It’s now official. The Israeli shekel has broken all records. It is stronger than the dollar, the euro and the sterling combined, so we are on the map and will remain on it. Economists and commentators are celebrating this event, explaining repeatedly that it is a welcome development, and that the wild appreciation of the shekel proves the Israeli economy’s strength. Moreover, Israel’s credit rating continues to excel, so the state can borrow any amount with zero interest and thus finance its expenses. Of this success it may be said, “Another such success and we are lost.” This is evident in the huge gap between the strength of the shekel and the value of labor productivity in Israel, which is lower per work hour than in other OECD countries by 24%! In other words, the Israeli economy relies on high-tech, which accounts for half of Israel’s exports and attracts the flow of dollars, while all other industries and services suffer from deliberate neglect.

It is enough to travel 30 kilometers north, south or east of Tel Aviv to understand the gaps that have opened up in Israeli society. The country’s 300,000 high-tech workers, who make up 10% of all those employed, live the dolce vita along with a handful of tycoons, real estate entrepreneurs and stock market speculators. The other 2,700,000 workers in industry, services and the public sector belong to a group whose labor productivity is low, and whose level of earnings is likewise low. Thus, absurdly, as the shekel strengthens, Israeli society weakens, and the gap between the center and the periphery widens.

Far behind the high-tech people, who earn NIS 30,000 and even more per month, are hundreds of thousands of workers, mostly women, who live on minimum wage, with 50% of employees in Israel earning below the tax threshold. Although Israel is a start-up nation, it is also the country with the second highest income disparities among industrialized countries after the US. The word “balance” does not exist in its lexicon. Either you succeed or you are a “failure,” and all thanks to or because of you.  Finance Ministry economists are not only proud of the shekel’s strength, but pound into our heads that the shekel will continue to get stronger. In other words, the gaps that exist today between a minority of those who benefit from this blossoming and the majority suffering from it, will only widen. Economists tell us again and again how a weak dollar to the shekel benefits us, because flights abroad are cheaper, as are imports of consumer goods, while tax revenues from high-tech rise.

What they do not say is that Israeli exports are increasingly expensive, and the hundreds of thousands of workers employed in non-high-tech industries are paying the price as manufacturers roll the profit reductions back to their employees. To maintain their profitability, employers require workers to put in more hours that are not reflected in wage increases. The cheaper it becomes for Israelis to travel abroad, the more expensive Israel becomes for both Israelis and tourists. The coronavirus epidemic has hit the tourism industry, which employs 30,000 workers, along with some 200,000 workers dependent on tourism, from bus drivers to peddlers in the market, while high-tech has flourished. These workers remain invisible in the dazzling glare of high-tech.

One does not have to be a genius to trace the source of the huge gaps in Israeli society. Every child and parent knows the answer – education, education and again education. The results of international exams demonstrate that the quality of education in Israel is low, and Israel is characterized by frightening inequality between the academic achievements of different population groups. “These are disturbing findings because there is a direct – and causal – connection between the quality of education of the labor force and productivity,” stated a Bank of Israel document from 2019. The Bank states that “the educational component in early childhood frameworks should be strengthened, and the accessibility and funding of early childhood settings for households with weak economic backgrounds should be increased, as part of the student’s educational continuum.” So simple and clear, yet so frustrating if you look at the Israeli education system, which leaves behind hundreds of thousands of children, Jews and Arabs from the periphery. The terrible result, felt today as a social scourge, is violence in the streets and in schools. This is not how we build a healthy economy that works for the equal benefit of all.

The Israeli formula is not limited to preferring high-tech over other industries. Its economy remains captive to the Reagan doctrine, which espoused the principle that “government is not the solution to the problem, government is the problem.” In other words, any public expenditure on education, health and welfare is a waste, since in order to finance it taxes must be raised, and high taxes hurt investors’ motivation to invest. That is why Israel has become a paradise for foreign investors, who want to convert their dollar into shekels. With an inflated defense budget on the one hand, and a tight fist in everything related to education, health and welfare on the other, the Israeli economy grows while its society shrinks.

The Bennett-Lapid “government of change” is talking about a “social” budget, that is, big reforms, especially in imports at the expense of local production. But this will not alter the image familiar to all. Classrooms will continue to be crowded, teachers’ salaries will remain low, preschool assistants will continue to receive starvation wages without any professional training, the queues for specialist doctors will continue to lengthen, overcrowding in hospitals will only increase, the wait for a child psychologist, or a communication clinician, will last a year or more, the elderly in public nursing homes will wait patiently to die without respect, and public transport will shut down every weekend to preserve the Jewish character of the state, thus increasing traffic congestion.

Private education, private health, private geriatrics, private psychological treatment, private enrichment classes, and the flourishing towers in the heart of Tel Aviv, all create not just gaps between the rich and everyone else. They divide the people themselves between those who have everything, and those who see with wide eyes how they are left far behind. This social rift has become the habitat of the populism that Netanyahu and those around him represent today. The hatred toward the arrogant Ashkenazis and the governmental system that works for the rich, is a result of the inequality, that is, a result of contempt toward the idea of a state for all its citizens. This is also what happened in the US, when a populist, anarchist and racist figure like Donald Trump, a soulmate of Netanyahu, was chosen on the basis of his promise to “dry the swamp”, meaning the administration in Washington. As is well known, this ended in a violent attempt by marginalized white citizens to act against state institutions and the democratic election process under the slogan “Stop the Steal!” Just as Wall Street is responsible for undermining the American democratic regime, the strong shekel is undermining democracy in Israel.

This is why the Biden government is working hard to get rid of Reaganism, adopting the opposite formula, which holds that “the state is the solution.” Biden has set the motto “Build back better!” no longer relying on the formula that the richer the rich become, the more the poor will benefit. “Tax the rich” has become a common slogan vis-a-vis billionaires like Jeff Bezos, Elon Musk and Mark Zuckerberg, but not in Israel. The Israeli ” government of change” continues to adhere to Reagan’s old formula, with Right, Left and Islamists locking arms to prevent the return of Bibi.

They act stupidly and blindly, and as with the Palestinian question, they bury their heads in the sand and refuse to face reality. Racism, violence and xenophobia are a direct product of the social disease from which Israeli society suffers, and Bibi simply nurtured it in a populist way. The gaps between Jews and Arabs, between Ashkenazis and Mizrahis, between Israeli and Palestinian citizens, all create the sad reality in which we live: violence in Arab society, hatred and violence within Jewish society, and the continuing daily bloodshed in the West Bank and Gaza. The country’s priorities need to change from top to bottom, but as long as the government sticks to the same old path, this reality will continue to explode in our faces day after day.

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The Prime Minister’s Conference on Minorities, held on Oct. 29, 2013, was entitled “Growth in Partnership.” PM Binyamin Netanyahu and senior ministers took part, including the “brothers in arms” Finance Minister Yair Lapid and Economics Minister Naftali Bennett, as well as Education Minister Shay Piron and Bank of Israel Governor Karnit Flug. The speakers gave stirring speeches full of promises to boost the political and economic integration of Israel’s Arab citizens, and to dismantle barriers to enable the full business potential of the Arab sector to be used. Higher education was emphasized along with employment, real estate, and fields in which government incentives could encourage economic growth in the Arab sector.

One step forward, two steps back

This conference is an expression of government efforts to demonstrate change in its policies towards the Arab population. The government has been holding such a conference each year since 2007, providing an opportunity for leaders to proclaim their commitment to the Arab sector and the need for positive discrimination. The initiative began during Ehud Olmert’s term as prime minister, and at that time senior representatives of the Arab population also participated (this year no Arab political leader attended).

Until a few years ago the government almost totally ignored the Arab population and swept its concerns under the rug. Now it has suddenly recognized that there is a problem and demonstrated its willingness – at least in words – to deal with it. An expression of this new approach can be seen in the critical report compiled by Prof. Eran Yashiv and Bank of Israel researcher Nitsa Kasir, which was published in May 2013. This report won official recognition, and Yashiv – who gave a speech at this year’s conference – commented that in a recent meeting with Economics Minister Bennett, the latter was ready to listen.

The new approach is reflected in other ways too: about half of the employment guidance centers opened in recent years have been located in Arab towns; the government has set itself the measurable target of increasing workforce participation of Arab women from the current 20% to 40% by 2015; a budget has been allocated for developing public transportation in large Arab towns which, till recently, had none at all; 400 million shekels (about $110 million) have been earmarked for developing industrial zones in the Arab sector; and for the first time in history, the Higher Education Council certified a university in the Arab city of Nazareth.

The conference’s panel on employment was opened by Minister Bennett. In his animated speech, he explained the need to overcome prejudice and take on Arabs holding academic degrees in industry, especially ICT (hi-tech). He also called on Arab youth, saying, “Don’t give up your chance to integrate into the State of Israel and create here a future for yourselves, and we, as the government, declare that we will not give up on you.” He went on to wonder how it is that only 2% of Arabs who have studied programming are taken on in the ICT sector. “After all,” he said, “the talents we’re after are not found only among members of one people or one religion. They are spread around everywhere! We must open our minds and take advantage of every opportunity that presents itself.”

Encouraging words, but Bennett would have done well to direct them at himself and at the members of his government. As noted by Amnon Beeri Sulitzeanu, co-director of the Abraham Funds Initiative, Bennett’s declarations do not sit well with his own political party’s agenda. Bennett, chair of the rightwing Habayit Hayehudi party, is an old friend of prejudice. How does Bennett intend to take on Arab degree holders in the public and private sectors when he himself proposes legislation that would turn Israel’s Arabs into second-class citizens? Right now the government is promoting a law which will discriminate against all those who did not do military or national service, in getting work, in their studies, in buying property and in other areas of life – all this in the guise of benefits to those who served.

Between propaganda and reality

But the fine hall at Tel Aviv University where the conference was held, where all speakers – Jews and Arabs alike – belong to the spruce and orderly upper middle classes, is very different from what one sees in the Arab towns. Here visitors will find poverty and hardship, and the gap between Arabs and Jews is growing. The problem is not merely the hypocrisy of the rightwing, busy inciting against Arabs on a daily basis while calling for us to overcome prejudice at media-covered conferences. The problem is far deeper: it is connected to the basic mood in Israel today, a mood which empties the prime minister’s conference of content.

Fundamental and profound discrimination against the Arab population is the cornerstone of the State of Israel. Positive discrimination for Arab towns, designating land for industrial and commercial development, constructing public and residential buildings, increasing the educational and welfare budget, and investing in infrastructure – all this requires billions of shekels which the government has no intention of spending. It won’t even spend such sums on Jewish towns in the periphery – it will certainly not spend them on Arab towns. And without these sums, as Yashiv explained in his excellent lecture, small initiatives – important though they are – are liable to become barriers to the greater change that is so crucial.

Indeed, as long as the present government continues its blatantly racist policies, such as the decision to establish a Jewish town near Arad at the expense of an Arab village that has existed there for 50 years, all its words on equality for Arabs are a bad joke. (See this article from Haaretz.)

The government has failed miserably to increase the number of Arabs in the state service sector – an issue entirely in government hands, requiring no special resources. It didn’t even achieve its target of increasing the proportion of Arabs in this sector to 10% by 2012: the percentage today stands at 8.5%. This is particularly sobering when one remembers that the Arabs make up 20% of Israel’s citizens. Despite certain steps to integrate Israeli Arabs in the economy since 2010, the gaps between Jews and Arabs are still growing.

Another failure is linked to Israel’s economic structure and only indirectly affects the Arabs as part of the poverty-stricken periphery. The economy today does not create sustainable jobs in quantities that would enable thousands of new workers to be hired. On this issue we should listen to the words of Zeev Rotem, founder and CEO of Rotem Strategy, in an interview he gave to Tali Heruti-Sover (The Marker, Oct. 27, 2013). He said that the “excellent” statistics on the state of employment in Israel are nothing but deception; most jobs offered today are part-time or seasonal, with wages so low that they do not even meet the most basic needs of the worker. About a third of Israeli workers today are in part-time positions. In other words, approximately one million men and women are not in full-time employment. The fact that the poverty rate in Israel is the highest among OECD countries isn’t a coincidence, he says. This is not a case of laziness – it’s the economy, which is creating more and more destitute workers.

A policy for the elites

In light of the above, how should we understand the aims of the conference? There can be no doubt that the government’s change of approach towards Israel’s Arab citizens was due to its desire to join the OECD, which it did in 2010. An OECD report of that year said that Israeli Arabs suffer severe discrimination, and it conditioned Israel’s membership on fundamental changes in its policies toward this population. According to Raed Mualem, Vice President of the Nazareth Academic Institute, even the decision to allow the opening of a university in the Arab City of Nazareth was the result of a specific OECD demand (Al-Arab website).

On the one hand, the Israeli establishment is willing to make certain changes to keep the OECD leaders happy, since membership in the organization brings many clear strategic advantages in the global market. On the other hand, there is an understanding that the backwardness of the Arab sector in terms of employment, economy and education is pulling Israel’s economy backwards too, and there is a real danger that Israel will become a third-world country, as Israeli Arabs and the ultraorthodox Jews grow in numbers relative to the productive and educated population. According to research published in the days leading up to the Israel Democracy Institute’s Caesarea Conference in November, the Arabs and ultraorthodox will together make up half of Israel’s population by the year 2059 if current trends continue (source.)

In particular, there is a growing awareness in Israeli establishment circles that the Arab population is a powder keg, and as long as no resources are set aside for welfare and for dealing with unemployment and poverty, we are all approaching an explosion. This explosion will find expression in increasing crime rates and extreme trends towards separatism and isolationism, nationalist, religious and anti-Israeli sentiments.

But since the government has no intention of turning the present reality upside down, it focuses on the big promise of the Arab educated middle class, which constitutes a reservoir of wasted talent. It bases itself on the Arab economic elite, which is characterized by pragmatism and makes do with what Netanyahu calls “economic peace” with reference to the Palestinians of the Occupied Territories (meaning that while Israel refuses to accept a political solution and recognize Palestinian national rights, it is ready to give economic incentives to a certain social class, thus replacing the struggle for peace and equality with a narrow economic agenda). The Arab middle class in Israel is comprised of university graduates who are willing to work hard for a relatively low salary in order to get into the job market.

There is no vision of social mobility behind the declarations at the conference. Arab graduates who were taken on at Teva, Super-Pharm and Intel are not ambassadors of social change; rather, they are an example of the fact that one can succeed if one turns one’s back on the desolation of one’s people in the Arab towns. The government is under the illusion that the integration of these educated Arabs in the Israeli economy will create opposition to the Arab leaders, whose popularity is anyhow in decline. And indeed, one cannot but notice that, in contrast to the prominence of Israeli Jewish leaders at the conference, not a single prominent Arab public figure attended – even though hundreds of Arab businesspeople and NGO workers filled the hall.

We can conclude that the conference’s debates did not reflect a fundamental change of policy, but an attempt to skim the cream of the Arab elite – while accepting that the problems of the vast majority of the Arab population are too huge and too severe to be dealt with.

Assaf Adiv, WAC MAAN General Director, attended the panel on employment at the Prime Minister’s Conference on Minorities.

• Translated from the Hebrew by Yonatan Preminger

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