Economy & elections

"It’s the economy, stupid” was one of three defining messages that political strategist James Carville used in helping Bill Clinton to unseat George H.W. Bush in the 1992 US presidential elections. A decade later the economy continues to be an issue that can make or break US presidential hopefuls and determine the balance of power in Congress and in the Senate. And the same is true in democracies around the world.

But in Israel, economic policy – if mentioned at all in the platforms of even the largest political parties – has consistently been eclipsed by security and diplomacy issues. When referring to right-wing and left-wing politics in Israel, the intention inevitably is not to make a distinction between social democrats and neoconservatives but between doves and hawks.

And this preoccupation with security issues is understandable. From its very conception, Israel was gripped in a struggle for survival. Today, Iran is marching toward the attainment of an atomic bomb while vowing to “wipe Israel off the map.” And Iran’s proxies in the Gaza Strip and in south Lebanon continue to build up arms with the purpose of attacking the Jewish state.

Still, a number of factors have come together to make the economy a central issue in elections for the 19th Knesset expected to take place on January 22.

Part of it has to do with the relative quiet in the West Bank and in Lebanon – and to a certain extent in the Gaza Strip, though there has been what is expected to be a temporary flare-up there in recent days. And Israelis have become accustomed to the stalemate with the Palestinians on peace talks, recognizing the tremendous distance between what Israel is willing to compromise on and Palestinians’ demands. This state of affairs has allowed Israelis to refocus their attention from security and diplomacy to socioeconomic issues.

There is much to focus on.

Though basic macroeconomic indicators such as unemployment and GDP growth look good – especially in comparison to the US and Europe – there is a plethora of socioeconomic data that point to major flaws in our economy.

Topmost among these is severe income inequality.

In OECD countries today, the average income of the richest 10 percent of the population is about nine times that of the poorest 10% – a ratio of 9 to 1. In Israel, Turkey and the US the ratio is about 14 to 1.

And it is becoming increasingly difficult for the average Israeli to make ends meet. Just this weak the Central Bureau of Statistics published figures for 2011 showing that the average net income per household dropped nearly a percentage point to NIS 12,345 a month, while average household expenditures were up slightly to NIS 13,967 a month. In other words, Israelis spend more than they earn (assuming reported income reflects actual income).

Due in large part to low participation in the labor market by haredi men and Arab women, poverty levels are exceedingly high in Israel. According to the National Insurance Institute Poverty Report for 2011, 1,773,400 Israelis live in poverty – 837,300 of them children. The institute also found that 433,300 families are impoverished and 20.1% of the elderly are destitute.

Issues such as poverty, high consumer prices and income inequality must not be ignored. During the election campaign candidates must be forced by the voting public to articulate coherent economic policy solutions such as increasing competition to bring down the prices of consumer goods; finding ways of getting more ultra-Orthodox into the labor market; and improving our educational systems so that more young people receive the education they need to find higher-paying jobs as adults.

These are necessary conditions for the health and strength of Israel no less than protecting our citizens from terrorism and military threats. In the US, in Europe and in other democratic countries the economy receives the attention it deserves from politicians.

The time has come for Israelis to join in declaring: “It’s the calcala (“economy”), stupid.”