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Between Economics and Politics: Netanyahu and the Domestic Crisis in Israel

Yoav J. Tenembaum - 8/5/2011

The latest waves of demonstrations in Israel have surprised most observers and politicians, including Prime Minister Benjamin Netanyahu. Indeed, even the demonstrators themselves are surprised at the effect of what they have done.

The groups that have organized the demonstrations, let alone those participating in them, are hardly monolithic in their political allegiance and economic views.

At the demonstrations one can see a lot of red flags, pictures of Che Guevara, on the one hand, and Israeli flags and flowers, on the other hand. One can notice slogans from the most ridiculous (comparing Netanyahu with Mubarak and Assad) to the most innocent (asking for a better quality of life).

It has been reported that political parties, from the Communist to the free-market opposition party Kadima, have actively assisted in organizing the protests that have been taking place for the last three weeks.

To be sure, ruling Likud Party members have expressed themselves in support of the demonstrations, too.

Opinion polls indicate that an overwhelming majority of Israelis support the demonstrations.

The demonstrators have gained many adherents from most political parties and, particularly, from the printed and electronic media.

Non political groups representing diverse interests in Israeli society have assumed the leadership of this yet-to-be defined movement.

Their lack of political experience has become crystal clear when they asked for negotiations to be held exclusively with Netanyahu at the full glare of TV cameras, in public and live. They professed to be asking for transparency. They actually ended up eliciting critical comments from many in Israel, including the head of the Workers Federation, a powerful potential ally. What became transparent, then, was their irritating arrogance.

They had to admit they had made a mistake.

Netanyahu, who, to begin with, has tried to embrace the demonstrators, has said that a populist spirit has engulfed the country.

He is right.

However, some of the complaints being aired by the demonstrators make sense. After all, they claim that the cost of living in Israel is high; that most families find it hard to make ends meet; that indirect taxes are too high; that renting an apartment can eat up a considerable slice of the family budget…

Translating their complaints into concrete demands is what makes the difference between staging a demonstration and advancing concrete, viable requests.

This process, though, entails an internal debate among the heads of the demonstrators that has yet to be defined.

The calls for a change emanating from the demonstrators and their supporters have been made on behalf of the middle class, and have ranged from the moderate reformist to the radical revolutionary: from introducing some changes within the economic system to changing the economic system itself.

The government headed by Netanyahu has already said it would be ready to introduce changes. Indeed, a committee of ministers, advisers and academics has been set up by the government to open a dialogue with the demonstrators.

For the last few years, the Israeli government, alongside the central bank, has pursued a prudent fiscal and monetary policy aimed at averting a crisis in Israel similar to the crises that have beset many countries in Europe.

Israel's success in maintaining a stable macro-economic system amidst the global economic crisis has been noted by many economic observers, including the major credit rating agencies.

An economic volte-face right now might derail this process. A constant blinking yellow light is – indeed, should be - in front of the decision-makers in Jerusalem as they discuss their next steps.

Netanyahu wants to diffuse this political dynamite without bringing down the entire macro-economic edifice. It's a difficult task. The Finance Ministry, it has been reported, fears Netanyahu might overdo it. Netanyahu, for his part, is said to be frustrated at the passivity of the Finance Ministry. Both may be right.

The problem is that Netanyahu thinks in political terms, no less so than in economic ones, whereas the Finance Ministry thinks in economic terms, more so than in political terms.

Netanyahu's government is not in danger right now. Indeed, it is very stable. Nevertheless, Netanyahu may fear the long-term political consequences of this latest domestic crisis.

Harold Macmillan, British Prime Minister between 1957 and 1963, said, with the benefit of hindsight, that what he feared the most while serving as Prime Minister was surprises.

Netanyahu seems to be having a lot of them lately.