An Economic Rebellion in Israel

By Joel C. Rosenberg

Why have 300,000 Israelis taken to the streets?

An economic rebellion is underway way in Israel. On August 1, some 50,000 Israelis held a demonstration in Tel Aviv to protest soaring prices for food, apartments, gasoline and other basics. Five days later, an estimated 300,000 Israelis had joined the protests in Tel Aviv while thousands of others protested in Jerusalem and in other cities throughout the country. What’s going on and why does it matter? Let’s take a look.

In many ways, modern Israel is a conundrum:

On the one hand, Israel’s macro economy is booming, especially compared to the U.S. Despite wars and rumors of wars and all kinds of regional instability, Israel’s increasingly sophisticated, high-tech and export-driven economy is growing faster than most other countries in the industrialized Western world. Israel’s GDP, for example, grew at a rate of 5.4% last quarter, while the U.S. growth rate was a paltry 1.3% (and only 0.4% in the first quarter). What’s more, unemployment in Israel is actually at an all-time low right now – just 5.7%, compared to 9.1% in the U.S. That’s the good news.

On the other hand, prices in Israel for gasoline, apartments, even cottage cheese and other food staples are high and soaring higher, and many lower- and middle-income Israelis are becoming so exasperated that they are literally taking to the streets in protest government policies that are compounding the problem. This is the bad news. I returned home after spending the month of July in Israel working on projects for The Joshua Fund with our staff, volunteers, and my family. For the weeks we were there, we saw protests growing in Tel Aviv, Haifa, Jerusalem and elsewhere and they continue to growth rapidly. Young people are setting up “tent cities” to to show their frustration with an economic system that is leaving them behind and actually causing many to slip into poverty. Doctors are on strike to protest low wages in Israel’s nationalized health care system.

One of very serious problems Israelis are facing are soaring apartment prices. There simply isn’t enough housing supply to meet Israel’s growing demand. The Israeli government owns about 93% of the land. For a variety of reasons (most originating in decades of socialist policies from the founding of the Jewish state), the government makes it extremely cumbersome and expensive for developers to purchase/lease land and then plan and build new single family homes and/or apartment complexes. Thus, as Israel’s population steadily grows — naturally, and from “aliya’ (Jewish immigration into the country) — the number of new homes and apartments coming onto the market simply isn’t keeping pace. As a result, apartment rental prices in some areas of Israel have skyrocketed by some 35% to 40% in just the past few years. Purchase prices have shot up, too. We visited families living in tiny apartments with two or three bedrooms that would cost between $600,000 to $1 million to buy. Obviously, very few Israelis could possibly afford that, meaning that many young people, young couples, the elderly, and new immigrants are simply priced out of the market.

Food prices in Israel are also skyrocketing, as I wrote about in The Joshua Fund newsletter and on the website a few months ago. Read Article

• Canola oil prices are up 23%
• Sugar prices are up 40%
• Flour/Semolina is up 19%
• Buckwheat is up 106%
• Jam is up 15%
• Tuna is up 3.3%

This makes it even more difficult for poor and needy Israeli families to buy basic foodstuffs. This makes the humanitarian relief work of The Joshua Fund even more important, even as it drives up our costs.

In a column last week in the Wall Street Journal, one of Israel’s leading economic reform experts, Daniel Doron, wrote about what is becoming known as the “cottage-cheese rebellion.” Excerpts from his must-read article:

• “The cottage-cheese rebellion started after a major business publication ran a series of features comparing food prices in Israel and abroad. People realized that while salaries in Israel are about half those in America, prices of consumer goods and services are about double….Izhak Alrov, a member of the ultra-orthodox community of Bnei Brak and a cantor by avocation, was outraged by what he experienced trying to survive on a modest salary. In June, the 25-year-old opened a Facebook page and called for a consumer boycott of one staple—cottage cheese. The response was electrifying. Over 100,000 long-suffering consumers soon joined the boycott. Stores reported a steep decline in cottage-cheese sales.”
• “The cottage-cheese rebellion is transcending its immediate cause, the high cost of food. It is spreading to other goods and services, especially housing, and it has given voice to a feeling of economic helplessness.”
• “Exorbitant profits, fees and taxes make even the cheapest imported automobiles cost between $35,000-$40,000.”
• “A gallon of gas costs almost $10.”
• “A small apartment can cost the average Israeli worker 12 years in annual salary.”
• “Water and electricity costs are inordinately high” [Note: electricity prices have gone up 9% more this week]
• “Poor government-run education leads many families to spend a mint on private tuition.”
   

The Netanyahu government is responding slowly. They recently announced plans to bring some 50,000 new apartments onto the market by next year, but they must do more to implement free market reforms and allow the private sector to dramatically expand the housing supply. They also need to reduce taxes, reduce regulations and take other steps to liberalize the economy and curb inflation. In the meantime, one-in-four Israeli citizens live below the poverty level, as do one-in-three Israeli children. The Joshua Fund is doing what we can to care for the poor and needy, because the Bible tells us to do so. Please be praying for the Lord to show His mercy to those in Israel who are struggling. Please pray for the Lord to give wisdom to the Prime Minister and the Knesset (parliament) to take the right steps to improve the economic situation for average Israelis. And please continue to pray for our team as we seek to show unconditional love and unwavering support to Israelis at this critical time. May the Lord bless you as you bless Israel and her neighbors in the name of Jesus.

AT-A-GLANCE: The U.S. economy Versus Israel’s ecomony

• U.S. unemployment rate in May 2011: 9.1%
• Israel’s unemployment rate in May 2011: 5.7% — an all-time low for Israel
• U.S. economic growth in 2nd quarter of 2011: a paltry 1.3% (note: in the first quarter, the U.S. economy grew a mere 0.4%)
• Israel’s economic growth in the 2nd quarter of 2011: a robust 5.4%
• U.S. economic growth in 2010: only 2.8%
• Israeli economic growth in 2010: 4.5%
• Context: the average growth rate for OECD countries in 2010 was only 2.7%

Photo by REUTERS/Ronen Zvulun