Middle Israel: Bibi’s populist challenge

The populist locomotive must be stopped in its tracks.

Kulanu leader Moshe Kahlon (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
Kulanu leader Moshe Kahlon
 "This can’t go on,” the finance minister said the other day, “the coalition must be expanded.”
It took Moshe Kahlon 12 months to realize what this column told him on last year’s election night; that the self-made Kahlon could emerge from the election as the national figure he aspires to be, a humbly born bridge between the well-born Benjamin Netanyahu and Isaac Herzog, or between Netanyahu and Yair Lapid, or as a bridge for all three.
Kahlon ignored this advice, and now laments the narrow coalition’s daily misadventures.
For instance, this week Likud lawmakers David Amsalem and Avraham Neguise nearly prevented the coalition’s introduction of the bill allowing for lawmakers’ suspension.
It was their way to protest the prime minister’s policy on the entirely different issue of immigration to Israel from Ethiopia. Before that, MK Oren Hazan derailed for his own reasons the passage of a coalition bill concerning civilian courts’ usage of military courts’ verdicts as evidence.
Meanwhile, the coalition’s fragile parliamentary situation has made it seek administrative detours, such as trying to implement its framework for mining offshore gas without bringing it to the Knesset, only to be ordered this week by the High Court of Justice to pass it through the Knesset.
Such, then, are the political reasons to broaden the coalition, which are besides the national reason, which is that it isn’t healthy for a government to be opposed by nearly half the electorate.
Yet there is a deeper reason to reboot the political landscape, a reason that is steadily unfolding as a dangerous global trend; a trend that already has become the improbable hero of the presidential election in the US; a temptation whose risks the prime minister understands all too well, unlike his treasurer, who is actually succumbing to this seduction, in cahoots with Labor MK Shelly Yacimovich. It’s called populism.
IN AMERICA the populist mania is now such that Republican candidate Donald Trump vows to exempt from income tax households earning up to $50,000 a year and drop corporate taxes from 35 percent to 15%, and also raise defense spending, and still keep the budget balanced and the deficit in check. When asked how this works arithmetically he says this “plan” was written by “senior economists,” without giving even one’s name.
Meanwhile, Bernie Sanders says the universal healthcare he vows to introduce will cost American taxpayers $1.61 per week per, while the fact is that insuring the 11.9% of Americans who are uninsured will cost the 88.1% who are insured a weekly $4.70.
The two candidacies’ combination of such derelict accounting with rhetorical broadsides would have been anecdotal had we lived in ordinary times. But we don’t live in ordinary times. We live in populist times, which is why these two demagogues are sweeping millions of impressionable people off of their feet.
We live in populist times for well-known reasons.
Capitalism has lost the human face it once wore. Teaming with automation and outsourcing it destroyed many jobs and left millions feeling dispossessed, insecure, humiliated and angry. Such people no longer care for facts and numbers, and might follow someone just because he sounds as angry as they are.
In America this spirit has yet to proceed from rhetoric to policy. In Israel it just did.
The Knesset’s slashing this week of senior bankers’ annual salaries to a maximum of NIS 2.5 million per annum, as opposed to their previous levels which in some cases exceeded NIS 8m., was voted in unanimously.
While economically problematic – this is unprecedented interference in the management of private business – socially the cut had become imperative.
There was no economic justification for Israeli bankers to be in the same league with American bankers who manage much larger assets and work in a far more competitive industry. And with many of their depositors struggling to make ends meet, and with the zeitgeist having become populist, the Israeli bankers should have realized they were provoking envy, sowing distrust in the system, and fanning social despair.
The same went for the gas-mining blueprint’s opposition. The blueprint, as previously argued here, was actually sound.
However, the populist zeitgeist had become such that the plan’s embrace of Yitzhak Tshuva, the real estate tycoon and gas prospector who had sought a haircut settlement for corporate bonds he said he couldn’t repay – made people fume.
That fury created political energy. And that political energy, while in some ways positive, is ultimately negative and in fact dangerous.
POPULISM, once unleashed, leads to economic ruin. We, unlike the Americans, have recent memories of its damage, when hyperinflation brought this economy to its knees in the 1980s.
The economy has since been cured, not only technically but also mentally, as Israeli households became so financially responsible that their aggregate debt plunged to 41% of GDP, nearly half the developed world’s average of 75%.
Now the populist zeitgeist threatens to overturn this precious achievement. If it’s up to Finance Minister Kahlon, the banking industry will be deregulated so that the Bank of Israel’s strict conditions can be compromised by new lenders, for instance by offering credit cards outside the banks.
That would lead us to the brink of America’s subprime abyss, where greedy lenders met weak borrowers before all were ruined in the 2008 meltdown, which fanned much of the wrath that now feeds America’s populist psychosis.
The gathering pressure for populist economics is no less dangerous than the greed that uncorked it. It is already in our midst, and no one should be more concerned about it than Benjamin Netanyahu, both in terms of his legacy as finance minister last decade, and in terms of his responsibility as prime minister.
The most immediate danger the populists pose here is that our gas will remain largely unmined. Getting it quickly pumped proved impossible with a narrow coalition.
First, Arye Deri stalled the process, now two ministers’ conflicts of interests are a stumbling block, and tomorrow this or that backbencher, masquerading as Robin Hood out to redeem the robbed masses, will block this economic and diplomatic treasure’s emergence from undersea.
This is no way to run a railroad. The populist locomotive must be stopped in its tracks.