Note: This is not an I/P diary. Indeed, does not mention the Palestinians, except perhaps in passing. This is an “Israel” diary. It focuses solely on the hundreds of thousands of protesters on the streets of Israel every week demanding better conditions, and it looks at the economic reality driving those conditions. The Palestinian demands for justice and an end to Occupation are just, righteous and necessary. However, this diary does not deal with those demands. Instead, it looks at events solely on the Israeli side.
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Israeli protesters again took to the streets this past weekend to voice their frustration with the high cost of living in Israel. Following rallies last week that numbered well over 300,000 protesters (mostly in Tel Aviv), Israeli protesters this past week avoided the capital and protested only in the “periphery.” Nonetheless, at least 100,000 Israelis protested in cities and towns across the country.
As Israelis demand structural changes to ease their burdens and make life more livable, the government responds by forming committees to investigate improvements. Additionally, of course, the government issues warnings that any reforms must not cut the military, must not endanger the financial stability of Israel, must not cause the government to spend beyond its means, etc. At some level, these warnings make sense: even the costs of basic fairness must be affordable.
Israeli protesters, for their part, have been careful to focus on purpose economic issues, particularly the costs of housing, transportation, etc. They have avoided touching social issues. The obvious elephant in the room is the Occupation of Palestine. The Israeli protesters have avoided touching this issue at all, for fear it would cause a split in their ranks and cause the numerous Israelis who support some or all of the Occupation to abandon the protests.
However, the reality is that the Occupation is driving these protests. That is to say that it is the cost of the Occupation that leave the Israeli government too little money to pay for basic social needs.
Paul Pillar at the National Interest tied the strands together clearly in an excellent article last week, Settlements versus the Interests of Israelis. Pillar points to a 2007 study showing that the settlements had cost Israel at least $50 billion between 1967 and 2007:
According to experts' estimates, the total economic cost of the occupation has by now reached more than $50 billion, including security and civilian expenses (the construction and maintenance of the settlements), as well as the potential loss of gross domestic product.
The annual average of military expenses on maintaining control over the territory stands at about NIS 2.5 billion.
Furthermore, one of the most significant outcomes of the war was the establishment of the settlement movement in the West Bank and Gaza. Some 121 settlements have been built to this day in the West Bank (not including east Jerusalem), and are home to about 250,000 settlers.
The civilian costs in such communities are higher than in communities within the Green Line, due to the various security expenses: Armored vehicles, special lighting on highways, and large army and police forces required to defend them.
The civilian cost of the settlements is valued at about NIS 2.5 billion per year. The value of property built in the territories is estimated at over $14 billion, and the losses in domestic product for the Israeli economy due to the recession that followed the second intifada are estimated at NIS 50 billion.
"Imagine how much less poverty there could have been in Israel," said Dr Ruby Nathanzon of the Macro Center for Political Economy. "There's a terrible distortion, an enormous economic cost in addition to the huge military burden."
Even this amount vastly understates the real costs of the settlements. As a recent column in the New York Times noted:
According to a report published by the activist group Peace Now, the Israeli government is using over 15 percent of its public construction budget to expand West Bank settlements, which house only 4 percent of Israeli citizens. According to the Adva Center, a research institute, Israel spends twice as much on a settlement resident as it spends on other Israelis.
Indeed, much of the lack of affordable housing in Israeli cities can be traced back to the 1990s, when the availability of public housing in Israel was severely curtailed while subsidies in the settlements increased, driving many lower-middle-class and working-class Israelis into the West Bank and Gaza Strip — along with many new immigrants.
Haaretz columnist Bernard Avishai noted the same thing, calling out some the economic factors squeezing Israelis:
The answer is that the atmosphere on Planet Netanyahu is slowly suffocating us:
• The settlement project was, and is, insufferably expensive. Upwards of $20 billion have been spent on settlements and infrastructure in occupied territory, and that doesn’t include the costs of securing them. Meanwhile, traffic on the coastal plain long ago graduated from heavy to infuriating; mass transit projects in major metropolitan areas are constantly postponed.
• The industries that liberated Palestinians will focus on, and draw regional investment to, are precisely those that lower-income Israelis are bound to benefit from: tourism, construction, retail, food processing. Israel and Palestine are one business ecosystem. Israel could generate another $8 billion in GDP just from doubling its number of tourists from 3 to 6 million a year. (Florence gets 12 million.)
• One-sixth of the government budget goes to defense, and that fraction is creeping up to incorporate new weapons systems. Social services are inevitably trimmed.
But these conclusions, as bad as they are, understate the full magnitude of the issue. Today YNet reports on a recent study by the OECD comparing the economic reality of Pre-1967 Israel with the economic reality of the territories Israel conquered and occupied in 1967 (East Jerusalem, the West Bank, and the Golan Heights). The study’s results are not pretty. In part it finds:
- The settlements add 11.1% to the population, but contribute only 4% to the GDP, thus reducing the per capita GDP by 6.5%.
- The Israeli government spent at least 10% of its 2007 budget (NIS 12.5 billion) on the settlements, a far greater percentage than the 4% GDP this brings in. This number does not even include the NIS 5.5 billion invested in construction, or the outsized portion of Israeli “defense” costs that go to defending the settlements, rather than Israel proper.
- While the population of pre-1967 Israel increased 2.2% annually between 1997 and 2009, the population of the West Bank settlements increased 8.0% annually, or over 3.5 times as fast.
- The settlements are not needed economically, and over 50% of the settlers work inside pre-1967 Israel proper.
- The settlements have lower levels of employment and labor force participation than pre-1967 Israel.
- Economic inequality in the settlement is 10% higher than inside pre-1967 Israel.
- The poverty rate in Israel (including the settlements) is the second highest among all developed countries (after Mexico).
These facts laid out above make it clear that Israel’s economic protests are a direct result of the massive resources successive Israeli governments have poured into the settlement enterprise. The Israeli protesters have generally avoided acknowledging this fact, as they fear to split their movement between pro-Occupation and anti-Occupation Israelis (or to simply get lost in that debate). However, by ignoring the elephant in the room, they allow the government to simply say: there isn’t enough money (for some reason), we can’t afford the social justice you all demand. In order change the economic situation, Israelis must deal with the economic reality of the Occupation.
This realization is especially true in light of the moves by the Israeli government to massively expand the settlements. In the last week alone, the Israeli government has approved roughly 5,500 new settlement houses, both in the ring cutting off East Jerusalem from the West Bank, and deep in the West Bank in the Ariel settlement. As I noted last week:
Over the last week, Israel has taken steps to dramatically expand the settlements. The steps include the announcement of massive new settlement construction in expanded “Jerusalem,” whose municipal limits Israel massively expanded to cut deeply into the West Bank:
- 930 new units in the Har Homa settlement (southeast “Jerusalem”).
- 1,600 units in Ramat Shlomo (northeast “Jerusalem”) (Israel announce a separate settlement expansion here timed to humiliate VP Biden's call for peace during his trip to Israel)
- 700 units in Pisgat Zeev (also northeast “Jerusalem”)
- 2,000 units in Givat HaMatos (southern “Jerusalem”)
All told, over 5,000 new units to house tens of thousands of new settlers were approved.
To this have been added 277 units in the West Bank settlement of Ariel.
The government will suggest that these expanded settlements will improve housing in Israel and lower housing costs for average Israelis. However, the economic facts demonstrate just the opposite: these new settlements will continue to increase costs for Israelis while providing very little benefit.