MONDOWEISS ONLINE NEWSLETTER

The Organization for Economic Co-operation and Development (OECD) –a group of 31 governments designed to address economic, social and environmental issues – decided earlier this week to make Israel a full member of the coalition. I’m in Paris right now, and when I heard the news I jumped on the subway and went to the organization’s headquarters in the western part of the city. I was hoping to protest but aside from a heavy police presence, there wasn’t very much going on. It’s possible I was just late to the party (it was around five in the afternoon).
Palestinian and solidarity groups have been engaged in a long-term lobbying campaign designed to undermine Israel’s bid for inclusion in the OECD. It appears that the effort has failed, leaving me both disappointed and puzzled. The disappointment is obvious, but I was puzzled because Israel just isn’t socially and economically fit for membership. In any case, there shouldn’t be any doubt that this is a significant victory for Israel and Benjamin Netanyahu in particular. So, what happened?
The OECD released a comprehensive economic review in January whose purpose was to evaluate Israel’s candidacy for inclusion into the organization. I read the report when it was publically issued and felt afterwards that Israel’s candidacy was weak (I’ve summarized the report below, but it’s worth a read if you have time).
The biggest issue was that all of the data used in the report was hopelessly unreliable. The authors state that the “review is not intended to cover … the Golan Heights, the Gaza Strip or the West Bank. However … this review uses Israel’s official statistics, which include data relating to the Golan Heights, East Jerusalem and Israeli settlements in the West Bank.” So the economic data which was used to evaluate Israel’s candidacy was seriously flawed and marred by an illegal occupation. Economists don’t like unreliable data, so this was kind of a big deal.
Aside from the data issue, there are real structural, market-based issues with Israel’s candidacy. I don’t think that anyone can plausibly argue that the Israeli economy is not market-oriented; labor Zionism has long since lost out to free market capitalism, something Benjamin Netanyahu virtually guaranteed during his stint as Finance Minster in the earlier part of the decade. Yet, some of the welfare state features of that first economic iteration have persisted into the present day. As you’ll see below, Israel has a 20% poverty level – that’s 50% of Palestinian-Israelis and 60% of Haredim.
Now, two of the OECD’s stated goals are to “boost employment” and “raise living standards.” In the Palestinian-Israeli sector that’s doable (although I don’t think it will be done). If you invest in education and come out strongly against racist Jews-only hiring practices you’ll see marked improvements in employment rates and a corresponding decrease in poverty levels. It’s the Haredi sector that’s really problematic.
These are people who not only don’t want to work (in the free market sense of the word), but can’t because of unequal, basically useless (in the context of a market-oriented economy) skills. They only exist because Israel is a welfare state for Haredim. The Haredi problem only gets worse over time because the proportion of working-to-welfare Israelis is shrinking steadily. Some industrious OECD economist can probably identify the point in the future when Israel’s tax base becomes incapable of supporting its welfare-reliant population.
For Israel to really improve and fix its economic fundamentals, it has got to take care of its Haredi problem. I don’t think it’s capable of doing that.
I spent twenty minutes on the subway wondering if I’d missed something. Stanley Fischer – Governor of the Bank of Israel – did a good job steering the country away from the subprime derivative and CDO contagion. But skillful economic maneuvering hardly papers over the serious gaps in social equity and education mentioned in the report.
Then I remembered that I recently saw something suspect about Israel pledging not to  building for a couple of years in ‘Ramat Shlomo’ in East Jerusalem. Was this the price for Israel’s complaisance? Is Barack Obama responding to Netanyahu’s intransigence with an endless supply of soft-boiled carrots?
If I was in Benjamin Netanyahu’s position, I’d game the American President for all he was worth. I’d say something like, ‘Hey, listen. You want me to commit political suicide for the sake of your agenda in the Middle East. Well I can’t do that until I shore up my base. You’ve got to help me do that.’ One OECD vote later and Netanyahu’s done just that.
This is all speculative of course. It remains to be seen whether Obama will get his piecemeal peace deal or not. I doubt it. He likelier succumbed to Netanyahu’s superior brand of politicking.
Here’s the summary of the OECD report:
After a period of high inflation in the 1980s, Israel adopted an anti-inflationary macroeconomic policy. Structural reforms continued into the 1990s including “privatisation and regulatory reforms to encourage market competition… and greater use of market mechanisms in other spheres.” While real GDP growth averaged 4% over the past fifteen years – the “6th highest figure when compared alongside OECD countries” – per capita growth was only 1.7% over the same period. This was largely due to the impact of mass immigration from Russia in the 1990s.
“On a purchasing-power-parity basis, the level of GDP [Gross Domestic Product]per capita has reached 80% of the OECD average.” However, it has reached only 60% of the United States average. The per capita GDP growth rate, which is lower than the OECD average, implies a widening gap between living standards. By contrast, 5 top GDP growth countries in the OECD averaged 2.5% higher growth than the OECD average.
Israel’s GDP in 2008 stood at 726.9 billion New Israeli Shekels (NIS), or USD $203 billion. Per capita GDP was at 98,572 NIS, or USD $27,534. The US dollar was trading at an average of 3.58 NIS in 2008. Israel receives approximately 4% of its GDP through a net positive transfer balance from Europe and the United States. Military aid from the United States comprises half of that number, with 2% coming from private households and remittances.
Growth prospects for Israel in the two-year term appear positive. OECD projections put growth for 2009 at 0%, but “project growth of 2.2 and 3.3% for 2010 and 2011, respectively.” Israel has targeted an inflation rate range of 1% to 3% since 2003, and it has mostly met that target. However, inflation volatility is high compared to OECD countries. The standard deviation of quarterly CPI inflation between 1999 and 2008 was 2.5%, while it was it was between 0.5% and 1.5% for OECD countries.
The ratio of civilian (i.e. not defense spending or debt service payments) spending to GDP is just 33%, while the OECD average is 41%. Public debt is considerably high, however. Israel’s debt-to-GDP ratio will likely stand at 82% in 2010. In light of this problem, the “government budgeted to keep the central-government deficit (excluding net credits) to within 6% and 5.5% of GDP in 2009 and 2010, respectively, and aims to reduce it to 3% of GDP in 2011.”
Israel has higher levels of poverty than any OECD country. Approximately 20% of Israelis are below the poverty threshold. Two groups account for most of the poverty in Israel. Around 50% of Arab-Israelis and 60% of Ultra-orthodox Jews subsist below the poverty threshold. The Arab-Israeli segment of the population constitutes 45% of the 20% poverty figure, while the smaller Ultra-orthodox community constitutes 15%.
The central bank first began intervening in the foreign exchange market in 1997 with the goal of increasing reserves to match 100% of short-term debt. The bank continued to intervene after achieving that goal and now has a policy of discretionary intervention which is tantamount to a “dirty float” foreign exchange policy. Observers believe that the intervention price is around 3.8 NIS to the US dollar.
Government expenditure as a share of GDP was around 44% in 2008. As a percentage of total expenditures, approximately 17% went to the defense sector, 12% was spent on healthcare, 16% was spent on education, 25% was spent on social protection, 14% on general public services and 16% on other items.
The OECD report issues several recommendations in light of its findings. For instance, “more strenuous efforts are required to level the educational playing field for Arab-Israelis,” and, “more vocationally oriented learning needs to be encouraged in the Ultra-orthodox community.” The report goes on to recommend that the Bank of Israel cease manipulating the exchange-rate to avoid “damaging its credibility.” Additionally, “labour-market regulation should be more uniformly enforced, particularly the minimum wage.”

Samuel Nichols of the Christian Peacemaker teams comments on the video he took below in the occupied Hebron hills. “Myself and a CPT colleague, were providing accompaniment to a family who routinely graze their flock near the settlement of Ma’on… Worth noting is that settlement security guards’ salaries are paid by the Israeli military. So this is a settler, living in Ma’on, who is an employee of the Israeli Defense Forces.”

Alon Pinkas, a former Israeli gov’t official, suggests the imposition of the two-state solution in a piece at Politico. Myself I wonder if it is not too late for that. Pinkas makes a typical error:

The [peace] process inevitably grew into a bureaucracy. The less the process accomplished, the bigger the bureaucracy grew.
It turned into an industry, with all the recognizable attributes: executives, strategists, tacticians, analysts, designers, experts, workers, lobbyists, public relations people, industry-media and investors — the works.
It was intoxicating and consuming. Hundreds of diplomats, ex-generals and politicians in the Middle East, the United States and around the world devoted careers to it.
It drained all intellectual and political energy. It morphed into a sort of quasi-religion, with believers and adherents, as Aaron David Miller wrote in his smart, candid article for Foreign Policy.
Except for one small thing: There was no product.

Actually there was a product: More settlements, more colonization, further occupation. Americans were in on it, and this was a real product with a real effect. It seems to have ended the possibility of a viable Palestinian state in the fragment of the land left to them. This is a power struggle. I don’t see how you create equity in Israel/Palestine without some profound shift in the power balance. That is where the U.S. comes in, or could.

More evidence that the Petraeus doctrine has traction. Below is a report sent out by the Jewish Institute for National Security Affairs, the outfit that in Colin Powell’s view got us into the Iraq war. It’s a report on a recent lobbying trip to Israel that JINSA took with six retired American generals and admirals. In it you will see that the American military men are graveled by the Israeli claims about their security. Security is of course the endless justification that the Israelis have used to rationalize oppression, and it reflects a profound insecurity– victim Israel. You can see that the generals aren’t buying.
“When Israel’s interlocutors think of Israel as big and the Palestinians as small, they demand concessions from the ‘stronger’ to the ‘weaker,'” JINSA notes. Exactly. Now who is in touch with reality here? Email below the jump.

Differences Between U.S. and Israeli Strategic Calculations Cannot Be Ignored   The 2010 JINSA Flag & General Officers Trip to Israel took place during a period of political frustration between the United States and Israel on several fronts. The JINSA group, comprised of six recently retired American Admirals and Generals plus two JINSA officers and a staff professional, spent 10 days traveling the country and meeting with the highest echelon of Israel’s defense and security establishment. Everywhere the group went, their hosts thanked them deeply and sincerely for coming to Israel. In each place, the closeness of U.S.-Israeli military and intelligence ties was made clear, even if there are differences that require “ironing out” at the political level. It is hard to underestimate the importance Israelis attach to the security relationship and the abiding friendship they have for those who come to listen, learn and share their experiences. Iran, hybrid war, Hezbollah, Hamas, the “two state solution,” Lebanon, Syria, missiles, defensible borders and the Goldstone Report were recurring topics of conversation, and all of them contained threads of military and political policymaking that resonated with JINSA’s military guests. In fact, the very resonance of the themes and the differences in detail may account for some of the frustration between two countries that are and should be allies in defense of the Western values we share. Close as the United States and Israel are, there are differences that cannot be ignored. The United States is a very large, rich country with an almost boundless capacity to absorb and correct for mistakes. We think in grand sweeps and, if they fail, we go on to the next sweep. Whether the issue is TARP spending, health care, nuclear disarmament, or the move from diplomacy to the threat of sanctions with Iran, the United States has an enormous margin for error in which we can, and often do, change course. Israel has almost no capacity to absorb and correct for such enormous mistakes. [That has been one of the recurring themes in the 28 JINSA Flag & General Officers Trips since 1982: until they stand on the ground, it is hard for our guests to understand just how small Israel is, just how close its enemies are and just how little margin for error there is.] One consequence is that the Government of Israel needs a great deal of confidence-building in order to encourage additional risk-taking (if additional risk-taking is needed), and requires security backup systems for every concession they are asked to make. It leads Israel to want everything worked out in advance-hence the long and detailed “agreements” in the “peace process” thus far. The result can be impatience on the part of even Israel’s best friends, not to mention impatience on the part of those who don’t as a matter of course have Israel’s interests at heart. Impatience breeds frustration, frustration breeds irritation and irritation breeds a desire just to get the deal done and move on-the antithesis of what it takes to actually get the deal done. When Israel’s interlocutors think of Israel as big and the Palestinians as small, they demand concessions from the “stronger” to the “weaker.” Only when Israel is placed in regional context-considering Syria and its connections to North Korea, Lebanon, Iran, etc.-can the size of Israel and the need for defensible borders be properly appreciated. Israelis with whom we met took great pains to be clear about: 1) the risks Israel is already taking; 2) the potential for disaster in larger future risks; and 3) the nature of the present and future conflict. As one example, there will be no battlefield or even a traditional “front” in the next war because the Arab states, Iran, Hamas and Hezbollah are targeting missiles right over the “front” (the borders) and straight at the cities and civilians of Israel. Meetings with Mayor David Bouskila of Sderot and Brig. Gen. Yair Golan of the Homefront Command were eye-opening. How many Americans outside of Times Square even think of themselves as a “front”? Further thoughts and lessons from the 2010 JINSA Flag & General Officers Trip will appear in articles and JINSA Reports over time. For now, it is enough to say that the group was pleased by their Israeli hosts’ candor and the Israelis were energized by the enthusiasm of their American military visitors. JINSA is heartened by the continuing closeness of the American and Israeli security establishments even as we worry about new and growing threats to Western-and specifically Israeli-security interests.

One of my themes is that Zionism is dumbing down the Jews. In order to believe the Zionist narrative about Israel, you basically have to block out a lot of history and wipe out another people’s humanity and experience, simply disavow it. Here’s further evidence. Deborah Nussbaum Cohen in the Forward has a fine report on a controversy over a question on an Advanced Placement test. “Some Jewish” high school students (“Some Jewish” is my ace in the hole, too) have objected to an essay question that uses a quote from the late Palestinian-American Edward Said.
Note that this has nothing to do with Edward Said throwing a rock in Lebanon or whether you think Israel has a right to exist etc.

The Said quote on the AP test reads: “Exile is strangely compelling to think about but terrible to experience. It is the unhealable rift forced between a human being and its native place, between the self and its true home: its essential sadness can never be surmounted.”
“I’m in a public school and most students here have the impression that Israel is the one attacking [the Palestinians],” the 17-year-old [Ayelet] Pearl said. “To put a quote in like this subconsciously reinforces the idea that Israel’s the antagonist, the aggressor, the one in the wrong.”
Though she had just 40 minutes to write the required essay, Pearl froze when she encountered the Said text. “I didn’t know what to do because I wasn’t comfortable answering it,” she said. She decided to put a paragraph objecting to the quote’s inclusion at the top of her essay. “I find it really inappropriate to put a political question like that on a test,” she said she wrote.
Using this quote in the AP exam “is very reflective of the widespread use of education and testing as a platform for anti-Israel propaganda,” she told the Forward.

This is crazy. It is an effort to deny the experience of a prominent intellectual who witnessed the Nakba then sought to document it.
For the record. Edward Said grew up in privileged Jerusalem, the Talbiyah neighborhood, and left at 12 in 1947 for Cairo. As the Nakba enfolded his old neighborhood and country, he saw his aunt spending her days helping Palestinian refugees who were pouring desperately into Cairo. He learned that the neighborhood of his youth was now populated by European immigrants, cleansed of Arab life. He was instructed by his father never to bring politics into his work or his career would be finished. Said bit his tongue until 1967, but dissociation about lost Palestine afflicted him all his life.
As he wrote in the memoir, Out of Place: “Even now the unreconciled duality I feel about the place, its intricate wrenching, tearing, sorrowful loss as exemplifed in so many distorted lives, including mine, and its status as an admirable country for them (but of course not for us), always gives me pain and a discouraging sense of being solitary, undefended, open to the assaults of trivial things that seem important and threatening, against which I have no weapons.”
Huh. Seems like he really means that.
Ayelet Pearl does not want to believe that Israel was an antagonist, an aggressor. This is fantasy. Ennobling Israel means never having to come to terms with the unfairness of Said’s dispossession– which by the way, was in complete defiance of the 1947 Partition resolution that breathed legitimacy into the Jewish state. It means self-imposed stupidity.

I thought Jeffrey Goldberg was over, the needle had moved while he hewed to the rightwing line on Goldstone and the colonization of East Jerusalem. Well, I was wrong. Save the date: Jeffrey “The Serious Moderate” Goldberg vs. Jeremy “The Passionate Moderate” Ben-Ami. But wait, there is no “versus”– this is a conversation not a debate! One can only wonder what and who will be thrown under the bus. Walt and Mearsheimer? East Jerusalem? Goldstone? Brant Rosen and the young Jews?
June 16. 7 pm at the NY Society of Ethical Culture
Jeremy Ben-Ami, J Street Founder and President, in conversation with Jeffrey Goldberg, National Correspondent for The Atlantic, about the U.S. role in working to solve the Israeli-Palestinian conflict.
Location: New York Society for Ethical Culture, 2 West 64th St. at Central Park West
Oh, here’s Rosen, by the way:

most critically, younger Jews are increasingly frustrated at being labeled anti-Israel or even anti-Semitic for voicing their opposition to Israel’s treatment of Palestinians. As a community, we are clearly beginning to step out from the shadow of those who still believe that the status quo is maintainable – or acceptable. Judge Goldstone has upheld the principles of justice, compassion and truth that are the very heart of the Jewish religion.