This article was published in Hebrew on July 8th, 2020, before PM Netanyahu decided, under pressure from a mass movement of people who have lost their jobs and businesses, to extend unemployment benefits and payments to the self-employed until June 2021. We print the article in English, because the basic situation remains as it was at the time of writing.
The outbreak of the second COVID-19 wave has caught the Israeli government by surprise, with Netanyahu losing popularity in the face of the current health and economic chaos. This is the same Netanyahu who knew how to recover from the 2008 global financial crisis, who managed the 2011 social protests, who won three election campaigns despite three indictments against him, and who, having declared victory over COVID-19, found time to deal with annexation of Jewish settlements in the occupied West Bank and enhance his personal tax benefits, all the while enjoying record popularity in public opinion polls. Yet the magic touch has dissipated. One million unemployed workers (a quarter of the labor force), plus a thousand new COVID cases every day, go to prove—in the words of Bibi’s adviser, Professor Eli Waxman—that the situation is out of control.
The resignation of Professor Sigal Sadetsky, the director of public health services who fought against the first wave of COVID-19, further deepens the crisis. There are now two dominant views as to the causes of this second wave: First, the government rushed to open the economy and bring students back to schools, creating an atmosphere that the virus was behind us. Secondly, the government did not act, when it still had time, to build a strong epidemiological system that could quickly and effectively respond to the next outbreak. At last we know, too late for many, that the virus is here to stay and that we must learn to live with it.
Contributing to public complacency have been those who promoted the bombastic and hallucinatory television performances of Professor Yoram Les, who repeated the mantra of Donald Trump and Jair Bolsonaro, that “it’s just the flu and will disappear on its own.” The people of Israel began celebrating in a big way, with weddings, rooftop parties, prayer congregations in synagogues and end-of-school parties, infecting themselves with unprecedented fellowship.
The question is, What to do now? The natural desire is to flatten the curve again and return as quickly as possible to the celebrations that existed prior to the pandemic. Everything was so good! Israelis flew to every corner of the globe, malls were packed as were bars and restaurants, and crowds filled the Caesarea Theater for performances by Shlomo Artzi and Eyal Golan. The calm security situation and a sense of inexhaustible abundance created in Israel a fools’ paradise that promised Netanyahu many more years in government.
During that heady pre-Corona time, half of Israeli workers earned minimum wage and did not reach the threshold for paying taxes; young couples couldn’t buy homes; the public sector suffered from widespread cuts; education, health, welfare, mental health and infrastructure shrank for want of investment; all of these fissures were papered over by a false sense of satiety. Schools had 40 students per class, the elderly slept in the halls of doctor-shorted hospitals, teachers’ salaries were low, welfare bureaus were dilapidated and traffic jammed the streets, all of which testified that something was very sick in Israeli society even before the pandemic.
Meanwhile, Netanyahu stuck to a strict doctrine that the public sector is a burden on the manufacturing sector, and that capital should be preferred over labor, that corporate taxes should be eased, that banks should be nurtured and state budgets cut. This theory created the phenomenon of tycoons, and with it, social disparities that are among the worst in the OECD. The same doctrine continues to guide Netanyahu, who perceives the pandemic as a “just a little bump in the road” that can be overcome without unnecessary spending on health, education and welfare. Yet one million workers who’ve been jobless for four long months now constitute a first-rate social disaster, which threatens to plunge their families below the poverty line and undermine government stability. The street protests leave no doubt: this public is desperate, and Netanyahu knows well that most of them voted for and trusted him.
Netanyahu, who has thus far proved resourceful and resilient, sees the problem and realizes that his rhetoric will no longer calm the people. He therefore approached Professor Stanley Fischer, a former Governor of the Bank of Israel, to come to his rescue. Fischer previously served as the chief economist of the World Monetary Fund. In 1985, when inflation in Israel was verging on 400% (largely because of the costs of the Lebanon War), Fischer was among those who advised the government to implement the economic stabilization plan. This plan ended the cooperative economy hitherto controlled by the State and the Histadrut labor union. That year, 1985, Israel jettisoned Keynes’ monetary theory, which viewed the state’s active intervention as obligatory. It was the Keynes doctrine that had enabled Israel to implement immigration and absorption as its primary goal, providing housing, employment, health and a social safety net for all. Instead, Fischer’s approach was adopted.
Stanley Fischer’s concept, on which Netanyahu relied, found its end with the outbreak of the 2008 financial crisis, which created the social chaos that eventually brought Trump to power in the US. America has become a world leader in its failure to deal with the pandemic, because of a first-class failure of leadership, and Israel may follow suit. If Netanyahu continues to subsidize capital instead of labor and welfare, Israeli society will collapse. Nonetheless, the Bank of Israel has been following in the steps of the US Federal Reserve, infusing NIS 15 billion into companies traded on the stock exchange, even though this will serve only to inflate the value of the stocks, as is the case on the New York Exchange. There is no need. At a time of crisis, the state is tasked with creating jobs instead of injecting billions into corporations with the false hope that they will invest in employment. The trillions of dollars that the Obama and Trump administrations poured into corporations have only worsened poverty in the U.S., deepened the degeneration of physical infrastructure and tarnished the public health system.
Netanyahu intends to provide money to the small businesses impacted by the lockdown, and to finance this by a 15 percent across-the-board cut in public sector salaries. This merely illustrates his adherence to a failed economic policy that cannot be resurrected. What is needed, instead, is investment in job creation; in public infrastructure; in classrooms to reduce the number of students per class, improving both their academic achievements and health; in the health system by expanding wards and the number of doctors and nurses; in raising the salaries of teachers, social workers and psychologists; and in a public nursing home system that will provide humane care to the elderly.
The recurrent proposal to invest in vocational training is correct but insufficient, because the question is what types of work will be done by these workers and who is responsible for creating these jobs. How can we think of a modern economy capable of absorbing a million unemployed workers, a fourth of the labor force, in value-added jobs, when the education system is outdated, and only the rich can afford private schools? How can you imagine a healthy society with a health system that is vastly underfunded? How can you live in a modern country when culture is not supported, forced to operate according to the dictates of revenues and ratings? How can new jobs be created when the transportation infrastructure is outdated and traffic jams to work are a way of life? How can we think of a modern economy when the electricity infrastructure is outdated and dependent on oil and gas, and the fiber optic infrastructures depend on the profitability of their deployment, rather than on becoming a first-rate public priority?
And there’s another question floating in the air: what to do with the inflated security budget? Is it right to cut 15 percent from the salaries of public sector workers while not touching the inflated salaries and pensions of the career military personnel? If one million unemployed workers and their families are facing food deprivation, why buy more expensive weapons to continue the futile war against real and imagined enemies? It is time to slaughter the sacred “security” cow for the sake of children, teachers, the elderly, the poor and all those who have lost their world overnight.
Bibi Netanyahu can continue to sit with Stanley Fischer as much as he likes, but Fischer has ceased to be a shining light of the American economy, ever since he and his like brought about the American tragedy. Social protests in America have embraced the Roosevelt-inspired Green New Deal, which is light years away from the Trump administration’s reckless policy of dumping trillions on the stock exchange while the nation remains ill, poor and unemployed.
The current decade will dictate new economic and social priorities for the next US government, which promises to be different from the Republican consensus that Netanyahu adheres to today. The pandemic is the wake-up call. The need is to change the paradigm from a capitalistic, growth-driven economy to a job-driven, human-centered one, and to shift to renewable energy, everywhere, even here in Israel.