Lapid, Netanyahu: Unholy unions

If they are consistent and resolute, Netanyahu and Lapid can win the war they have decided to wage on the monopolies; the labor unions that tried to flex their muscles this week are not the political Tarzans they were a generation ago.

Lapid Netanyahu at Knesset swear in 370 (photo credit: Marc Israel Sellem/The Jerusalem Post)
Lapid Netanyahu at Knesset swear in 370
(photo credit: Marc Israel Sellem/The Jerusalem Post)
It nosedived at takeoff. The airlines strike that initially threatened to disrupt life here indefinitely, ended abruptly with hardly any gains, and made plain what many had previously doubted: Lapid and Netanyahu are going to war, and they intend to win.
With the aviation industry’s strike behind them and an austere budget’s mayhem ahead of them, Prime Minister Binyamin Netanyahu and Finance Minister Yair Lapid seem ready, maybe even eager, for a wholesale showdown with the trade unions.
The aviation strike seemed for a moment to be catching the government off-guard. With thousands already stranded at Ben-Gurion Airport and in dozens of terminals overseas, Histadrut chairman Ofer Eini joined the fray, announcing he would order ground workers to bring the Tel Aviv airport to a standstill 48 hours later.
At stake was a deregulation agreement with the European Union that would open previously restricted air routes to competition, thus increasing the number of carriers and the frequency of flights to and from assorted European destinations. Consequently, Israelis’ travel costs would shrink and incoming tourism would grow.
On the other hand, the three Israeli operators – El Al, Arkia and Israir – said competition would result in mass layoffs among their combined 25,000 employees.
However, halfway into that 48-hour ultimatum, with radio, TV and Internet reports spotlighting and amplifying passengers’ woes and outcries – the strike was called off abruptly. Officially, the airlines and the Histadrut explained that the government had given in to their demands. Unofficially, they had raised a white flag.
Yes, the government agreed to foot 97 percent of the aviation industry’s security costs, but the Histadrut’s central demand, that the reform be suspended for 30 days during which it would be renegotiated with the government – was sheepishly abandoned.
Netanyahu then appeared in the Knesset, declared “strikes do no scare me,” and promised to announce next week a big reform in the ports and another unspecified reform that would cut car prices.
“Monopolies,” he explained, “benefit at the expense of the public.” Lapid said similar things during the aviation strike. Evidently, both men are determined to reduce consumer prices through deregulation, each for his own reasons.
Netanyahu’s passionate speech echoed the mercantilist zeal that characterized his stint as finance minister a decade ago. Clearly, the prime minister’s conclusion from what transpired here between the social protest of 2011 and Lapid’s electoral success in 2013 is that Israel’s monopolies and cartels have become for him a strategic enemy.
Lapid, for his part, knows that he was elected by people who were fed up with vested interests’ impact on the middle class’s income, and within those vested interest cartels and monopolies loom tall.
Politically, this positions the prime minister and his treasurer like a pair of reality show competitors, compelled to jointly navigate their way through stormy waters checkered with boulders and cascades – only to ultimately emerge from the canoe into which they have been inserted and sprint separately to the finishing line.
Even in Israel’s stormy politics, this is a unique situation, indeed one not seen here since the 1980s, when the unity governments’ finance ministers and prime ministers represented rival parties. Otherwise, all Israeli prime ministers were careful to appoint finance ministers from their own parties.
Then again, the first time this principle was abandoned, Yitzhak Modai’s stint during Shimon Peres’s premiership, was economically remarkable, though politically it ended with the former’s removal to another ministry after he repeatedly attacked the prime minister.
Chances are we are witnessing the beginning of a similar relationship of economic cooperation animated by political suspicion, much the way things worked between Netanyahu when he was Ariel Sharon’s finance minister.
In any event, before they emerge from their canoe in order to reach the political part of their journey, Netanyahu and Lapid have the economic part, where fate now leads them to jointly battle organized labor.
The labor unions that tried to flex their muscles this week are not the political Tarzans they were a generation ago. While still a force to contend with, they have since lost the ability, and the will, to reshape reality – and focus instead on preserving it.
Ironically, the Histadrut’s historic disempowerment, which came in two installments, was the doing of Labor leaders. First, as part of the 1985 stabilization program, then prime minister Peres stopped the indexation deals with which the Histadrut used to force employers to automatically adjust salaries to inflation. The result was a sharp loss of the Histadrut’s leverage on corporate management.
Then, in 1994, prime minister Yitzhak Rabin abolished previous arrangements that forced public sector employees to be members of the Histadrut’s Clalit Health Services.
The result was a general flight from Clalit, and with it, a massive exodus from the Histadrut itself – whose membership plunged from 80% of the workforce in the 1980s to about 30% today.
Meanwhile, the Histadrut also found itself marginalized by the unions themselves, as those representing the 13 most politically powerful employees, in the utilities, banks and defense industries, began coordinating labor policy independently – as they do to this day, shedding the Histadrut’s social solidarity ideals for a more prosaic what’s-in-it-for-us agenda.
The structural reforms Netanyahu and Lapid are about to launch will challenge these powerful unions.
The first in line will be the ports, where the plan is to privatize the existing ports of Haifa and Ashdod and build a new one alongside one of them. The Eilat port’s operation was already privatized recently, through a 15-year franchise that was won by the Nakash Brothers for NIS 120 million.
This week’s announcements by Lapid and Netanyahu, which were then followed by Economy and Trade Minister Naftali Bennett’s equal enthusiasm, quickly drew threats from the unions. Yet here, too, the unions’ prospects are no better than they were in the face of the Open Skies reform.
Reports over the years by the Treasury’s public sector pay commissioner, about salaries in a notoriously nepotistic Ashdod Port averaging a monthly NIS 38,900 – are the kind of public theft fueling the social wrath that has been tilting Israeli politics since 2011.
It was this sentiment that decided the outcome of the aviation strike, where the strikers soon learned the public was not on their side. This will be doubly so when it comes to the ports, whose workers’ abuse of power and scorn for the public’s interest are far more glaring than anything that went on in El Al and its two competitors – all of which, unlike the ports, are privately held.
True, a ports strike will hurt the economy, as well as the public.
Anyone awaiting a seaborne cargo of any size and shape, from an oven to a truck, might suffer for a while. But the disruption of routine will be less acute than this week’s abortive airline strike, when parents with babies in their arms were stuck in distant cities with no place to spend the night.
THEN THERE is the threat of a general strike, which the Histadrut can always call.
However, Chairman Eini knows that a real general strike, one that lasts more than a symbolic 24 hours and spans everything, from schools to public transportation to passport issuance to garbage collection – is a weapon of last resort.
Using it might backfire in ways he can neither predict nor afford.
Eini is a calculated man. During his eight years as chairman of the umbrella union, he has emerged as a shrewd negotiator, an able conflict manager and a cautious warrior.
For instance, in 2010 he threatened a general strike while demanding a 10.5% pay raise across the public sector, but soon settled for an incremental 6.5%, which effectively meant less than an annual 2% increase for 3.5 years. For him, it was a modest but solid feat with which he could return to the wage-earners he represents, and for the government it was an affordable price for industrial quiet.
Before that, in 2007, he mediated between the teachers’ unions and the Treasury, ultimately producing the deal that ended that year’s protracted school strike. Unlike what one might expect from a union leader, his role there was to end rather than cause a strike. The following year he played a similar role during a professors’ strike.
Eini, in short, is a practical man with a very sensitive ear for the public mood. He knows there is no defending the Israel Electric Corporation employees’ average monthly salary of NIS 20,000, more than twice that of the average teacher.
That is why Eini’s conduct in the unfolding circumstances will likely be the same as it was during previous labor disputes: constructive mediation.
His strategy will be to fight for what is publicly defendable and fiscally obtainable, namely workers’ pay and rights, but it will not include, at the end of the day, a jihadist defense of cartelism.
In short, if they are consistent and resolute, Netanyahu, Lapid and Bennett will win the war they have chosen to wage. Their quest to break down monopolies and reduce consumer prices is not a whim; it reflects political predicaments, social pressures, economic convictions and a historic opportunity.
When facing strikes, the public will be told that its hardship is the price of a war waged on its behalf against vested-interest groups that have been feasting at its expense. It will be a convincing argument, because it is the truth.
Apparently, Netanyahu and Lapid are planning to proceed gradually, one monopoly at a time, and from the lighter to the heavier.
Aviation was the easiest, because its owners are private. The ports will be more difficult, and the IEC will be the toughest, as all governments have traditionally feared its workers’ ability to shut down power throughout the country.
Time will tell how far the alliance at the heart of this government is prepared to go in this war, but judging by this week’s events and rhetoric – the battle has been engaged. “No strike will deter us,” said Lapid in the Knesset this week.
“It is impossible to build a strong economy without competition.”
Telling the lawmakers that they all know what this will mean, Lapid summed up his attitude: “Let there be war.”