On the fifth anniversary of the cost-of-living protests, The Report examines the movement’s successes and failures.
By SHLOMO MAITALA protester holds a sign during a demonstration in Tel Aviv calling for lower living costs and social justice on September 3, 2011(photo credit: REUTERS)
LIKE MANY revolutions, this one began with one person and one seemingly trivial incident in the hot summer months of 2011.Video editor Daphni Leef, then 25, had to vacate the Tel Aviv apartment she had lived in for three years due to major renovations. She soon found that apartment rental prices had skyrocketed and, on her salary, were unaffordable. So, on July 14, she started a small protest, pitching a tent on the city’s Habima Square to dramatize her housing problem.She opened a Facebook page and invited others to join. Many did. Protesters gathered around Rothschild Boulevard, and by the following day 50 tents had been pitched.Why there? Because the real estate along the boulevard was the most expensive in all Israel. Soon, there were many hundreds of tents. “You have to be a Rothschild to afford to live here,” the protesters said.Tens of thousands of demonstrators joined a rally on July 23 calling for social justice, a lower cost of living, lower housing costs and government action to help the increasingly squeezed middle class.On August 8, responding to the protests, Prime Minister Benjamin Netanyahu appointed a committee headed by Prof. Manuel Trajtenberg to make concrete recommendations.The social protest grew quickly. It peaked on Saturday night, September 3, with the “March of the Million,” when 460,000 took to the streets of Haifa, Tel Aviv and Jerusalem, including 300,000 in Tel Aviv alone.There was no formal leadership; social media were the main organizing tool. But some activists did emerge as leaders, including Stav Shaffir and Itzik Shmuli − later, MKs for the Zionist Union. Both have been effective in the Knesset.The protest ended when, by mutual agreement, the Rothschild tents were moved to a site near the Arlozorov train station on November 28, 2012.Was the Rothschild Revolution a flop? Or did it at least in part fulfill its goals? Five years later, we can draw up an interim assessment.The Rothschild Revolution did generate modest improvements, directly and indirectly.The Trajtenberg Committee made many recommendations for lowering housing costs, boosting competition in the economy and reducing defense spending in favor of social spending. But the one proposal for which it is widely known was to make preschool for three-year-olds compulsory and free − one of the few recommendations that the Netanyahu government implemented. Not earth-shaking, but significant for many since child care is a heavy burden for working people. Trajtenberg, formerly head of the Budget Committee of the Council for Higher Education, is now a Zionist Union MK.Indirectly, the rise of the Kulanu party led by Moshe Kahlon may have its roots in the Rothschild protest. Finance Minister Kahlon and Construction Minister Maj.-Gen. (res.) Yoav Gallant have pushed measures to increase bank competition and lower housing costs and rents, making affordable cost of living their mantra. So far, they have had limited success. Housing prices continue to rise inexorably.Social media have forever changed politics and democracy. But they prove it is far easier to call attention to deep-seated problems than to solve them.The Rothschild Revolution could not have occurred without social media as organizing tools. Nor could the so-called Arab Spring, in which social and political protest began in Tunisia and spread widely to Egypt, Libya, the Gulf States and Syria.But while social media make it easy to quickly assemble a large mob to protest, they are largely ineffective at shaping the intricate political deals and coalitions needed to implement change. In a sense, we now have asymmetric democracy – more social protest, less social action. Social media-driven democracy can tear down old governments but cannot build and empower new ones. This is proving rather dangerous in many countries.Generation Y disproved their apathy.Generation Y is the cohort born from 1980 to about 2000. They are also known as the Millennials. It is widely claimed that this so-called “me” generation is apathetic and that its members care only for themselves. (See The Report,“Can Generation Y Save Israel?” January 14, 2014.) But the Rothschild Revolution was, in fact, sparked by Gen Y. Apparently, when Gen Y as a whole is hurting, it can come together to protest and seek action and remedies.It is exceedingly difficult to organize mass protests of looming economic crises when there is no perceived direct and immediate link to the public’s pocket.For me, this is the main lesson drawn from the Rothschild Revolution.Isaiah Berlin once wrote a famous essay in which he said there are two kinds of people: hedgehogs, who have one big idea; and foxes, who have many small ideas.Our government seems to be a hedgehog. It focuses on one idea, whatever trivial idea the media are blasting at the moment, validating the principle that, in politics, the “urgent” (e.g. Sarah Netanyahu’s treatment of her hired help) displaces the important (Israel’s slumping economy and lagging exports).As Yesh Atid leader Yair Lapid asked rhetorically of government ministers, “When do you work for us?” I would add, when do you deal with the real problems, if you spend all your time on the trivial ones?Israel’s economy is slowing. In 2015, Israel’s services exports fell for the first time since the 2008 global crisis, dropping 3 percent, to $34.4 billion. Much of the drop was the decline in tourism, which slumped 6%. Overall, total exports fell 7% last year to $45.7 billion, continuing a downward trend evident since 2012. Partly as a result of weak exports, Israel’s economy grew only 2.3% in 2015, its slowest pace since 2009.These worrisome trends have become more pronounced in 2016. During March- May, exports of high technology industries slid 27.8%. Israel’s trade deficit in goods (the surplus of goods imports over goods exports) was 14 billion shekels in January- May.Last November, the OECD (Organization of Economic Cooperation and Development), a group of some 34 developed countries, predicted Israel’s economy would grow 3.25% in 2016. In May, OECD economists revised this forecast sharply downward to only 2.4%, and even that low number may again be adjusted downward later.The only thing propping up Israel’s economy has been a wave of consumer spending, buoyed by low interest rates and growing consumer debt. Consumer borrowing rose 9% in 2015 and continues to grow in 2016. When consumers begin to perceive the weakness in the economy, that growth engine, too, will diminish.So, who in the Cabinet is taking responsibility for the slumping economy?Apparently, not Kahlon. His chief economist Yoel Naveh “put the sagging export performance into perspective,” noting that 80% of the export decline in 2016 came from three industries: pharmaceuticals, electrical components and chemicals. These three industries account for half of Israel’s total exports, he admitted. Naveh believes this is not a macro problem, but a micro one.It is true that unemployment is at a historic low, but jobless numbers always lag behind growth and export numbers. I fear there is inevitable bad news ahead for workers.While the Cabinet appears to be asleep, the Bank of Israel stands watch.BOI experts recently analyzed an “extreme case” geopolitical crisis in Israel driven by sharp increases in inflation, interest rates and unemployment; a 25% drop in housing prices; a 40% decline in the Tel Aviv 100 stock index; and a 40 billion shekel write-off of bad loans.I would like to see the Cabinet discuss this scenario, build contingency plans for each ministry and, for once, “work for us” ‒ pay attention to serious matters rather than trivial, marginal ones.Author Nasim Taleb warned of “Black Swans” in his book by that name ‒ unexpected and unpredictable events (so named, because black swans were believed not to exist, until some were found).In the volatile Middle East, the only thing predictable is that there are frequent, largely unpredictable black swans. Citizens might rest easier if their government took some time to think about how to respond to some worst-case black swans – including those already flapping their wings here at home.So, was the Rothschild Revolution a flop? Or did it fulfill its promise? In hi-tech there is a key concept known as “proof of concept.” It means, if you have a great idea on paper, you still have to prove it is feasible by making a prototype or sample.The Rothschild Revolution was a proof of concept. Concerned citizens can indeed gather in massive numbers to protest key issues and initiate awareness among political leaders, generate proposals and spur action.It happened once. It could happen again. And there are hopeful signs.On June 14, local government leaders and social activists started a march from the Negev to Jerusalem. Called the March for Equality, protesters demanded equality in state funding for schools and social services in their communities in the periphery, noting that upscale Ra’anana spends many times more per child than Ofakim or Sderot.But, even though the protesters were joined by Knesset Members and Avi Nissenkorn, head of the Histadrut labor federation, media coverage was scant and the impact, so far, has been minimal.No social policy is more effective for helping low-to-middle income people than a strong economy. But it is a fact of life that Israeli politics are dominated by an 800-pound gorilla: defense and security. Economics is almost always a distant second.If I pitched a tent in Gan Tiyul, Zichron Ya’acov, where I live, with a huge sign reading “Prevent the Recession Now!” would anyone pay attention? Not likely. In that sense, the Rothschild Revolution was an aberration, not a precedent.Fall of the TycoonIn the first draft of this column, I missed a key point. On July 4, US Independence Day, Tel Aviv District Court Judge Khaled Kabub made a small Israeli declaration of independence (from tycoons). In a tightly reasoned 280-page judgment, he convicted Nochi Dankner of illegally manipulating the share price of IDB Holdings Corp., which he controlled.Dankner bought IDB from the Recanati family in 2003 for a song. In the boom years up to 2008, and even beyond, he used IDB to borrow billions and build a pyramid of companies. At the peak, Dankner and his IDB controlled publicly-listed shares were worth $142 billion. But he made a basic mistake.The rule for good management is: Borrow during inflation, but be sure you pay it back before the deflation sets in and you no longer can.Dankner over-leveraged (i.e. over-borrowed) his pyramid, struggled to pay back the money he borrowed from banks and bondholders and, then, according to Kabub, manipulated the slumping stock price of IDB in a desperate effort to raise money and avoid bankruptcy.Business daily TheMarker founder Guy Rolnik sees a direct link between the Rothschild Revolution and Dankner’s fall.Post-2011 legislation put an end to the kind of pyramid Dankner built and its attendant abuses. Until 2011, Rolnik claims, a majority of the people were apathetic toward how money and power were concentrated. After the Rothschild Revolution, all that changed.New awareness arose. New legislation was passed banning pyramids. Dankner’s pyramid (see The Report, February 10, 2014, “Twilight of the Tycoons”) and all such pyramids became illegal under the Business Concentration Law passed by the Knesset on December 9, 2013.So, no, the Rothschild Revolution was not a flop. But, today, when dramatic protest is needed to focus some attention on the slumping economy, and the damage it will do to lower-income groups, apathy and complacency again prevail.Alarm bells are ringing, But our government is sound asleep.Postscript: Finance Minister Moshe Kahlon announced in early July plans to cut both corporate and income tax to spur the flagging economy.The writer is senior research fellow at the S. Neaman Institute, Technion and blogs at www.timnovate.wordpress.com.
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