Listen to the talk by Barbara Swirski on YouTube:
What I am going to say today is not the usual way of speaking about the occupation, but we believe it adds an important perspective. For the opportunity to talk to you about it, I would like to thank Maya Haber and Partners for Progressive Israel. And most of all, you listeners!
There is a world of information to be found in the Adva report on the cost of the occupation: Here, I would like limit myself to four negative effects of the occupation on Israel’s economy and society:
The first effect is Financial Instability, and with financial instability, lost potential for a more prosperous society, a society whose prosperity is more widespread than it is today;
The second effect is Increased Polarization of Israel society: Socio-economic policy in Israel now ensures that the rich get richer, and the poor stay poor. An important point that I would like to emphasize is that the main losers of the occupation in Israel are low-income Arab and Jewish Israelis.
The third effect is Fiscal Austerity. Its implementation involved drastic cuts in civilian services and social assistance, and stepped-up the privatization of social services begun earlier. The policy of fiscal austerity, initiated back in 1985 by the Emergency Economic Stabilization Plan, and put on ice in the 1990s, reached a new, unprecedented level due to \\ ONE the neo-liberal ideology of the country’s leaders, and // TWO the real threat to the economy posed by higher defense spending and a subsequent budget deficit and increase in the national debt.
The fourth effect is Increased valorization of the Military: In fiscal terms, this has meant increased outlays on defense – at the expense of civilian services – and a change in the focus of police services from domestic matters to actions that support the occupation or counteract its negative effects.
First, Let’s take Fiscal Instability:
The continued bouts of violence stemming from the occupation have resulted in a roller-coaster economy, when measured by annual growth in GDP. GDP is short for Gross National Product, the value of all goods and services produced in a country in a given year.
The first intifada (1987-9), the second intifada (2000-2003), and the Protective Edge Campaign (2014) resulted in especially large reductions in the rate of economic growth – larger than that caused by the world financial crisis in 2008.
And now something else I think cannot be emphasized enough: Although economic growth resumed after each bout of violence, what was lost was never regained. Despite all the talk about Israel’s robust economy — when violent confrontations occur as a result of the continuing occupation, Israel’s economy falters — while other economies keep moving ahead. And if we want to catch up with the strong economies of Western Europe, not to mention the United States, we need to grow faster than them.
The effect of the Second Intifada, which not only extended to the heart of Israel but also lasted several years, is almost always underestimated, and it is often accompanied by the statement: NOT TO WORRY: afterwards Israel always returns to “business as usual.” // However, as the figures we present on Tourism show, all violent clashes reduce tourism (not just tourism, but tourism is a good litmus test) not only for the duration, but also for months to come. And again, that is only part of the story. If Israel were at peace with Palestine, tourism would not only not experience a roller-coaster effect, it would be much higher to begin with.
It was the instability of the Israeli economy caused by the occupation, that led to stringent austerity policies: budget cuts designed to reduce government debt (measured by debt-to-GDP ratio) and designed to communicate the message to the world financial community that Israel’s economy is robust enough to withstand occasional violent eruptions and that other countries can certainly do good business with us.
Now on to Austerity Policies:
A few figures can demonstrate the story: Let’s start with government outlays: Total government spending was reduced, from 47% of GDP in 1995, to 41% in 2000, to 35% in 2016. You can easily guess where the cuts were made: not in defense spending, of course, but in spending for civilian purposes. The biggest cuts were made following the Second Intifada, but the basic policy has continued to this day: thus in 2016, whereas the average outlay on public social expenditures in OECD countries was 21% of GDP — which is not very high in itself –Israel’s was 16.1%: only Iceland, Latvia and South Korea registered slightly lower expenditures. (US 19.3%)
Was the policy of fiscal austerity a force majeure? Not at all: There is always more than one alternative: for example, Israel might have chosen a different reaction to the Second Intifada, one that did not involve re-occupying the entire West Bank. This would have been much less expensive; Israel might have increased income and corporate taxes to pay for the higher defense expenditures, or it might have issued government bonds, rather than what it actually did: REDUCE income and corporate taxes.
The tax breaks did not give a break to low-income Israelis. At Adva we did a study showing that very few women benefitted from the tax breaks.
What the tax breaks born of the Second Intifada did do was to undermine one of the foundation stones of the Israeli welfare state.
The recovery plan, called symbolically “Operation Economic Defensive Shield ” – after the name of the military operation designed to reoccupy the West Bank – shielded high-income Israelis by giving them tax breaks, but exposed low-income Israelis to the full fury of the cost of the military operation by reducing public services – services they could not pay for, and by slashing social assistance. The rules for receiving assistance were modified to make it more difficult to receive, and the actual amounts paid out were reduced. These measures have been analyzed in detail by Adva as well as by the National Insurance Institute of Israel.
We seriously doubt that under normal circumstances any Israeli government would have proposed such measures, brought to the Knesset as a package deal, on short notice, with a sense of national emergency, just as we doubt that the Knesset would have approved them.
It remains to quote the report of The Committee Against the War on Poverty (2013) set up in the wake of the 2011 Social Protest: “the significant reduction in benefit levels . . . caused real harm to the program’s primary objective – the provision of a reasonable, minimum standard of living.”
By the way, that is exactly what the struggle of the disabled in Israel today is all about: giving disabled persons a standard of living equivalent to that of other Israelis.
Now, for Increased Polarization:
Basically, it is the poor and lower middle classes who shoulder the financial burden of the occupation: I WOULD LIKE TO REPEAT THAT SENTENCE: IT IS THE POOR AND LOWER MIDDLE CLASSES WHO SHOULDER THE FINANCIAL BURDEN OF THE OCCUPATION. While tax breaks and the increasing privatization of what were once public services benefit the well-off as never before (with more, more expensive and higher quality services just for them), services that were once free of charge or nearly so, like education and health, now cost money that many cannot afford. Allowances (income support, unemployment compensation, child allowances, disability pensions, etc.) have ceased to benefit poor and low–income persons as they did before: One telling figure: whereas in 1998, allowances (and taxes) reduced the poverty rate by 46.1%, in 2015, it reduced it by only 34.6%. And Israel now has the dubious distinction of registering the highest poverty rate of all OECD countries (19.1%) and one of the highest rates (31%) of low-wage earners (Low wage means no more than 2/3 of the median wage: this is an international convention). In fact, the occupation has actually helped entrench low-paying jobs — in construction, agriculture, manufacturing and nursing care — by opening the doors to cheap, disenfranchised labor, first from the occupied territories and later from other countries.
At the same time that the life chances of the poor were decreasing, the life chances of the rich were also changing: Israel developed its very own top one percent. Economic growth – how states measure how well they are doing economically — trickled up to the top rather than down to the bottom — assisted by tax breaks, cheap credit, and cheap labor. These 85,000 persons have become Israel’s “untouchables” : untouched by the occupation and its violent confrontations, untouched by fiscal austerity, and, I might add: untouched by what happens to the rest of us.
Now — on to the Military: (defense budget = 23% of regular budget)
The ongoing, unceasing need to maintain the occupied territories also maintains the defense establishment as the most important institution in Israeli society. It is no coincidence that the newest peace movement in Israel is called “Women Wage Peace.” Because it is men, mostly, who wage war. And bring home weapons. And use them at home. And it is mostly men who serve as military professionals and who receive generous state-paid pensions when they retire at an early age, way earlier than other employees and in amounts way out of proportion to what other employees receive as pensions.
Back to fiscal matters: The only budget book that is not transparent is that of the Ministry of Defense, so we are not in a position to estimate the military cost of the occupation. What we do know:
Between 1988 and 2010, the Ministry of Defense published a budget figure described as “for increased activity in the territories.” Once we began publicizing those figures, the Ministry ceased revealing them. However, we do have some estimates for the Protective Edge Campaign (6.1 billion NIS in 2014) and for 2016. Together, the figures we do have ad up to some 65 billion shekels, at 2016 prices. Just think what we could have done with that sum: Build 75,000 units of public housing or rental housing for low-income persons, institute a 50% increase in social security payments for the elderly for five years – or, many other things.
Finally, the Ministry of Internal Security, once called the Ministry of Police, was drawn into the vortex of the occupation. Its budget increased three and a half fold since 1994 // not in order to cope with domestic violence, with so-called “family honor” crimes that have become epidemic, with reckless behavior on Israel’s highways, with the violence occurring in Arab localities, with organized crime or with other civilian matters — but rather in order to cope with the fallout of the occupation.
I would like to emphasize the obvious: monies that go to the Ministries of Defense and Internal Security are not used to develop undeveloped areas of Israel, they are not used to create jobs for Arab citizens of Israel, and they are not used to increase the educational opportunities of Israeli youth who fail to matriculate, do not go on to college, and cannot join Israel’s “start-up nation.”
This is my message for today: THE OCCUPATION IS BAD FOR ISRAELI SOCIETY AND FOR THE ISRAELI ECONOMY. IT IS ESPECIALLY BAD FOR LOW-INCOME ISRAELIS. What I haven’t talked about are the most obvious results of the occupation: the expansion of the settlements, the development of a political elite that acts to stymie all attempts to end the conflict, the diversion of government funding to the settlements — at the expense of localities within Israel proper, and the neglect of Jewish development towns and Arab cities and towns.
For detailed information on these matters, I would like to refer you to our report:
“The Occupation: Who Pays the Price”, by Dr. Shlomo Swirski and Atty. Noga Dagan-Buzaglo. June, 2017.
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How the Occupation Dictates Israeli Economic Policy
Israel: A Social Report – 2017 – An Economic Miracle for the Few