaza - use Western failure to follow through to bolster their position. More than that: North Korea, Iran and Hamas relish crises because they invariably demonstrate (a) that their people are under siege by pitiless foreigners; and (b) that only their leadership and the people's willingness to sacrifice can ultimately protect them from the alien threat.

Another lesson from B.R. Myers: Do not presume to put yourself in the shoes of the leaders of alien societies. The rational-decision-making model has its limitations when dealing with tyrannical, dogmatic and ideologically mobilized polities. For example, preventing the suffering of ordinary people is, for these polities, largely irrelevant. They focus not on the punishments (airstrikes, sanctions, etc.) they have endured, but on the punishments they have withstood and, especially, on the bad behavior (terrorism, kidnapping) their respective regimes have gotten away with.

The people of North Korea, Gaza and, arguably, Iran, know they would be economically better off if their leaders played by civilized rules. And yet there is every reason to believe - certainly in the case of Gaza and North Korea - that given a genuinely free choice, the masses would still opt for the current leadership.

The lesson, therefore, is: North Korea, Hamas and Iran cannot exchange their belligerency for normalcy. Why? Because, paradoxically, they derive their legitimacy from a constant state of confrontation and threat.

Avigdor Lieberman's First Day

Friday -- Who killed Annapolis?

Foreign Minister Avigdor Lieberman has made a stormy entrance. The "ultra-nationalist" (BBC and al-Jazeera); is "blunt and belligerent" (The New York Times); "aggressive" (Haaretz) and a "racist" (Yasser Abed Rabbo). This new government will make "no concessions for peace" (Guardian) and "spurn the peace process" (CNN)

Why the uproar? Because Lieberman announced: "The Israeli government never ratified the Annapolis accord."

Ahem. Actually, the cabinet did endorse Annapolis, on December 2, 2007. Ehud Olmert sold it to his colleagues with the argument that the negotiations would not be constrained by any deadline, and with the promise that if an agreement was reached, it would be implemented only after the Palestinians halted all violence. Privately, prior to the cabinet's endorsement, Olmert briefed Lieberman; who then absented himself from the vote.

BUT THE thing is, Annapolis is dead - just as Lieberman so undiplomatically stated. And everyone knows it. It died when Mahmoud Abbas and Ahmed Qurei rejected Olmert's and Tzipi Livni's offer last year of virtually the entire West Bank (the Palestinians already have Gaza), plus tracts of the Negev to make up for strategic settlement blocs retained beyond the Green Line.

Olmert and Livni proffered international stewardship for the holy places, and were prepared to turn over east Jerusalem. A tunnel or bridge would connect east and west "Palestine," providing contiguity between the West Bank and Gaza.

The Kadima government balked only at a total pullback to the 1949 Armistice Lines, and on granting millions of Palestinian "refugees" the right to "return" to a truncated Israel - something that would demographically smother our Jewish population.

In other words, had the Palestinians taken Olmert's and Livni's astonishingly magnanimous deal, "Palestine" would have become the 22nd Muslim Arab state in the Middle East.

Still, the petulant way Lieberman made his Annapolis announcement detracted from the substance of what Israel's argument should be. Had he handled himself more adroitly, the next day's headlines might have read: "New Government Embraces Road Map." For Lieberman did pledge a total commitment to what is officially known as a "Performance-Based Road Map to a Permanent Two-State Solution to the Israel-Palestinian Conflict."

The Annapolis process was a stab at leapfrogging over the road map because the Palestinians could not - or would not - fulfill their obligation to end the violence. And the international community preferred the illusion of momentum Annapolis provided. The alternative would have been to concede that even "moderate" Palestinians are not prepared follow through on the hard work necessary to achieve a two-state solution.

Lieberman is convinced that all the sweet talk from Olmert and Livni got Israel precisely nowhere. Yet, significantly, the Netanyahu-Lieberman-Barak government is committed to achieving a Palestinian state via the road map. What now needs to be worked out is whether the Palestinians remain committed, and whether the steps to implement the road map must be taken sequentially (the Israeli view), or in some other undefined fashion (the Palestinian view).

The road map stipulates that,"A two-state solution to the Israeli-Palestinian conflict will only be achieved through an end to violence and terrorism, when the Palestinian people have a leadership acting decisively against terror and are willing and able to build a practicing democracy based on tolerance and liberty, and through Israel's readiness to do what is necessary for a democratic Palestinian state to be established…"

That would require Israel to freeze settlements and dismantle those established since February 2001.

This is what Lieberman supports. What could be clearer?

THE Lieberman flap comes as Israel buries another victim of Palestinian terror, 16-year-old Shlomo Nativ, who was hacked to death on Thursday in Bat Ayin, a settlement southwest of Jerusalem. It is this kind of Palestinian brutality - combined with diplomatic obduracy - that keeps the road map grounded.

By talking tough instead of talking smart, Lieberman claimed he won "respect." In fact, he handed an unnecessary win to those who misrepresent Israel's stance by arguing that it is blocking the creation of a Palestinian state.

This was an inept performance by our novice foreign minister, no question. Nevertheless, Annapolis has become just another footnote in the 100-year history of Palestinian rejectionism.

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Shabbat shalom and thanks for reading...

Happy Birthday Tel Aviv

Thursday - Tel Aviv at 100

No two cities complement each other better than Tel Aviv and Jerusalem. Yet the denizens of Israel's political and spiritual capital often view their compatriots 60 kilometers down the road as if they were from another planet. Which is fine with Tel Avivians, who think of their coastal city, the country's commercial and cultural capital, as the real Israel.

Jerusalemites, whose city lies smack between Judea and Samaria, are sometimes exasperated when smug Tel Avivians act as if the Green Line were 1,800 kilometers away, instead of just 18.

Yet we would invite those quick to disparage Tel Aviv as a pale imitation of Miami, or to decry its sultry summer climate, to take a second look. Tel Aviv is an absolute delight in the spring and fall, as anyone who strolls along its beachfront promenade and boardwalk will readily acknowledge.

This is arguably Israel's most civilized and tolerant city. So what if the atmosphere on Shabbat is different from that of Jerusalem? The beauty of 21st-century Israel is that it offers both environments. Yet the city is all too simplistically dismissed as home to "Hebrew-speaking gentiles" when, in truth, interest in Judaism has never been greater there.

So all Israelis - haughty Jerusalemites included - have reason to celebrate this month's centennial anniversary of the founding Tel Aviv-Jaffa, a new beginning in a land steeped in history.

It does not detract from the sanctity of Jerusalem to appreciate Tel Aviv's beaches, museums, parks, Bauhaus architecture and soaring Azrieli towers. That's why the theme of this year's Independence Day celebrations will be "100 Years of the First Hebrew City - Tel Aviv-Jaffa." In fact, the celebrations begin Saturday night at Rabin Square, with a sound and light show accompanied by the Israeli Philharmonic Orchestra under the baton of Zubin Mehta.

TEL AVIV-JAFFA is the nucleus of a metropolis that extends from Rehovot in the south to Herzliya in the north. Today's Tel Aviv, with its skyscrapers, urban sprawl and gentrified neighborhoods, was intended to be a garden suburb of the port city of Jaffa, itself first settled in 1820 by a Jewish traveler from Constantinople.

Over the years, Jaffa became home first to Sephardi, and then Ashkenazi Jews. With monies raised by the Jewish National Fund and despite the obstacles placed in their way by Ottoman authorities, Jews began buying land beyond Jaffa's city walls.

On April 11, 1909, Tel Aviv's founders met on the beach to allocate plots for a new neighborhood to be called Ahuzat Bayit. The name Tel Aviv was coined on May 21, 1910 and was the title Nahum Sokolow gave to his translation of Theodor Herzl's novel Altneuland, though you'll also find the name in Ezekiel 3:15.

When the Ottoman rulers expelled its Jews during the First World War, Tel Aviv-Jaffa extended 1,000 dunams beyond Old Jaffa. The residents obviously welcomed the British Mandate with open arms.

During the Arab riots of 1921, most of Jaffa's Jews fled to Tel Aviv.

In the years following WWII, Tel Aviv was a center for "illegal immigration" by sea. When the War of Independence broke out, the city was shelled by Arab positions in Jaffa. It was when the Hagana captured Jaffa that most of its 100,000 Arabs fled.

At independence, Tel Aviv had 210,000 residents. In 1949 it and Jaffa were amalgamated, along with nearby abandoned Arab villages. Today, Tel Aviv-Jaffa boasts a population of 400,000 residents.

Iran refers to Tel Aviv as the capital of "the Zionist regime." And, in fact, all foreign embassies are located there. Perhaps it's easier for foreigners to acknowledge an Israeli connection to a city with "no history" than to one which abounds with Jewish associations going back millennia.

But Tel Aviv represents the first Jewish city that was "not a ghetto," in the words of Marcus Ehrenpreis in his 1927 Soul of the East.

The poet Haim Nahman Bialik wrote that he loved Tel Aviv because it was "established by our own hands… because we need not feel obligated to anyone for its good points, or apologetic for its bad ones. Is not this the whole aim of our redemption… to be owners of our body and soul, masters of our spirit and creation?"

Indeed.

Netanyahu Takes Over

See too: http://www.fromil.com/tv/index.php?radio=4
(my interview is about half-way through)


Wed - And now, to work

Israel has a new government, the most bloated in its history, with 30 ministers and seven deputy ministers.

It's appalling. Selfish. And to be expected.

• Blame the political system, which makes it impossible to form a government without exchanging patronage for parliamentary support. No political party ever formed a government without horse-trading; and now the Likud has been forced to throw in paddocks, stables and hayricks to garner the support of roughly 70 of the 120 Knesset members.

Did anyone think Israel Beiteinu, Shas, Labor, United Torah Judaism and Habayit Hayehudi would come cheap? Or that the hurt egos of Likud MKs excluded from the most prestigious ministries wouldn't have to be soothed?

• Blame the voters, who should have thrown their support behind one of the three or four major parties for the Knesset, but instead sent 12 parties to the legislature - most of whom place their parochial needs above the collective good.

• Save some blame, too, for Kadima leader Tzipi Livni. Had she joined Binyamin Netanyahu's government together with Avigdor Lieberman, a relatively lean cabinet able to embark on urgently needed electoral reform could have emerged. Instead, Livni claimed - quite disingenuously - that "policy differences" with Netanyahu over how best to negotiate with the Palestinians would not allow her to join.

Yet what actually sent her to the opposition was his refusal to consent to a rotation government.

THE SIZE of the government may make it hard for Knesset committees to function, but it shouldn't have a deleterious impact on governmental decision-making. That's because the mega-cabinet, which will meet Sundays, is not where decisions will be made.

The premier must appoint a security cabinet, whose membership is determined by law. Netanyahu will also create an "inner cabinet" to debate a range of domestic and international issues. It will include Lieberman, Dan Meridor, Moshe Ya'alon, Bennie Begin, Silvan Shalom, Binyamin Ben-Eliezer and Eli Yishai. But the most sensitive decisions will be made by Netanyahu and Ehud Barak.

How efficiently the government works will depend not on the size of the cabinet, but on how well key staffers in the Prime Minister's Office coordinate the apparatus of power and manage the flow of decision-making up the chain of command.

ISRAEL now has a semblance of a "unity government" and can move forward. Indeed, there are several laudable cabinet appointments.

Though Netanyahu will head his own economic team, Yuval Steinitz will be his man at the Treasury. Steinitz has no particular expertise in economics, but sufficient brainpower to excel in a job where personal loyalty to the premier can help bring coherence to government policy.

The ministry has an image of being dominated by supercilious civil servants who think they should set the agenda. On the other hand, with tax revenues dramatically down, it may fall to Steinitz to tell the coalition partners that not all of his boss's promises can be kept. The presence of Shas's Yitzhak Cohen as deputy finance minister is, however, worrisome. His being there will cost taxpayers money.

At a time of unprecedented economic dislocation, Israelis are less interested in economic dogma than in job and wage security.

LET'S hope the brainpower of Meridor (security services), Ya'alon (strategic affairs), Yaakov Neeman (Justice) and Begin, among others, will fully be utilized.

With our new premier intent on reversing the downward spiral in our education system, Netanyahu loyalist Gideon Sa'ar takes the education portfolio. Consummate professional Matan Vilna'i will stay on as deputy defense minister, and that's comforting.

Yuli Edelstein can contribute as hasbara minister - not by seeking to create an empire, but by working with the premier's new communications director, Ron Dermer, to maximize existing public diplomacy resources while avoiding ruffling bureaucratic feathers.

Of course, the object of this exercise is not to form a government, but to govern. Together with Barak, whose presence bolsters Israel's case in the international arena, Netanyahu will grapple with a crisis-filled agenda that includes Iran's nuclear weapons program, Hamas's ascendency among the Palestinians, and a wobbly economy.

We can't promise Netanyahu a honeymoon. But we'd advise a good night's sleep - there's lots to be done.