On Tuesday, voters turned out in record numbers in order to have their say in the democratic process, resulting in the election of a government led by now former-former prime minister Benjamin Netanyahu and including outspoken political extremist Itamar Ben-Gvir: a government that, if its campaign promises are fulfilled, could radically impact the nation’s economy.
First, some context: The economy that Netanyahu’s government stands to inherit is actually doing pretty well, compared to other developed countries. Israel currently boasts the second-lowest inflation rate in the OECD and one of its highest growth rates. As such, the country’s incoming leaders will have more economic degrees of freedom than other nations may have.
“The promises made by these parties are such that they can very quickly lead Israel down the rabbit hole.”
Prof. Dan Ben-David
With that in mind, “The promises made by these parties are such that they can very quickly lead Israel down the rabbit hole,” said Prof. Dan Ben-David, head of the Shoresh Institution for Socioeconomic Research and an economist at Tel-Aviv University. According to him, the threat posed to Israel’s economic well-being by the nation’s new leadership is both present and substantial.
How does a Netanyahu-Ben-Gvir government threaten Israel's economy?
“In terms of straightforward economics, they are promising tons of money to various sectors. Netanyahu has promised free education from the age of zero, he talked about freezing interest rates and arnona (municipal tax payments), he promised to give full funding to all of the haredi schools,” Ben-David said. “That’s going to cost a lot of money, not to mention the fact that it’s completely going to mortgage Israel’s future.”
Basic economics aside, there is a critical political factor in play. If Ben-Gvir’s Otzma Yehudit Party manages to reform the country’s judicial and political systems as it intends to do, it could lead to severe ramifications on the world stage.
“Those actions can basically bring down the developed world’s wrath on us,” Ben-David warned. “When you have Jewish supremacists in leading political cabinet positions, what does that say about Israel’s ability to defend itself against accusations of apartheid elsewhere? All you need to do is look at what happened in South Africa to get a glimpse of the kind of economic sanctions that we may get hit with if this government follows through with even a part of the things that they promised to do.”
“When you have Jewish supremacists in leading political cabinet positions, what does that say about Israel's ability to defend itself against accusations of apartheid elsewhere? All you need to do is look at what happened in South Africa to get a glimpse of the kind of economic sanctions that we may get hit with if this government follows through with even a part of the things that they promised to do.”
Prof. Dan Ben-David
A sufficient amount of serious economic turmoil from mishandling or severe sanctions could in turn lead to the evacuation of Israel’s largest economic contributors, Ben-David warned.
“It could happen way before the international community wakes up: The entire hi-tech industry, all of the physicians and all of the senior faculty in all of the research universities in Israel make up less than 4% of the population,” he said. “If a critical mass of the young, educated and skilled people in Israel reach the conclusion that it’s game over and leave in the next few years, then the game ends a lot quicker than it would have otherwise.”
It is still uncertain which of the many promises made by the entering parties will come to fruition, but if Israel’s new leadership doesn’t tread carefully, those who put them there could be in for even more change than they asked for.