The Palestinian scholar Walid Khalidi said to me recently that Menachem Begin may yet succeed where Nasser failed in bringing unity to the Arab world. No doubt this is why Yasir Arafat expressed satisfaction in June at the good prospects for Begin’s reelection. Yet the diplomatic and military pressures now mounting against Israel from Arab rejectionists, European leaders, and State Department officials have not united the Jewish state. The mean-spirited campaign that preceded the June 30 election has in fact revealed a country passionately divided by ideology, class, age, attitudes toward Orthodox faith and law—and crucially, ethnic origin. The ingathering of the exiles, it seems, has been a simpler matter than consolidating the nation.
What this election has also made clear is that the pro-Likud constituencies of the “new Israel,” composed mainly of Jews of North African origin, have proven even more convincingly to be a majority—albeit a slim one—in this turbulent society. It was these Jews whose support for Begin was decisive in the elections of 1977. They now may have superseded once and for all the institutions and values of historic Labor Zionism which before 1977 had presided over the Jewish settlement and the state without interruption since 1933.
Their victory was more convincing this time because by contrast to the campaign of 1977, they now supported a Likud government running on a record of economic mismanagement, civil corruption, and growing diplomatic isolation. Yet Begin’s coalition has held its strength: Likud will have forty-eight seats in the tenth Knesset to Labor’s forty-seven, and it seems the only party the president can call on to form the next government. By contrast, Labor and the Democratic Movement for Change shared forty-seven seats in 1977 to Likud’s forty-five.
To understand just how disastrous Likud’s policies have been to Israel’s economy, consider that in 1977 about ten Israeli pounds traded for one American dollar, while today the rate of exchange is 115 to the dollar and is climbing daily. Of course, this figure by itself is misleading: Israel has an efficient system of cost-of-living escalators which the finance ministry under Yoram Aridor has recently instituted along with a larger package of reforms. Wages, bank accounts, marginal tax brackets and so forth are now all 100 percent linked to the inflation, which is why, ironically, savings rates among Israelis are among the highest in the world in spite of the startling rate of inflation with which they must contend.
Still, as Uriel Lynn, the Likud-appointed commissioner of state’s revenue (and now a strong candidate to become governor of the Bank of Israel), conceded to me, the climate is foul for the long-term investments in industrial and high technology production that Israel needs to avoid economic collapse—including investments in aviation, computer software, and medical equipment, which now make up 9 percent of the GNP.
Much of Israel’s most vigorous industry is, in fact, now financed by foreign credit, and Aridor’s …
Reagan and the "New" Israel November 19, 1981