Contextual Content

Israel’s shock doctrine

This week, the OECD will decide whether to include Israel as its 31st
member state. The OECD is an organization of the developed nations of
the world and in January it conducted its first economic review of Israel.
The OECD’s secretary general Angel Guria congratulated Israeli Prime
Minster while presenting the review for his dedication to neo liberal
reforms and noted that Israel would be welcome in the organization. The
review, which according to internal OECD documents used misleading
statistics, found that if it were to be accepted, Israel would be the country
with the biggest poverty rate in the organization. The Real News’ Lia
Tarachansky spoke to Israeli economists Shir Hever and Shlomo Swirski
to understand how Israel came to develop such a poverty rate.

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Story Transcript

LIA TARACHANSKY, PRODUCER, TRNN: At the end of January, the Organization for Economic Cooperation and Development, a body of all the developed nations in the world, released its first economic survey of Israel. The survey was one of the final steps before the body will vote whether to include Israel as a member state of the organization next week. The Real News spoke to Shir Hever, an Israeli economist at the Alternative Information Center.

SHIR HEVER, ECONOMIST, ALTERNATIVE INFORMATION CENTER: Israel has tried to join the OECD since 1993, actually. Israel’s attempt to join the OECD is part of the policy that Israel adopted with the Oslo process in the ’90s, trying to become more integrated into the global economy and the global community, and using the peace process to pave the way for more integration, which is seen as a strategy that will protect Israel from international criticism for its violations of international law, and also as a means of strengthening the economy and raising revenue, which can be used to further Israel’s policies.

TARACHANSKY: The OECD found that if it were to include Israel as a member state, it would be the state with the biggest rate of poverty.

HEVER: The report focuses mostly on the government policies regarding welfare and social policies in a very right-wing approach, a very strict neoliberal view that calls for maximum privatization, for cutting welfare wherever it is possible. And, basically, policies that Israel has already started to implement, which increase gaps and social inequality, are the ones that the OECD seems to favor.

TARACHANSKY: The Real News also spoke to Israeli economist Shlomo Swirski of the Adva Center, an economic think tank that focuses on social equity, about how Israel developed such a level of poverty.

SHLOMO SWIRSKI, ECONOMIST, ADVA CENTER: The government cut its yearly budgets for four consecutive years. The cuts were very severe. So they hit the school system, the universities, the health system, and more than anything else our social security system. So we think two years the level of the poverty rate for families jumped from 17 to 20 percent.

HEVER: Poverty and inequality in Israel are the highest in the developed world. The only country that has a higher GINI coefficient than Israel�GINI coefficient measures the inequality of income�is the United States. The OECD is worried about the high level of inequality and poverty in Israel, although the policies that increase that inequality and poverty are the very same policies that the OECD seems to favor. Israel started to implement neoliberal policies in 1985, which is following a very deep economic crisis in Israel. But the rate of adopting these policies has been gradual, and the rate of liquidating the Israeli welfare state has taken many stages from 1985. But with the second intifada, the rate has increased very dramatically.

SWIRSKI: In this country, it was introduced by a bipartisan agreement between the two major parties, the Likud and Labor. Okay? And that is important to know, because ever since, both Likud-led government and Labor-led government have used the same kind of microeconomic policy. Okay? The Naomi Klein, this is�you can use it. You can use it in the Israeli case to explain at least one instance, and that’s the second intifada.

HEVER: In light of this combination of fighting, bloodshed, economic crisis, and state of shock for many Israelis who believe that the Palestinians would be forced to accept any deal offered to them, the government had a very convenient ground to impose neoliberal policies on the population, and in fact that was exactly the rhetoric that they used. They said, we are now in a state of crisis, so everyone has to tighten their belts. The ideas that Naomi Klein talks about in her book The Shock Doctrine are already visible in 1985, the beginning of these policies, because the economist that wrote the stabilization plan for 1985, the reform where Israel is taking a new road towards neoliberalism and away from the welfare state, have written in their own diaries and their own journals that they had the plan to implement these policies long before 1985, and they used the economic crisis as an excuse to push forward these reforms. So the reforms were not really tailored to the crisis.

TARACHANSKY: According to the OECD review, the two populations with the largest poverty rates are the Arab citizens of Israel and the Jewish ultra-Orthodox. In the case of the indigenous Arab population in Israel, major contributors are discrimination and a lack of government investment in development and education. The Jewish ultra-Orthodox, on the other hand, have chosen to dedicate their lives to religious study, and are therefore dependent on government subsidies. However, this conclusion is misleading, as the statistics the review used carefully excluded the Palestinians in the occupied territories, while including the Jewish settlers there. An internal opinion published by the OECD noted that the statistics Israel provided are misleading, but went ahead and published with the misleading statistics anyway.

HEVER: Israel did not give the OECD this data. And, in fact, Israel doesn’t have this data, because the Israeli government has intentionally created a system of data management which makes it blind to the size of the settlements. This kind of data can only be inferred indirectly by doing research and making estimates and using various reports written by NGOs. The Israeli government itself doesn’t provide this data to no one.

TARACHANSKY: The internal opinion also noted that the statistics Israel provided the OECD regarding its foreign trade were collected by a private company, therefore leaving the Central Bureau of Statistics vulnerable. Regardless, the OECD review used the statistics anyway and listed diamonds as Israel’s number one export.

SWIRSKI: When you look at the sheer quantity, money, money value of our exports, diamonds comes in first. But when it comes to diamonds, what you should really measure is the value added. You see, all we do in this country, many other countries that have a similar diamonds industry, you polish the diamonds. But the diamonds themselves come from abroad, they come for a certain period of time, they are polished, and they are sent abroad back. So�or what you should count is only the value added. Now, the military-industrial complex is the most successful industry�source of industry and services that we have, especially when in the late 1980s some big chunks of it were civilianized and turned into our well-known high tech industry.

HEVER: Israel has become the fourth biggest exporter of arms in the world. However, two of the three biggest exporters of arms in the world are already members of the OECD, so perhaps that is a sensitive topic for them to mention in their report. But if you talk about military exports as proportion to the size of the economy, then Israel is the biggest exporter of weapons in the world. And that means that the Israeli business model, or the business model of the Israeli economy, you could say, is constant conflict. Peace would not be good for the Israeli economy, at least for many large sections of that economy, and would have an immediate negative impact on Israeli exports.

TARACHANSKY: When it delivered the first economic review of Israel, the OECD secretary general, �ngel Gurr�a, congratulated Israeli Prime Minister Benjamin Netanyahu for the neoliberal reforms he has already implemented in his previous role as minister of finance, and noted that Israel would be a welcome addition to the OECD. Since the process began, Israel has now passed the 18 review stages that examine various aspects of its economy. Next week, the final decision on its acceptance will be taken by a committee of ministers of all the member states. They will decide whether the issue of the occupation is significant enough to prevent Israel from joining and becoming the 31st member of the OECD.