Privatization, Occupation, and the Israeli Economy

Political economist Shir Hever says recent plans to privatize struggling state-owned companies in Israel are hastened by the occupation of Palestinian territories


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ANTON WORONCZUK, TRNN PRODUCER: Welcome to The Real News Network. I’m Anton Woronczuk in Baltimore. And welcome to another edition of The Hever Report.

Now joining us is Shir Hever. Shir as an economic researcher for the Alternative Information Center, a Palestinian and Israeli organization.

Thanks for joining us, Shir.


WORONCZUK: So, recently Israel announced that it’s going to privatize $4 billion worth of state-owned industries in order to pay off its high national debt. Can you talk about the significance of this?

HEVER: This is a move that is in quite a larger scale than we’ve seen before. Israel has been pursuing privatization policies for decades, specifically since 1985, when it adopted a very neoliberal economic policy and pursued it until today. But I think the divergence is the point where Israel is not just any other Western country which adopts privatization policies as part of its neoliberal approach. We see these policies all around the world. But the divergence is because Israel is also facing the kind of expenses and the kind of economic challenges that most countries don’t experience. And that has a lot to do with the occupation of Palestinian territory and the repression of Palestinian resistance. And I don’t think we would have seen this much call for large-scale privatization had it not been for the attack against Gaza this summer.

WORONCZUK: And what industries will we see sold off?

HEVER: Well, the plan that the government is discussing and gave a preliminary approval for is 11 companies, worth a total of $4 billion. And out of these 11 companies, seven are going to be sold only partially. The government wants to keep at least 51 percent of the stocks in these companies and only generate finance, generate revenue by selling the other 49 percent. And four other companies are to be sold completely, 100 percent, to the public or to private investors. And out of these 11 companies, we see infrastructure companies, like, only two Israeli commercial reports, seaports, and Israel’s electricity company. Israel train system is to be privatized. But interestingly, also three arms companies are on that list. And, in fact, these three companies are in the state-owned armed industry of Israel. Of special note is Israeli aerospace industries. This is not only the biggest arms company in Israel, but also the second-biggest industrial company.

WORONCZUK: So, Shir, when the privatization plan was announced, port workers at the Haifa port went on strike. And I think it was about a day or two later the courts ordered them to go back to work. And the Haifa port and the Ashdod port are among the two state-owned industries that will be completely sold off. Can you talk about the history of the struggle between the port workers at the Haifa port and the Israeli state?

HEVER: Well, that’s part of a long feud between the Israeli government and–actually, Netanyahu, the prime minister, even when he was minister of finance, and prime minister beforehand, has attempted again and again to lower the wage of the port workers and to threaten them with privatization, even at one point threatened to open–to allow the Palestinians to open a seaport a seaport in Gaza in order to create competition for the Israeli ports. This, I think, really signifies the sort of split labor market that we see in Israel between a very well-established labor force in the government companies, in the large public sector, and the much larger labor force, which is completely disempowered, denied of rights. And the reason for the very deep gap between these two groups of workers is the fact that there are also Palestinians who can be used as a cheap labor force without any rights at all. And now that most of the Palestinians have been marginalized and expelled from the workforce, Israel has imported labor immigrants to take their place.

So these port workers are trying again to go on strike in order to prevent the privatization. But, in fact, the federation of trade unions in Israel, the Histadrut, which has over the past decades become mostly an organization just to defend those better-organized workers and better-paid workers, the Histadrut rarely goes out of its way to defend the rights of low-wage workers. But they have actually called for a large struggle, with 43,000 workers in all of these 11 companies that are slated for privatization, and they could start calling for strikes anytime now.

I think they are not going to, though, because it seems unlikely that this privatization is actually going to succeed. The government really didn’t decide how exactly they’re going to sell these companies, because they just assume somehow that they can sell companies that they value their worth at $4 billion and people will buy them. And that’s the one weak point in this whole policy, because it’s not certain at all that there is a demand among investors to buy these companies, and that’s especially in a time of economic crisis in Israel and a global boycott movement against Israel. So there’s already been a meeting between the government and leaders of the big institutional investors, like the pension funds and the insurance companies. And the pension funds and the insurance companies said, we’re actually not going to invest in these companies because we don’t believe that these companies are going to be good investments. And if you’re going to keep the control over these seven companies which will stay a government control, then we will just make an investment, but we’re not going to see a lot of profit made. And I think because of that response by the institutional investors, the government is probably going to cut back its plan to privatization.

WORONCZUK: Do you think that the workers have enough power or are organized enough to have any effect?

HEVER: So far the workers have been able to delay privatization processes and to postpone them, especially in the military industry, because in the military industry the unions have this extra prestige of supplying the Israeli army with weapons. So they get more of a public, favorable opinion, as opposed to workers in the electricity company or in the train system, where workers are more reviled by the media and attacked by the corporate media, which weakens them. But I think the workers do have a lot of power up to the point where the government is able to call on other workers who are completely disempowered to take their place. And without a system which protects workers’ rights in general, then these unions, one by one, start to lose their struggles.

WORONCZUK: So the proponents of the plans for privatization say that by selling off parts of the companies, that it will improve the profitability of them, as some of them are struggling, it will improve transparency, and it will also help to pay off the national debt. Do you think it will have this intended effect? And what effect do you think it will have at large on the Israeli economy?

HEVER: We know that this is not the case. We know that in every state in the world that went through with large-scale privatization, like the U.K. under Thatcher, like the U.S. under Reagan, these privatizations actually caused a reduction in public income, because the private companies found ways to avoid paying taxes, reduction in workers’ rights and in worker power because under private corporate ownership the workers are disempowered, and higher prices and lower quality for the public because the companies are mostly interested in increasing their profit margin. That much is pretty clear, I think, from every experience of privatization around the world.

And, also, there are many examples inside Israel of this already being the case. And this is something I think the majority of the Israeli public is quite aware of, that, for example, the airline, El Al, which was sort of the flagship airline of the Israeli economy created by the Israeli government as a government company, they were privatized in 2003, and as they became a privately owned company, they managed to get the government to still subsidize them with large amounts of money. But now they can make decisions that harm the public interest. So, for example, during the last attack on Gaza, when many international airlines refused to fly to Israel, El Al, the private El Al company, agreed to continue its flights, but increased the price of its tickets by a factor of two to five and harmed the customers. So that’s what we can expect with privatization.

But I don’t think the government really has a choice. That’s the issue that it’s facing right now, probably the largest fiscal crisis in Israel’s history since 1985, since the original plan for a neoliberal project has been adopted.

This fiscal crisis that the government is seeing is because the defense budget grows exponentially and it grows every year, and every additional round of violence and additional attack against Gaza gives the army another excuse to demand more money. And the only way that the government stays in power is by scaring the people, by calling on additional threats, mentioning how further threats could threaten the public, and there is no choice for people but to accept a reduction in their standard of living in order to finance the growing costs of security. People are not really willing to take that sacrifice, and there is a large number of Israelis who are leaving the country, especially educated Israelis, skilled workers, who are leaving and finding jobs elsewhere. The government knows that they cannot cut welfare and cannot cut public services with no end. At some point, the society begins to crack and collapse. And that’s why they’re going with this privatization plan at full speed, just in hoping that they can make some quick cash by selling these companies. But they can only do it once. You can’t sell a company again and again.

WORONCZUK: So, then, what kinds of economic policies would you recommend, like, let’s say, if you could, to the economic minister that would deal with the fiscal crisis in a way that would be beneficial to ordinary people in Israel?

HEVER: Well, I think the key question is: who are the ordinary people? And the issue really hinges on the fact that they are about 12 million people living under Israeli control in that area, but only about 8 million of them are Israeli citizens, almost 9 million of them are Israeli citizens. And the others are not citizens, and nobody thinks about, nobody cares about their rights and their economic needs and their standard of living. And as a result of that, Israel has become almost a military base. The main thing the government is concerned about is security and keeping the status quo and preventing Palestinians from uprising against Israeli occupation.

And this, of course, is an unsustainable situation, that you cannot have economic policy when you always have only the military policy. So once we have democracy, once everybody would have the ability to participate in the government in a democratic way, I think the economic issues would go to the top of the agenda, and then we will start to see some reforms, even, I expect, nationalization of companies that have been too hastily privatized before, also in cases where there was a lot of corruption involved.

WORONCZUK: Okay. Shir Hever of the Alternative Information Center.

Thank you so much for joining us.

HEVER: Thank you, Anton, for having me.

WORONCZUK: And thank you for joining us on The Real News Network.


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