Terra Incognita: Is it unaffordable to live in Israel?

Unlike in Third World countries, where earnings are less but housing and basic products are cheaper, Israel doesn’t get the “benefit” of being a truly poor country.

Dairy aisle (photo credit: MARC ISRAEL SELLEM)
Dairy aisle
(photo credit: MARC ISRAEL SELLEM)
Three weeks ago my wife and I went shopping for a picnic lunch at a Tesco in Aviemore, Scotland. We got some sliced turkey lunch meat, a salami, cheddar cheese, six rolls, bottled water and popcorn. Total: 50 NIS (£8.50). When we laid all the food out we realized that back home in Jerusalem the total would be at least twice as much. Since average salaries in Israel are around $2,700 a month (NIS 9,631 - accurate as of July 2014) while in the UK it is $3,548 (NIS 12,560) – that effectively means food is even more expensive in Israel.
When we got back to Israel, average housing prices for 2014 had just been released. They had increased 13 percent from last year to $437,000 (NIS 1.61 million). It is not a surprise therefore that once again Israelis are debating the oppressive prices in the country that make it impossible to save money, difficult to live a life of dignity and put house and car ownership out of reach for many.
The spark this time was Milky, a pudding, which Israelis in Berlin had discovered for the equivalent price of 90 agorot and which they noted, costs 3 shekels at the discount market Rami Levy. The main problem, explained TheMarker, is purchasing power in Israel. Even when products are cheaper Israelis earn less. “A survey conducted by TheMarker in 2011 found that when prices were adjusted in relation to hourly wages in each country, even the seemingly cheaper items in Israel were at least as expensive as elsewhere in the world.” A supposed “investigation” at TheMarker put blame on supermarket chains, manufacturers’ profit margins, kashrut supervision and the 18% value- added tax.
But like so many things, within a week of the Milky scandal breaking out the Israeli public was being treated to the usual dose of patriotism vs. traitorism. Nadav Eyal at Haaretz claimed, “the politicians must stop telling lies if they don’t want the country to turn into a poor, ignorant plantation economy.” Others claimed that Israelis were leaving because of the right-wing government and that economics was just an excuse. On the other end of the spectrum Makor Rishon ran a cartoon showing a famous Holocaust memorial in Budapest adorned with Milky pudding cups. The memorial consists of shoes next to the Danube and now it showed shoes with Milky cups half eaten next to them. The insinuation was, Jews were willing to risk going to their deaths in a new Holocaust just to get cheaper goods.
Elisheva Mazya of the New Spirit organization had a more blasé view at Ynet. “Things aren’t so bad.” She burnished her blue-blood Israeli credentials with a story about her great-grandma at moshav Nahalal and claimed that in those pioneering good old days “that generation was happier because it didn’t live only for the sake of living.” She accused those leaving of renouncing Judaism and engaging in “self-flagellation,” an “ancient Jewish sin.” She concluded that this generation has a “lot of work to do” and should remain in Israel and “get their nose out of Facebook.”
The problem with these responses is that on the left they are predicated on a hatred of Israel’s politics. Milky is just an excuse to bash Netanyahu. On the right, the view is that real patriotism is in poverty. It is like the old communist slogan that subverts all the individual’s needs for the state. So people should “stop whining” and give up on “living for life’s sake” and embrace ideology.
Both of these answers eschew a better one: that an individual’s quest for economic independence is the highest form of patriotism. The strongest nations have historically been those that increase the economic freedom of the individual and encourage profitability. Nations of impoverished serfs and slaves fail over the long run, the Soviet Union being a classic example. Russia sought to put national interests before individual needs, so in the USSR people had to wait years to get a car or acquire an apartment, basic items like bananas were a luxury good. When Nikita Khrushchev and Richard Nixon had their famous kitchen debate in 1959, the victory of the US was already on the cards. Napoleon famously derided the English as a “nation of shopkeepers.” Quite unlike the glories of the French revolution, all fanatically subverting their interests for the “glory of the great man” Napoleon. And all that was for naught, Napoleon was dispatched by the shopkeepers.
Israel faces an increasing economic stranglehold on the consumer. Basic items, such as potatoes cost around NIS 7 ($1.88) a kilo, while at major chains like Safeway in the US they are $2 a kilo. Onions are NIS 3 per kilo while the in the US they are about the same price. Even products made in Israel, such as olive oil, are priced more than those made abroad – at NIS 46 a liter.
However, cost of housing in Israel is astronomical. In the most prestigious addresses costs are similar to New York City or San Francisco. But the real problem is that even in the greater metropolitan areas 100 sq. m. apartments still cost NIS 1.5 million, whereas in other countries prices decrease dramatically and the size of homes increase as one moves into the suburbs.
Almost all of Israel’s economic problems can be laid at the feet of nostalgia for the past. When it comes to local products Israel’s socialist legacy shackles the consumer to buy inferior Israeli products to subsidize monopolies dominated by a few economic interests, such as kibbutzim, that routinely scaremonger the public to believing they must subsidize inferior products so as to have “self-sufficient national” produce and to straitjacket the public, they lobby for higher tariffs on imports so their products don’t have to compete. The same is true for housing prices; a romantic attachment to the “old days” eschews opening up public land to private development; massive Soviet-style planning bureaucracy leaves Israelis chained to small over-priced apartments in towns.
The bizarro-world of Israeli politics leaves the consumer behind. Right-wing parties think that if you talk about lower prices and economic disparities of unaffordable housing you are not only insulting Zionism but are sounding leftist because one appears to care for the poor too much. On the left, the solution is more and more welfare and dependency for the poor, more handouts, more price controls that do nothing but force already inferior products to become increasingly inferior and cheaper. Price controls on bread doesn’t make bread better and cheaper, it produces loaves of bread that feel like bricks and taste like woodchips. Israel doesn’t want its poor living off handouts like in Ghana, it should want to create a robust middle class. The left promises only to protect its friends on kibbutz and ensure mass poverty.
It is surprising Israel is facing such a bleak economic future or penury for large numbers of citizens. Many of my friends cannot afford cars and see no economic future for themselves in this country. Many of the successful people abroad who came to Israel with dreams had them crushed and either left, or accepted living hand-to-mouth. One sees an economic tragedy in the making and like in other countries that suffered such distress the usual train of scapegoats are brought forward. One woman told me it was the haredim (ultra-Orthodox) who cause “the problem” by “not paying taxes.” Another thinks it is the “economic drain of the settlements.” What possible role could haredim play in the price of olive oil? You think “the settlements” make housing prices higher? It is the opposite. The West Bank has been an economic relief valve providing temporary respite for the housing crisis in Israel by creating an inventory of housing in places like Efrat or Ma’aleh Adumim. Without the West Bank prices would be even higher.
Israelis are earning too little, but paying more than their Western peers. Unlike in Third World countries, where earnings are less but housing and basic products are cheaper, Israel doesn’t get the “benefit” of being a truly poor country. The author Jim Collins spelled out in 2001 the concept of taking companies from “good to great.” Israel is a good country, but it should be aiming for greatness, and economic greatness must be part of the puzzle. Scaremongering about the Holocaust or “self-hating Jews abroad” provides a false patriotism of excuses for poverty. Real patriotism is in transforming Israel into a wealthy successful country where citizens can afford to live well.
Follow the author on Twitter @Sfrantzman