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  June 12, 2013

Israel has More Poverty than Any Developed Country

The OECD, like Israeli protestors, turns a blind eye to the occupation, which has become the greatest drain on Israel's welfare system
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Shir Hever is an economist working at The Real News Network. His economic research focuses on Israeli occupation of the Palestinian territory; international aid to the Palestinians and to Israel; the effects of the Israeli occupation of the Palestinian territories on the Israeli economy; and the boycott, divestment and sanctions campaigns against Israel. His first book: Political Economy of Israel's Occupation: Repression Beyond Exploitation, was published by Pluto Press.


SHIR HEVER, TRNN PRODUCER: The image which the Israeli Ministry of Foreign Affairs promotes of Israel is an image of a prosperous economy, a powerhouse of innovation.

As part of the efforts to present Israel as a success story, Israel applied for membership in the OECD, the Organization for Economic Development and Cooperation, and received it.

The organization publishes statistics about the member states and promotes certain kinds of reforms, usually associated with neoliberal values. OECD statistics have undermined the goal of Israel's reason to join the OECD. These statistics show that Israel suffers from extreme level of inequality, its education system is among the worst in the OECD, and its poverty is the highest compared to all OECD countries.

It should be noted that the OECD decided not to include statistics about the occupied Palestinian territory and the occupied Syrian Golan, because the member states of the OECD don't recognize these areas as part of Israel. But because the OECD relies on Israeli published statistics, the actual data published by the OECD reflects a segregated picture. While colonists from the occupied territories are included in the reports, the 4 million Palestinians who are also part of the Israeli economy are ignored by the OECD.

Israel's overall tax income as a proportion of its GDP is higher than that of Chile, Mexico, and Turkey, for example, and is even higher than the weighted average of all OECD countries, but Israel's poverty rate is the highest compared to all of these countries.

So what explains Israel's failing welfare system and raging poverty rate? The most prominent feature of the Israeli economy is its high military expenditure. In proportion to its budget, it is higher than any OECD country. Even the U.S, the second-biggest spender on the military, spends about 4.5 percent of its GDP on the military, while Israel spends, according to official numbers, between 7 and 9 percent. Unofficial sources speak of much higher ratios.

But the cost of Israel's massive military and security apparatus is not equally distributed among the population. The Boston Consulting Group recently published its Global Wealth Report for 2012, in which it was revealed that Israel is the country with the tenth-highest ratio of millionaires compared to its population. In relation to households considered "ultra-high-net-worth", Israel is eighth place, even higher than the United States.

The stark inequality and high poverty rate can explain the social protests in Israel which took place in the last two summers. The so called "Tent movement" or the "J14 Movement" demanded a change in priorities and a return to social programs. The protestors demanded that the government take responsibility over the standard of living of the population and do something about the rising costs of living while income remains stagnant.

But the results of the election of January 2013 brought no changes to the priorities of the Israeli government. Israel's newly appointed minister of finance, Yair Lapid, used the social protest to garner popularity, but immediately set on a path to implement austerity measures, cut social spending, while leaving the defense budget intact.

The poverty line is measured as half of the median wage for a household. In developing counties, poverty measurements are different, relying for example on the World Bank's definition of poverty. Israel's poverty rate is the highest in the developed world, but even counting Israel as a developed country is misleading, because it ignores the fact that a third of the population in the area controlled by Israel are not Israeli citizens, and their average standard of living falls far below accepted levels in developed economies.

And that is precisely the point which explains why the high poverty and inequality among Israelis do not inspire a true attempt to change the system. Israel's political environment is based on the "divide and conquer" strategy, on the principle of separation.


LIA TARACHANSKY, TRNN PRODUCER: I asked Dana why the social protest movement does not at least address the occupation from an economic point of view. While the Israeli public pays over $9 billion a year on subsidizing the settlements in the West Bank, most of the profits go into the same private hands whose centralized control over the Israeli economy the movement opposes.

JOSEPH DANA, +972 MAGAZINE: That's very true. And unfortunately I have yet to see that statement clearly made in the way that you just made it in these demonstrations anywhere. And so this is what we're talking about. Why isn't the statement that you just made discussed, and why isn't it openly discussed, and why aren't there opinion pieces about it, and why aren't the tent protesters organizing around this principle? We think that the barrier between connecting what's going on in the streets of Tel Aviv and the tent protest and the statement that you just made is the separation principle.


HEVER: Yair Lapid, while running for the Israeli parliament, the Knesset, tried to appeal to people's concerns about their standard of living.

YAIR LAPID, ISRAELI MINISTER OF FINANCE: We are the party of the Israeli middle class, the old-fashioned taxpayers who served in the army and afterwards worked hard all their life, paying a high tax, and see that they cannot afford an apartment to their children, and the cost of living is going up and up, and there's no equality of burden with the other parts of Israeli society, and they're becoming more and more frustrated with the way things are going around here.

HEVER: But indeed, after being appointed minister of finance, Yair Lapid understands that in Israel's political culture he will not be forgiven if he appears soft towards the Palestinians, and he can therefore not make very serious cuts in Israel's enormous defense budget. But he will probably be forgiven, or so he believes, for abandoning his promises for social reform.


INTERVIEWER (SUBTITLED TRANSL.): Someone who makes 100,000 [Shekels] a month will suffer a lot less from this budget than someone who makes 10,000 a month.

LAPID (SUBTITLED TRANSL.): Let's start with this: I'm not a socialist. I don't think we need to scare the entire business sector. I know the theory that let's take from the rich. I also see it didn't work. There is no place in the world where it worked. All the economic history--you know this more years than me--socialism didn't succeed anywhere in the world. I won't destroy the Israeli economy so that they will stop writing bad things in Facebook.


HEVER: The conclusion is that even the Israeli public pays a heavy price for the continuation of the occupation and segregation policies. But as long as the occupation and the apartheid continue, the military and security apparatus will continue to dominate the Israeli political system and will not allow a redistribution of resources to restore Israel's welfare system.

This is Shir Hever for The Real News.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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