Most Americans will sing no sad songs for the latest catastrophe in the puzzling public career of Benjamin Netanyahu.
The U.S.-educated Bibi spent most of the last decade arrogantly alienating friends, embittering enemies and outsmarting himself at every turn. But last month’s election results, which netted his Likud just 12 Knesset seats, did set a benchmark for failure. While he has his fans, especially here in the Philadelphia region where he grew up, Netanyahu’s fall is appreciated more than his rise was.
Despite that dismal result, supporters of the Israeli Right are attempting to argue that Ehud Olmert did not earn a “mandate” to withdraw from parts of the West Bank because his own vote totals fell below expectation. That’s a loser’s argument because – even if the results were less than overwhelming – Olmert will still have the votes to govern and probably do as he plans.
But even from this distance, there’s no doubting there was one issue on which the voters really did send a message: the economy. And that’s where the unfortunate Bibi comes in.
During his stint as finance minister while serving under Ariel Sharon, Netanyahu made more progress in changing Israel’s troubled economic paradigm than any of his predecessors. Though every Israeli government since 1992 has pledged itself to free-market reform, the hold of the old socialist model on the country (imposed by its founders, whose understanding of economic principles did not equal their grasp of security) has been like a zombie’s death grip in a horror movie.
While Israelis rightly brag about their high-tech industry, the economy as a whole was sick.
Though the burden of defending a nation under siege hurts the economy, that’s not the complete explanation. Sky-high taxes and a bloated government bureaucracy that sticks its nose into everything that moves – and much that doesn’t – are fatal to growth. Nor did anyone seriously take on the enormous social-service entitlements that flow from the government.
Economic power in the Jewish state was still concentrated in a few banks, the Histadrut, Israel’s national labor federation, and government-controlled enterprises and authorized monopolies, a dilemma caused by the slow pace of privatization.
Shortly after his triumph in the 1996 election, then-Prime Minister Netanyahu had told a joint session of the U.S. Congress that he was going to try to end economic aid from the United States (military aid, which is separate from the economic assistance, makes up the majority of all U.S. aid, is actually almost all spent in the United States, not Israel). But that never happened.
What Netanyahu did as finance minister was to enact an austerity budget that sought to curb the massive deficits and unending flow of money from the treasury. He pushed reform of the banking industry and injected a touch of accountability into the government sector.
The result of these modest measures was growth and the hope that the country might take its first real steps toward an end to dependence on foreign aid, which is the underpinning of the entire system.
Although Netanyahu earned his unsavory political reputation honestly, his time running the Finance Ministry proved to be his finest hour of public service. The irony is that it was also his most unpopular.
Netanyahu faced constant criticism for being “heartless,” victimizing the poor and violating Jewish “values.” The Histadrut, which was run by the unreconstructed socialist Amir Peretz, who would lead Labor in the election, tried to sabotage the reforms through illegal strikes.
The cuts were painful, but they were also necessary. In the long run, his measures would have created more prosperity for more Israelis, something that this underpaid and overtaxed people will never get without change.