JERUSALEM -- For two months, Israel has teetered on the verge of societal paralysis -- not because of the Palestinian intifada but because the Histadrut, the country's largest labor union and the representative of all public-sector employees, has been threatening a general strike. Zionism's pioneers had strong socialist inclinations, and they bequeathed to Israel's current citizens a large and rather ungainly public sector. As a result, the Histadrut wields tremendous power. A general strike would shut down banks, the postal service, airports, garbage collection, public hospitals, ports, telephone directory assistance, public transportation and schools. If the strike lasted more than a couple of days, gas stations would run out of fuel, automatic teller machines would run out of cash, and telephone and electrical outages would go unrepaired. A figure that has been widely reported here estimates that the daily cost of a strike would be about $300 million.
Israel's National Labor Court has repeatedly barred a general strike, and yesterday it once again ordered the Histadrut not to move ahead with strike plans for at least another nine days. Still, the tense labor situation has already caused plenty of disruption. Workers in government ministries walked out two months ago, putting a halt to the processing of passports, work permits and other official documents. Meanwhile, other subsets of the Histadrut have called impromptu work stoppages, shutting down the country's main airport for a day, leaving the streets of Tel Aviv strewn with trash on another and temporarily halting nonessential services in public hospitals.
The reasons for the labor dispute have a lot to do with the unusual realities of Israeli economics, but the standoff's immediate cause may well be the political ambitions of one man -- Finance Minister Benjamin Netanyahu. The former prime minister took control of the finance ministry after being soundly defeated earlier this year in his bid for control of the conservative Likud Party by the current prime minister, Ariel Sharon. Netanyahu has made little secret of his desire to reclaim Likud's leadership from Sharon, and he may see the labor standoff as an opportunity to keep himself in the political spotlight.
Netanyahu was educated in the United States and once worked for an American business consulting firm. Unlike Sharon, who represents a strain of Israeli conservatism that focuses solely on issues of national security, Netanyahu has long been a champion of supply-side economics. Earlier this year, following his loss to Sharon in the Likud primary, Netanyahu served as the government's foreign minister, a central role in Israeli politics. In February, however, Sharon removed Netanyahu from the job and gave him the post of finance minister, a demotion (of sorts) to a position often viewed here as a political backwater. But Netanyahu has refused to fade from public view, using his new post to advocate sweeping economic reforms modeled on the initiatives of Ronald Reagan. His plans include proposals to privatize government-owned services (such as the Israeli electric, water and telephone companies), reduce the number of public-sector personnel, slash social-welfare programs, reform government pensions and cut tax rates for the wealthiest Israelis.
Economic reforms, Netanyahu has argued, are unavoidable. Because of Israel's unique geopolitical situation -- not to mention decades of benign neglect by governments more concerned with security than prosperity -- the country's economy is in dire straits. Israel employs the largest civil service per capita in the industrialized world; spends an enormous percentage of its gross domestic product on defense; has taken on the unprecedented obligation of accepting the immigration of Jews from anywhere in the world, regardless of their socioeconomic status; and must import and export all its products by sea or air, as it has virtually no economic relations with any of its Arab neighbors. What's more, the intifada has decimated tourism and foreign investment here.
So no one doubts that the Israeli economy is in desperate need of attention. The problem is that economics is not a comfortable subject for most Israeli politicians. "The path to political success in Israel has always been through military accomplishment," says Paul Liptz, a sociologist at Tel Aviv University. "In terms of economic policy, Israel is in diapers. The country is incredibly developed militarily, ideologically and in terms of absorbing immigrants, but economics has never really even been part of the public debate."
Into this void has stepped Netanyahu, with his dogmatic supply-side views. And he has found a tenacious sparring partner in the Histadrut's chairman, Amir Peretz, who is himself a member of Israel's parliament. Like Netanyahu, Peretz has some self-reclamation to do -- he has presided over a decrease in the Histadrut's political influence and a split between his union and the leadership of Israel's Labor Party -- and, perhaps as a result, the confrontation between the two men has taken on an increasingly shrill tone. The pattern in Israel has been for such labor disputes to simmer for a while and then end with a quiet compromise, but neither Netanyahu nor Peretz seems to want quiet or compromise right now.
Yet it is the battle between Netanyahu and Sharon for the soul of the Israeli right that may be the most intriguing subplot of this episode. Sharon's government signed off on some of Netanyahu's initial reforms several months ago, but the prime minister himself has said almost nothing about economic policy during the months-long battle between his finance minister and Peretz. Yosef Goell, a retired political scientist at Hebrew University and a columnist for the Jerusalem Post, told me that he believes Sharon is allowing Netanyahu a free hand on the economy for Machiavellian reasons. If Netanyahu succeeds, Goell predicts, Sharon will try to take credit for improving the economy and for tackling difficult problems that previous governments had ignored. If however, Netanyahu's efforts fail, Sharon can distance himself from the entire situation and allow his rival to take the fall.
As for Netanyahu, taking up the problem of economic reform has allowed him to remain in the public eye at a time when voters in his own party have only recently rejected his hard-line proposals for ending the Palestinian intifada in favor of Sharon's more pragmatic, if also hawkish, approach. Liptz argues that economic issues will play an increasingly important role in Israeli politics in years to come. At some point, a wider range of politicians will no doubt speak comfortably about economic issues, but for now, Netanyahu seems intent on playing his comparative advantage in the area of economics for all it's worth.
For his part, Peretz may have proven to be a dogged opponent for Netanyahu, but the Israeli left has a larger problem: the absence of a coherent economic plan of its own. There is certainly ample material with which Israeli liberals could build a modern economic agenda. In the 1970s, Israel had the smallest gap between rich and poor of any industrialized nation; at present, its gap is the widest outside the United States. And, as Goell notes, "This is a much smaller country, and people see the effects more directly. The resentment over the gap is much greater here." What's more, 30 percent of Israeli children live below the poverty line, 22 percent of Israeli families do not have the means to maintain a balanced diet and 16 percent of children live in families where neither parent is employed.
But the Israeli left has been wandering in an economic wilderness since 1977, the year that Likud broke the Labor Party's lock on power and began pushing the country toward a less state-oriented economic model. The Histadrut's tone-deaf approach to its dispute with Netanyahu's finance ministry -- disrupting Israeli lives by staging work stoppages without warning or clear explanation -- hasn't done much to put the left in the good graces of Israeli voters on economic issues. Netanyahu has underscored public disgust with the Histadrut by endlessly citing the statistic that Israel loses more workdays to strikes each year than any other industrialized nation.
According to the Jerusalem Post, polls show that a majority of Israelis oppose a general strike. Peretz, the Post reported last month, "is not too concerned with the Histadrut's diminishing popularity, nor is he disturbed that the public has no idea what the strike is all about." At a moment when the Israeli left finds itself struggling to come up with politically tenable security proposals, it turns out that it could use a thoroughly articulated economic policy as well.
Jeff Mandell is on a yearlong leave of absence from the University of Chicago Law School. He is living in Jerusalem, where he is a Dorot Fellow and a Leifer Social Justice Fellow.
