Israel Can't Bear the Cost of a Unity Government
In the aftermath of Israel’s inconclusive snap election on Sept. 17, the country’s chattering class has worked hard to convince Israelis that they want a national unity government. To drive home their point, commentators have drawn parallels between Israel in 1984 and the country today. But the comparison doesn’t hold.
The Israeli economy was on the brink of collapse, with inflation running rampant, when Likud leader Yitzhak Shamir and Labor’s Shimon Peres agreed to share power in 1984. The country was also in the grip of the first Lebanon War. In 2019, Israel's economy and security are relatively stable, and they have been that way for some time. Despite regular skirmishes with Hamas in Gaza and Hezbollah in Lebanon, the Israel Defense Forces aren’t waging a ground war on enemy territory.
So why the rush to convince Israelis that they want a unity government? Because in a country increasingly divided along political, religious, and economic lines, national unity has an appeal that intoxicates even seasoned observers. In their enthusiastic embrace of the idea, commentators are ignoring the danger a grand coalition would pose to the wellbeing of Israeli society. That danger relates to the problems such a government would be unable to address.
The cost of living in Israel is exploding. Sure, the country’s macroeconomic performance is impressive, especially compared to 1984. But a report released by the Organization for Economic Co-operation and Development (OECD) sheds light on economic difficulties Israelis have been living with for years.
Daily life in Israel is grotesquely expensive. Food here is 19% more expensive than the OECD average. Meanwhile, apartment renters in Israel spend 25% of their gross adjusted disposable income on rent while homeowners paying mortgages spend 15%, a discrepancy that’s among the highest in the OECD. Since 2009, according to Israel’s Central Bureau of Statistics, housing prices have shot up by more than 90%.
If you’re raising children in Israel, good luck. Elementary school education and academic studies are 17% more expensive than they were a decade ago, while the average cost of preschools has risen by 14%. And Israel’s floundering public healthcare system is forcing many Israelis to supplement their mandatory universal medical insurance with out-of-pocket private policies. According to the OECD, only 8% of Israelis rely solely on public healthcare.
Here’s one more stat to consider: Israel ranked a lowly 38th on the economic freedom scale, dropping one place from 2018, according to the Economic Freedom of the World: 2019 Annual Report. In general, the higher a country’s level of economic freedom, the better off its citizens are.
What you won’t hear advocates for a national unity government explain is the history grand coalitions have of arresting the implementation of seriously needed policy changes. Neither Shamir nor Peres were able to address any major issues during their national unity government, because the proposals of each were immediately scuttled by the other.
Back to the present. With neither of the two biggest parties able to form an outright 61-seat majority, the siren song of national unity beckons. But the Blue and White Party, which garnered the most seats, ran on a platform extolling the virtues of the welfare state. Blue and White's left-leaning supporters view business tycoons and unchecked corporate greed as societal ills that require increased state regulation at all levels.
In contrast, Prime Minister Benjamin Netanyahu heads a right-leaning bloc that supports policies intended to liberalize the Israeli economy. Netanyahu's Likud Party cites record-low unemployment, low inflation, and rising exports as proof that laissez-faire economic policies must continue and should be expanded.
These aren't differences of degree, they are completely contrary economic worldviews. It's difficult to imagine how one major coalition partner's need to placate its neoliberal policy supporters doesn't cancel out the other's need to push through ambitious wealth-redistribution programs.
Israel’s next government will be tasked with an awesome responsibility: to develop and carry out policies that remove the disproportionately large financial burden being carried by Israel’s working men and women. For millions of Israelis today, a government of national paralysis is not a viable option. The cost of prolonged stagnation is too high.
The views expressed are those of the author alone.