The internal pressure imposed on Netanyahu during 2011 came from a most unexpected source in Israel: the social justice protests that swept across the country during the summer months. The root cause of the protests remains a hot topic of debate.
The Arab Spring and the push for political, social and economic change in the states that bordered Israel were always going to have some spillover effect. The upheavals in the Arab world might well have impacted upon the timing of the protests, but the deeper long-term catalyst for the protests was the economic reforms started by Netanyahu during his tenure as Minister of Finance.
The tent protests that developed into mass demonstrations were sparked by rises in the cost of living, particularly in housing. The widespread use of social media platforms such as Facebook to help organize the protests and disseminate demands was a first in Israel. This also made the protests highly dynamic and heightened the ability of the vast array of organizers to get their message over to the Israeli media and the numerous foreign journalists based in the country.
Netanyahu, and the rest of the government, were caught off-guard and were initially slow to react. In retrospect, nobody should have been surprised by the protests. There had been significant increases in the cost of living for Israel’s low-income and middle classes, as well as strong economic dissatisfaction among Israel’s youth population and high levels of unemployment in key sectors of society.
Cases of poverty were on the increase, as many Israelis struggled to find work, pay their bills and buy basic consumer goods, priced much higher in Israel than in the United States or Western Europe. Poverty was nothing new in Israel, but the gap between the rich and the poor was widening to levels that far exceeded other Western-style democracies, and this placed strains on social cohesion in the country.
By the summer of 2011, many Israelis had suffered enough and were joining the social protests. While Netanyahu talked of how much better off Israelis were compared to Israel’s neighbouring states, it went over the heads of many of the protestors, who were more interested in comparing their standard of living to Americans and Western Europeans.
As the leader of economic liberalization and market reform in Israel, Netanyahu was singled out for harsh criticism by the protestors. The origins for the malaise in the Israeli economy ran much deeper than Netanyahu’s economic policy. The old Labour Zionist economy that characterized the first 55 years of the State of Israel until 2003 was inefficient, and its sustainability in the new globalized markets was questionable.
Netanyahu’s reforms brought the Israeli economy into line with other Western capitalist ones. Tensions between the pursuit of wealth and Zionism have been an important factor for those in Israel arguing for a more redistributive economy. Netanyahu saw no alternative to economic reform, and for him this was a vital component in securing Israel’s future.
The social protests in Israel caused much excitement, led to a new form of much needed political participation in the country and created a new class of young and ambitious leaders, several of whom entered party politics. It challenged Netanyahu to defend his economic philosophy, and to adopt a new, kinder and more human tone in his pronouncements on the economy. At the end of the day, it is debatable whether or not the protests led to any major changes in the micro-economic policies of the government.
Netanyahu raised the issue during his address to the Graduates of the National Security College, on 25 July 2011, five days before the protests snowballed into mass demonstrations across Israel. Netanyahu reminded the audience:
This is true also with regard to the economy. There are plenty of reasons why we would like to see a developed and dynamic economy, but the most simple, prosaic reason is that we have no other way of financing our defence – and defence costs a lot of money. Weapons cost a lot of money, forces cost a lot of money and development costs a lot of money, and it keeps going up and up.
. . . We have tackled the economic problem by doubling our GNP per capita in comparison with our neighbours. We were more or less equal, but now we are 10 or 15 times larger than our neighbours. It is as if our population was 10 or 15 times greater, although we have a lot of neighbours. We have tackled it also through our economy of knowledge and our technological economy. I am a great believer in this, on condition that there is freedom of entrepreneurship. Free economy is a necessary pre-requisite for a growing economy – a growing economy that now surpasses European countries in its GNP per capita – something that did not exist a decade ago.1
All this was normal Netanyahu-speak for ‘everything is functioning well’. As the scale of the protests grew, the Prime Minister was told in no uncertain terms that the status quo was not acceptable. Following the biggest rallies in Israel’s history on 3 September 2011, when around 300,000 Israelis joined the protest, Netanyahu came under severe pressure to be seen to be doing something to satisfy the demonstrators.
Israelis carried banners that said, ‘An entire generation wants a future’ and ‘The people demand social justice’. Other banners carried slogans attacking the government and Netanyahu in particular.
The main problem that Netanyahu faced in dealing with the protestors was the wide range of demands they made, ranging from tax cuts for low-income workers to the expansion of free education and larger government housing budgets. Netanyahu warned the protestors that he would not be able to satisfy all of their demands.2
Netanyahu was eventually able to weather the political storm as the protests died down after the government promised to look seriously into aspects of its economic policies. There was also a feeling that a solution to Israel’s economic ills was not so easy to achieve. Nobody really presented a viable alternative to Netanyahu’s free-market economics.
In his opening remarks to the winter session of the Knesset on 31 October 2011, Netanyahu, as well as presenting his thoughts on the impact of the Arab Spring, devoted a large part of his speech to both a defence of his economic policies and an acceptance that changes needed to be made as a result of the social protests of the summer of 2011.
Starting with his traditional approach of summarizing the state of the global economy, Netanyahu was keen to remind Israelis that, unlike the rest of the world which was in economic meltdown as the result of the credit crunch, the Israeli economy, for all the protests, was doing rather better. As he put it:
Over the last few years, the world economy has been in a crisis which is not over yet. The sea is stormy there too. Major Western countries that did not act responsibly, that did not heed the danger, were occupied with chatter and did not do what was required of them – those countries now find themselves on the verge of bankruptcy. Not only have their credit ratings gone down, but many, many people are unemployed.
So far this economic storm has skipped over Israel. There is no doubt that the responsible way in which Israel has conducted itself over the last decade contributed to that fact.3
He then moved on to a defence of the free-market economy. This part of his speech might have been given by Ronald Reagan or Margaret Thatcher, rather than by the Prime Minister of Israel. Looking back through history, it would be hard to find any other Prime Minister who would have included these words in their address – with the possible exception of Shimon Peres during the mid-1980s.
There is one golden rule that every citizen knows from his own home economy: over time, if you spend more money than you make, you will eventually go bankrupt. The overdraft grows and you collapse. This is true for a family and it is true for a country. There are countries around the world that forgot the rule, and are now paying dearly.
Israel acted differently, responsibly. That is how I acted as Finance Minister, it is how the finance ministers after me acted, and it is how we act today. But you cannot generate the growth that is vital for creating jobs, growth that is vital for resources, for education, health, you cannot generate growth only by responsibly sticking to the budget. In order to make the market grow one must encourage competition. Not cartels, not monopolies, but fair, supervised competition that benefits the consumer.
Competition is not the enemy of the consumer. On the contrary – it is the consumer’s greatest friend. It reduces prices, improves service, reduces gaps, and raises the standard of living. Lack of competition in Israel is one of the most severe causes for the increase in the cost of living, and that is why a year ago, Mr. Speaker, not now, not two or three months ago, I established the Committee on Increasing Competitiveness in the Economy. That is why we are advancing the section of the Trajtenberg Committee’s recommendations on increasing competition in the market, and for good reason.
Netanyahu had smart political antennae and he understood that his government needed to be seen to do something to alleviate the burden on the lower-income workers and middle classes.
A TV poll taken by Channel 10 in Israel, at the height of the social protests over the summer of 2011, suggested that around 85 per cent of Likud voters supported the protests, as well as 98 per cent of Kadima supporters.4 As a result, he tried to focus on the concrete measures he had taken and was willing to take. He said:
Yesterday, at the Cabinet Meeting held in Tzfat, we approved the recommendations of the committee dealing with taxation; we cancelled the planned increase on excise tax, a step that benefits every Israeli citizen; we reduced the purchase tax and duty on commodities; we gave extra tax credit points to fathers of children up to the age of three, which will be very helpful for young couples. But these are only the first steps.
I am pleased that all the Members of Knesset want to help, and you will all have the opportunity to do so, as I plan to introduce several bills to the Knesset during this session that will help the citizens – guaranteed. Education for preschoolers will cost less, the burden of taxes will not be so heavy and housing will be more available.
I am aware of the real difficulties which you speak about, Mr. Speaker, and I am committed to solving them, including resolutions that we will pass during this session, and I hope the opposition will help too.
Finally, he reminded Israelis that he would not be abandoning his free-market economic approach and returning to the old Israeli model of a bloated and inefficient public sector.
Members of the Knesset, I promised that I would give you an answer. We are committed to acting with the utmost social sensitivity to change priorities, but I do not accept the claim that the free-market system has collapsed, that we must return to a centralized economy run by clerks, an economy in which the government must be involved in everything and control everything, an economy in which the citizens will have to run around government buildings and beg before the bureaucratic powers. We have been there and we are not going back. That is how to kill an economy, how to destroy it.
Margaret Thatcher once famously stated that the lady was not for turning. In 2011, despite massive protests, Israel discovered that Benjamin Netanyahu was not for turning either. It was a major risk for him to take, given that the lower-income groups continued to be supporters of the Likud and would be required to turn out in force if Netanyahu was to have a chance of being re-elected in the Knesset elections scheduled for 2013.
With increased challenges on his socio-economic policies, continued deep divisions over secular/religious issues and little meaningful progress on the Palestinian front, Netanyahu moved into defensive mode. This was the area in which he felt most comfortable and his decision-making centred upon preparing for potential conflict with Iran and continued ones with Hamas in Gaza and Hezbollah in Lebanon.
It was within this context that, on 25 October 2012, Netanyahu surprised the Israeli political world with the joint announcement that the Likud and Avigdor Lieberman’s Yisrael Beiteinu party would run together in the Knesset elections in January 2013. It was a curious move on several different levels, and many people found it hard to understand Netanyahu’s motives for pursuing it.
In electoral terms, the alliance didn’t make much sense. The announcement tried to justify the move. ‘In Israel, the Prime Minister needs a big, cohesive force behind him . . . A clear mandate that will allow me to focus on the main issues, rather than trifles,’ Netanyahu told the gathered press. The main issues were judged to be concerns such as Iran’s nuclear programme and the socio-economic problems that Israel continued to face.5 As he put it:
One ticket will strengthen the government, it will strengthen the Prime Minister, and it will strengthen the country. We are asking the public for a mandate to deal with the security threats, at the top of which is stopping Iran from obtaining nuclear weapons, and fighting terrorism. We are asking for a mandate from the public to continue the changes in the economy, in education and in the need to lower the cost of living.6
The only trouble with this thinking was that polls taken in the period immediately following the announcement indicated that the alliance would shrink the number of seats that Likud–Yisrael Beiteinu would win as a joint list in the election from what they would achieve if they ran separately. Netanyahu would also have to pay a political price for the alliance by having to surrender places in the Likud list for the election to Yisrael Beiteinu.7
For Lieberman, the alliance was all about succession to Netanyahu. He believed that in his secret discussions with Netanyahu (many of which took place without their respective aides present) he had been tapped to become the successor to Netanyahu when the Prime Minister eventually decided to step down. Corruption allegations, which took Lieberman away from politics at the end of 2012 for nearly a year until he was acquitted in November 2013, reduced the possibility of him taking over from Netanyahu.
Naturally, Netanyahu’s critics both at home and abroad saw the alliance as proof that the Prime Minister was going ‘dark side’ by aligning himself with ultra-nationalist figures such as Lieberman. Zehava Gal-On from Meretz articulated a typical attack from the left and told Israeli Army Radio:
The Prime Minister is essentially signalling that he has chosen the extremist, pro-settlement right, that he has chosen to walk in place, not to make progress in the diplomatic process [with the Palestinians].8
Outside Israel, the alliance was met with deep concern, centring upon the belief that the new alliance increased the chances of an Israeli military strike against Iran and reduced the possibility of an agreement with the Palestinians. There was also a feeling that, by standing side by side with Israel’s leading xenophobe, Netanyahu had revealed his true right-wing ideologue identity.
In retrospect, the alliance was born out of political necessity. Netanyahu was never an admirer of Lieberman’s cheap brand of ultra-nationalistic politics, despite the latter having headed up Netanyahu’s office for part of his first period in government. Fundamentally, Netanyahu did not trust Lieberman and vice versa. He considered it better to have him and his supporters on board, where they could be formally roped into Netanyahu’s political agenda.
Top of this agenda was the possibility of an attack on Iran, and the political fallout from such an eventuality. While Israeli mainstream politicians were united in their opposition to the nuclear programme in Iran, there were divisions over a unilateral Israeli military attack against Iran. Netanyahu, as a result, wanted to build as strong a basis of support as possible in the eventuality of an attack on Iran by formally strengthening the links between himself and his political allies.
Previously, he had helped his key partner on the Iran issue, Ehud Barak, maintain his position as Minister of Defence even after he had quit the Labour Party. With an attack on Iran on the horizon, there was a feeling that the resulting conflict would be a multi-dimensional one, involving attacks against Israel from Iran, Hezbollah and potentially also Hamas. Netanyahu was building his wartime inner cabinet and he wanted to make sure that he could exercise as much control over its senior members as possible.
The primary risk for Netanyahu getting into bed with Lieberman was that he might alienate his allies in the Republican Party in the United States. The Israeli journalist Ari Shavit argued that, prior to the alliance with Lieberman, Netanyahu could have claimed to be an Israeli Ronald Reagan or Rudy Giuliani, but not after it. Instead he had cosied up to a man who admired the Russian leader, Vladimir Putin.9
In Israel, the new alliance was soon put to the test with Operation Pillar of Defense, which began on 14 November 2012 and lasted until a ceasefire came into effect on 21 November. The conflict was both a continuation of the ongoing struggle with Hamas and the prelude to a much bigger war with Hamas in the summer of 2014.
This was Netanyahu’s first large-scale clash with Hamas and, in military terms, thanks largely to Israel’s defensive missile shield known as the Iron Dome, Israeli population centres were largely spared from being hit by rockets and missiles fired from Gaza. This was the first time, however, that missiles fired from Gaza reached central Israel and was seen as confirmation that Hamas was following a similar strategy to Hezbollah in attacking centres of Israeli population.
During the course of the conflict there was widespread support for the military operations against Hamas and the government’s handling of the crisis. Divisions occurred over the ceasefire, which several leaders on the right argued had left Hamas free to carry on with its military rebuilding and had not removed it as a medium- to long-term threat to Israel. Netanyahu, who during the conflict had to navigate a careful path between dealing with international reaction to the operation and achieving Israel’s military goals, claimed the operation was a success.
Once Operation Pillar of Defense was completed, Netanyahu turned his attention to the Knesset elections, scheduled for 22 January 2013. Unlike several of Netanyahu’s previous campaigns, this time there appeared little doubt about the outcome. Opinion polls conducted in Israel throughout the campaign put the joint Likud and Yisrael Beiteinu list winning an average of 35 seats.
As a result of the perceived lead, Netanyahu fought a largely risk-free campaign that stressed issues related to national security. His main fear was, with the outcome of the election seemingly not in doubt, the Likud supporters would not come out to vote in large enough numbers. Much of the campaign was therefore concentrated on speaking to the Likud base and ensuring that it was organized and motivated to vote.
Critics of the government, and of Netanyahu in particular, focused their efforts on highlighting the Prime Minister’s poor relationship with President Obama, who was sworn in to serve his second term in office in the same month as the Israeli election. A number of parties attacked him on socio-economic issues, arguing that his policies were the root cause of the problems, and that he was not capable of listening to the lower-income groups in the country.
On the day of the election, the Likud–Yisrael Beiteinu emerged as the largest list, but with only 31 seats, a loss of 11 seats from their combined totals from the previous Knesset. In second place was Yesh Atid (There Is a Future), led by a former journalist, Yair Lapid, which won 19 seats. This party focused on socio-economic issues and was seen as centrist in nature.
The other development was the arrival on the scene of Habayit Hayehudi (Jewish Home), led by Naftali Bennett, which won 12 seats. Habayit Hayehudi was positioned to the right of the Likud and was seen as a natural bedfellow in a Netanyahu-led coalition. After the usual fraught coalition negotiations, Netanyahu was able to form a government along with Yesh Atid, Habayit Hayehudi and Hatnuah, which gave him a stable-looking coalition with 68 seats.
By the springtime of 2013, with his new government up and running, Netanyahu appeared to have weathered the political storms and was looking to consolidate his grip on power. Stories in the media started to focus on when, and if, Netanyahu would decide to stand down, with the belief being that this would not happen until after the ongoing crisis over the Iranian nuclear programme had been resolved one way or the other. The presumption was that this would not happen in the immediate future, and therefore Netanyahu would try to serve out his full four-year term as Prime Minister.
What lay ahead for Netanyahu, however, were not relatively calm waters, but, rather, a series of challenges that came close to finishing his political career. What Israelis liked about Netanyahu would fade into the background, to be replaced by the reminders of what they didn’t like about him. It was a reversal of fortunes, not major political mistakes, that made Netanyahu face the prospect of defeat in 2015. It would require all his political skills, and his famed flip-flopping on policy, to try to ward off defeat.
Needless to say, in Washington, President Obama would watch reports of Netanyahu’s apparent demise with much glee. He hoped to finally get an Israeli leader with whom he could do business. Obama wasn’t alone in this, as European leaders hoped that the era of Netanyahu rule in Israel was finally drawing to a dramatic close.