Poacher Turned Gamekeeper

New Israeli finance minister Yair Lapid is learning that it is much easier to be criticising from the sidelines, than it is to be taking action from within the government.  Having spent much of his life as a journalist and TV presenter which had him criticising governments and government policy, his switch into politics has given him the opportunity to prove his own credentials.  The poacher turned gamekeeper is discovering that life in the political goldfish bowl is not quite as easy when he is having to fend off the arrows, as it was when he was shooting them.

Lapid has finally presented his budget for 2013-2014 for government approval.  When he was playing politics from outside governmental circles as a journalist, he was mostly focused on what the government was doing to improve social equality, and to address the needs of the weakest elements of Israel's society.  In his position as the minister of finance, he now knows that this nut is a tough one to crack.  How does a responsible government work to improve social equality, while also working to close the huge budget deficit and finance the mountain of government debt all at the same time?  The resulting budget prepared by Lapid and approved by the Knesset is much more about fiscal responsibility, than it is about helping the poor and the weak in Israeli society.  It includes increased tax rates, increased VAT, increased taxes on alcohol, tobacco and other luxury goods, and huge swathes cut from government spending.  Even the hallowed defense budget had three billion Shekels cut from it.  The result of this is that Lapid's popularity has dropped dramatically since he assumed his job as minister of defense.  In mid-April, Lapid was the most popular politician in Israel, topping even Prime Minister Netanyahu.  By the time May rolled around, Lapid found himself the target of anti-government street protests promoting social equality.  His popularity has steadily plummeted in the process.

The job of Israeli finance minister is something of a thankless task.  This is especially true for a finance minister who wishes both to promote economic stability and growth, while also helping the weak and vulnerable.  The difficulty was emphasised by reports that were published recently about key aspects of Israel's economy.  A report published by the Organisation for Economic Cooperation and Development (OECD) has placed Israel first in poverty rate amongst developed nations.  The report said that one in five Israelis live in poverty, and one in three Israeli children live in poverty.  Israel's State Revenue Administration of the ministry of finance published its own report which showed that half of Israeli wage-earners do not earn enough to pay tax.  Given that the tax threshold in Israel is NIS 4,700 (less than US$ 1,300) per month, this is a sad statement about the conditions that people are forced to work in.  When considering that unemployment in Israel is at a relatively low 6.9%, there is not a great deal of hope that the economic situation can improve dramatically by some miraculous boost to the number of people in work.  The Boston Consulting Group published a statistic of its own when it said that Israel has the 10th highest number of millionaires in the world, when measured as a percentage of households.  Fully 3.8% of Israeli households are millionaires.  This simply reinforces the huge gap between rich and poor in this country.

Many point to the huge military burden that Israel has had to carry over the years as the main contributing factor to the current economic challenges.  It is true that with a defense budget of NIS 50 billion (approximately US$ 13.5 billion) and making up around 6% of GDP, Israel does indeed carry a huge defense spending burden.  This is exacerbated by the fact that the ultra-Orthodox and Arab sectors have significantly lower employment than other sectors of society, and earn substantially less than other groups.  This places a heavy burden on the social services for these population groups, who boast larger families and much lower income.  While addressing the earning power of the ultra-Orthodox and the Arabs will not be a magical solution to heal all Israel's economic woes, this must certainly be one of the actions to help the economy back to full health.

There is no easy fix to the Israeli economy that will give an answer to all the questions in the short-term.  The solution is longer-term austerity and responsible fiscal policy.  Even this will not answer all the economic questions that are being asked of our finance minister, but it is important to create an environment for economic growth.  This will give the best possible platform to provide as many possible answers to the numerous questions being asked.

In 65 short years, Israel has built its economy from zero to one which is now in the elite club of the most developed economies in the world in the OECD.  This is nothing short of a miracle, and has been constructed with no help from natural resources, and with maximum exploitation of human capital.  The enormous economic growth and success that Israel has experienced can be attributed in no small way to the hard work and innovation of the average Israeli.  The time has now come to re-examine this approach, and to reinvent it in order to move forward with the new set of realities.  Israel stands on the verge of a natural gas boom which is set to provide noticeable impetus to the economy.  The ultra-Orthodox community once numbered a few tens of thousands, but is now 10% of the population and growing.  The model adopted by the modern Orthodox community, that allows them to live a traditional Jewish life and work to contribute economically, needs to be expanded to the ultra-Orthodox community as well.  Attention needs to be paid to the growing Arab sector to ensure that it makes its fair contribution to the economy.  Weaker people in our society need help, and those who spend their days working to make a living should be entitled to make a living from the work that they do.  The country needs to be able to continue to protect itself, without the defense budget crippling the economy.  These are only a few of the enormous challenges that need urgent addressing.

With all of this in mind, there are some who wonder why Yair Lapid was so eager to take on the role as minister of finance.  Is he really up to this enormous task, and can he make a real difference?  Time will only tell.

Lapid Becomes Kingmaker

The election is over, the votes are in and the results are final.  Despite this, we still don’t really know where we stand.  The coalition negotiations are yet to take place, which will probably add most spice to the process.  The big story coming out of the election is the way in which Yair Lapid managed to propel his Yesh Atid (there is a future) party into second place by capturing 19 seats in the Knesset.  None of the opinion polls ahead of the election gave any indication that Yesh Atid was on the verge of such a significant achievement in its first election.  Many are wondering how Yesh Atid managed to sneak in under the radar in this way, and what the future holds for Yair Lapid and his new party.

It seems as though Lapid managed to pace his election campaign perfectly.  He peaked just as people were heading to the polls, still undecided about whose ticket they would place in their voting envelope.  An exit poll of Yesh Atid voters revealed that as many as 30% decided to vote for Lapid’s party in the last 4 days before the election.  This is an astonishing statistic, and reveals how little previously established voting preferences counted for in this election.  I also think that the combination of right of centre diplomatic polices, centre social policies and the insistence that all groups in society bear the burden equally, proved to be a popular platform for voters.  In particular, the idea that concessions should be given neither to the super-wealthy nor to the ultra-Orthodox, reflects a sense of fairness and equality that most Israelis can identify with.  Additionally, Lapid’s view that civil and social issues should have a higher priority on the new government’s agenda than diplomatic issues, has enjoyed a great deal of support.  Without minimising the threat to Israel or the level of its importance, many Israelis are tired of hearing the prime minister spend most of his time talking about Iran.  They would prefer to hear about how he will strengthen the economy, and make it easier for people to earn a decent living.  Lapid sensed this, and managed to incorporate these views into his platform.

Although the son of long-time politician Tommy Lapid, Yair Lapid has no political experience at all.  He is well-known in Israel as a journalist and TV anchor-man, a fact that clearly assisted him in his campaign.  He needs to use the next few years to accumulate as much political experience as he can if he is truly going to be able to take on the job of leading a government in the future, something he claims to have ambitions to do.  This also means that he has little choice but to join the coalition government that Benjamin Netanyahu is currently constructing.  Acting as leader of the opposition cannot be compared to taking on a senior cabinet role in government.  If Lapid is to progress towards his ambition of being a future prime minister of Israel, he will join the coalition at almost any price.

Despite having stood on a platform that opposed many of the outgoing government’s policies, Lapid and Netanyahu are politically not too far apart.  On paper, Lapid and Netanyahu have remarkably similar diplomatic policies.  Lapid appears more determined to create an environment that will encourage direct talks with the Palestinians than Netanyahu has shown himself to be.  Despite this, Lapid ‘s platform is clear in that it does not advocate the splitting of Jerusalem or giving up on the large settlement blocs in the West Bank in pursuit of a two-state solution.  The main difference between Lapid and Netanyahu becomes more obvious when looking at civil and economic policies.  Lapid is determined to pursue a responsible economic policy, which is also satisfies the calls for social justice.  Lapid’s interpretation of this means that he wishes to ensure that the social burden is equalised across all groups in society.  For the most part, this will manifest itself by reducing or withdrawing the special advantages that the ultra-Orthodox groups have enjoyed over many years.  In practice, Lapid aims to ensure that there is no wide-ranging exemption for the ultra-Orthodox from military service (or some form of national service), and he will be seeking to reduce or withdraw the special government grants that are paid to ultra-Orthodox men who are studying in yeshivot (religious learning institutions).  These two aspects have proved to be a drain on Israeli coffers, and have been the cause of great conflict and anger in Israeli society.

The difference between Lapid and Netanyahu is not because they have different basic convictions on the social and economic issues.  On the contrary, I believe that their basic beliefs are extremely similar.  The issue is that Netanyahu has been forced to accommodate the requirements of the ultra-Orthodox bloc in order to secure his position as prime minister.  He has played to the religious voters who support Likud, as well as to the ultra-Orthodox parties who he has been forced to share a coalition table with in the past.  This has meant allocating vast sums of money to maintain and support the stipends being paid to yeshiva students, and perpetuating their exemption from military service.  Both of these measures are extremely unpopular with the non-religious electorate, and contribute in a measurable way to lack of equality in Israeli society.  The decision earlier in 2012 by the High Court of Justice that the exemption from military service granted to ultra-Orthodox men is unconstitutional, has pushed the government into a corner to force it to make some changes to this policy.  If Netanyahu is able to structure a coalition to exclude the ultra-Orthodox parties, there is a greater likelihood that the required changes on the military exemption will be enacted in spite of the protests on the part of the religious groups.

The ultra-Orthodox parties have sensed the danger to their power base, and have decided to create single bloc out of the seats that were won by the two partes – Shas with 11 seats and the United Torah Judaism party with 7 seats.  Their 18 seats is a counter-balance to Lapid’s 19 seats, and forces Netanyahu to make a choice between one or the other.  It is almost inconceivable that Lapid would sit in a government with the religious parties, and vice versa.  It is my expectation that, after all the  negotiations are completed, Lapid will be in the government and the religious bloc will not.

As far as I can tell, Yair Lapid’s longer-term outlook looks more tenuous.  He has successfully created a political party that bases most of its strength on him as the leader.  Aside from himself, the members of the Yesh Atid list are relatively unknown, and much lower profile.  His platform of policies is not very unique, but rather borrows policies from many others, and packages them in a slightly different way.  His ability to continue to present this package in a unique way is key to determining whether Yesh Atid is a one-hit wonder, or whether it will be around in the future.  Political parties that were built around the fame and personality of their leader, have a poor track record in Israel.  Yair’s own father led the Shinui party, a party that no longer exists.  Similarly, Kadima that was built by Ariel Sharon, is in the process of dying.  There are many other examples of this, and I predict that Tzipi Livni’s Hatnua party will go the same way.  Perhaps Lapid has achieved what he needs from Yesh Atid.  His strategy may be to continue to lead the party in the current Knesset to his advantage, and then to fold into one of the established parties, probably Likud.  This is probably the best solution for Lapid to ensure his long-term survival in politics.

The tens of thousands of people who voted for Lapid are hoping that he will succeed in converting his written manifesto into policies on the ground, to make a real difference to Israeli society.  If he is able to achieve even a small fraction of what he set out to do, the kingmaker may go on to become a king in his own right.  Failure to do so my relegate him to the political trash pile.  The question is whether he is ready to take on the realities of Israeli politics, and to make them work to his advantage.  The challenge is a tough one.