Grand Canyon of inequality

The West sacrifices relationships and accumulate wealth that brings very little sustained bliss.

Social justice picture 370 (photo credit: Baz Ratner/Reuters)
Social justice picture 370
(photo credit: Baz Ratner/Reuters)
There is a large and growing gap between the rich and the working middle class in Israel – a veritable Grand Canyon.
This inequality has been generated over the past two decades, in part by failed privatization and a string of right-wing governments enamored with US-style capitalism. The gap has fueled the social protest movement, which fizzled this summer but still simmers beneath the surface.
How large is this gap? The top 10 percent of households earn five to six times more per month than the middle class (fourth and fifth deciles). For instance, the chairman of Bank Leumi, David Brodet, recently received a raise that brings his salary to NIS 173,000 a month ($42,000), earning in two days what an average middle- class household earns in a month.
Income inequality in Israel has become the highest among all OECD countries (which groups 34 developed nations) except for Mexico. But the dry statistics don’t really reveal the full picture.
Early one recent Friday morning, I went to the Paz Eshel gas station on the Tel Aviv-Haifa coastal road, just south of Herzliya, in search of a story. Together with a friend, I was on one of six teams each assigned to a four-hour shift at the Pancake House restaurant, located immediately next to the filling station. Our interviews, conducted over a 24-hour period, would become part of a podcast for The Israeli Story, a project launched by four friends to explore Israeli society and culture through personal stories and narratives.
As my friend and I walked into the restaurant, I was worried about finding a theme around which to build our interviews, the “glue” that could hold the various individual stories together. As I glanced west across the coastal road to the gleaming glass towers of Herzliya Pituach, where wealthy venture capitalists jostle with high-tech execs for parking spaces for their luxury cars, the theme hit me: Atop one of those towers was a Microsoft sign; some 250-feet high, it loomed over us – the working stiffs at the gas station – like a giant feudal lord staring disdainfully down at the peasants at his feet.
That was our theme – the Grand Canyon between the wealth on the west side of the highway and the working folk on the east side. Or, in the words of the opening line of Rudyard Kipling’s famous poem, “East is East and West is West and never the twain shall meet”.
I know the world of Herzliya Pituach – the wealthy West – as I’ve spent my career researching innovation and high-tech. But I myself live in the working-class east. I looked forward to the coming four hours of interviews, searching for revealing personal stories.
Danny, the popular and respected Pancake House manager, has four children and seven grandchildren. He’s worked at the restaurant since it was founded by an American couple in 1965. I ask him about the land across the highway.
“Those people don’t come over here,” he says.
“What do you think about the role money plays in happiness?” I ask.
“Money isn’t everything,” he says. “I come from Morocco. People there were satisfied with very little. They were peaceful, serene. When I see young people chasing money at the expense of family life, I think to myself, when you reach my age, you will be sorry.”
How much money do people really need? The answer is less than you think. An upcoming book, Happy Money: The Science of Smarter Spending by Elizabeth Dunn and Michael Norton, reveals that in a national sample of Americans, “people thought their life satisfaction would double if they made $55,000 instead of $25,000 a year; more than twice as much money, twice as much happiness. But our data showed that people who earned $55,000 were just nine percent more satisfied than those making $25,000”.
The optimum amount of income, they find, is rather close to the household average. Perhaps, then, the driven souls in the West sacrifice relationships and families for 24/7 work to accumulate wealth that brings very little sustained bliss. The expensive toys wealth buys soon become tiresome. And sushi lunches are, at least to my taste, inferior to the delicious pancakes we enjoyed.
Danny’s true passion is the Andalusian orchestra in which he plays the mandolin-banjo. He proudly shows me a photo of himself in a tuxedo, with the other 20 musicians. “Business is like an orchestra,” he explains. “Harmony, working together. I would do anything for my workers. Let them know they’re appreciated, then you get the most from them.”
My next subject, Reuven, is initially reticent, insisting he has no story to tell. But what a story he has: Jerusalem-born, he worked with the legendary Haim Laskov running Israel’s ports, held a senior position with contractor Solel Boneh and was CEO of a pension fund. Now almost 80, he has four sons and 14 grandchildren. Today he would more likely be anchored in the West than the East, but a generation or two ago, there was no real East-West gap.
I ask him to reveal the secret of happiness. “A good wife,” he says.
He and his wife have been married for 55 years; he attends Pilates classes twice a week and is learning to play the drums.
As we walk out toward the gas station, we meet Khaled, who has a degree in economics from Haifa University, but who became a driver for a contractor when he couldn’t find a decent paying job. He quickly learned the business and now has his own, specializing in upgrading gas stations.
I ask Khaled if he is happy. “Very!” he says. “Why?” I ask. “My wife,” he says, echoing Reuven.
“What is a good wife?” “Someone who is interesting, a friend, not demanding,” he says. “I loved my wife from the time she was a little girl. Today I love her as the mother of our children.”
Do most Israelis really resent the unfair gap between the rich and the middle class? Or do they like the Quixotic idea that this gulf means that theoretically anyone can rise out of middle class and become rich? According to Dahlia Sheindlin (Social protesters, not socialists, The Report, June 4), “More Israelis perceive the wealth distribution in their country to be unfair than the citizens of 19 other countries, out of 22 states, who were surveyed. Nearly one year after the largest social protest in Israel’s history, a near-consensus of Jewish respondents – 81 percent – say the wealth distribution is either not fair (39 percent) or not at all fair (42 percent).”
Professor of psychology and behavioral economics Dan Ariely, an Israeli academic teaching at Duke University in North Carolina, has similar findings even for capitalist America. He describes his research thus: “There is a 30 year trend in the US. To a society of rich and poor: Big wealth at top, big debt in the middle, poverty at the bottom. So, the starting point of our research was the debate, what is the right level of equality? If everybody is equal: it’s socialistic. If there’s some inequality: people are motivated. When inequality is too large: it demotivates. But nobody knows what is the right level of inequality.
“Michael Norton and I stepped back and said: Let’s ask people what kind of wealth inequality they want. We first asked people what they think is the wealth inequality in the US. We did a study of 30,000 Americans. A national random sample… On average people said 9 percent of the wealth accrues to the bottom 40 percent. The actual figure is far far less: 0.3 percent.
“The top 20 percent? It owns 84 percent of the wealth. America is close to some African countries in inequality. People do not understand this. They think there is far more equality in wealth in America than there is.
“We found something both hopeful and distressing. People created an ideal wealth distribution behind the veil of ignorance that was very equal, more equal than any country in the world. We showed them the US distribution of wealth and a distribution of wealth more equal than S weden, and asked: Which would you choose? Ninetytwo percent chose the ‘more equal than S weden’. Perfectly equal? Nobody wants that! People have a different view of the level of inequality we should have. But they want to create a society more equal than anything we have on the planet.”
What, then, did I learn at the Pancake House from Danny, Reuven and Khaled? Perhaps this.
The last, rarely cited lines of Kipling’s famous poem read: “… there is neither East nor West, Border, nor Breed, nor Birth, when two strong men stand face to face, tho’ they come from the ends of the earth.”
In the end, West or East, rich or poor, whichever end of the earth we come from, whether we dine on sushi or pancakes, we all seek more or less the same thing – meaning in our lives, love and happiness for ourselves and our loved ones. And those things have surprisingly little connection with money. •
The writer is a senior research fellow at the Samuel Neaman Institute at the Technion-Israel Institute of Technology.