Oded Balilty/AP Images

An Israeli family in a camp set up as part of a protest against the high cost of housing, Tel Aviv, Israel, July 23, 2011


Early in July, a group of young Israelis gathered in a small apartment in Tel Aviv to talk about the difficulties of finding affordable places to live in the city. They had come at the invitation of Daphni Leef, a video editor who was about to be evicted from the apartment and who had recently posted an “event” on Facebook summoning people fed up with the housing situation to pitch tents on the streets in protest. Inside Leef’s living room, there was enthusiasm for the idea, but no one expected a big turnout. “We didn’t expect it to last longer than a weekend,” Stav Shafir, a student who was there, told me recently. “I wrote an e-mail to my friends asking them to come, just so that we wouldn’t feel lonely.”

Daphni and her fellow protesters did not feel lonely for long. The first night the tents were pitched—July 14—about 150 people showed up. Within a few days, a sea of tents had spread across the pedestrian walkway bisecting Rothschild Boulevard, a busy street lined with art galleries and cafés. The squatters inside the growing encampment were dismissed at first as spoiled kids from Tel Aviv—“this isn’t a real protest, it’s people eating sushi and smoking nargilahs,” complained David Amar, the mayor of Nesher, a town in northern Israel. Yet similar encampments soon sprang up in places such as Be’er Sheva, a working-class city in the Negev, and Holon, a poorer town south of Tel Aviv.

On July 25, after tens of thousands of Israelis rallied to demand cheaper housing, the newspaper Haaretz announced that the demonstrations had “reached a peak.” Two weeks later, the peak was eclipsed, as an estimated 300,000 people demonstrated in cities across the country, blocking traffic and unfurling a giant banner in Tel Aviv that proclaimed “Egypt is here!”

What some termed the “Israeli summer” bore less resemblance to the so-called Arab Spring than to the economic unrest that has convulsed cities such as Athens and Barcelona recently. “We want a welfare state!” chanted members of a movement that soon had the backing of unions, women’s groups, parents upset about the exorbitant cost of day care, and medical workers on strike over low wages in public hospitals short of resources. The eruption of popular disenchantment and call for a “more just, humane Israel” spelled out in a manifesto released by some of the protesters made the right-wing government of Benjamin Netanyahu suddenly look a lot less stable, not least since the man at its helm has long been a staunch advocate of the laissez-faire economic policies the demonstrators angrily assailed.

By the third week of August, when I met Stav Shafir, the social protests had finally been pushed out of the headlines by news of a terrorist attack in southern Israel that left eight Israelis dead. The violence and ensuing diplomatic crisis with Egypt, which recalled its ambassador after five Egyptian security officers were accidentally killed during an Israeli retaliatory mission, prompted some to demand that the protesters fold up their tents and go home. “Security matters are once again the most pressing issue,” said Likud Knesset member Ayoub Kara—and much to Netanyahu’s relief, some of the protesters believed him. Yet on September 3, an estimated 450,000 Israelis flooded the streets yet again, linking arms and chanting “The people demand social justice!”—which had become the movement’s rallying cry. It was the largest protest in Israeli history.

Some of the tents on Rothschild Boulevard were folded up a few days later, when inspectors dispatched by the Tel Aviv Municipality arrived in the middle of the night to remove them. A judge subsequently issued an injunction stopping the evacuation until the court could discuss the matter. In early October, municipal workers accompanied by border patrolmen and police came back to finish the clearance operation. This time, a court rejected a last-minute appeal from some of the protesters to stave off the tents’ removal, and soon there were no more tents on Rothschild Boulevard.

Although it is too soon to say how the mass demonstrations this summer may alter Israel’s politics, one thing they have already done is challenge the optimistic portrait of the Israeli economy drawn by some analysts in recent years. “Israel has become an astonishing success story,” wrote David Brooks of The New York Times in January 2010, hailing the country’s emergence as a dynamic high-tech center. Brooks based his argument not on conversations with Israelis but on the findings in Start-Up Nation: The Story of Israel’s Economic Miracle, a book published in 2009 by Dan Senor, a Fox News contributor, and Saul Singer, a columnist at the Jerusalem Post. According to the book, which became a New York Times best seller and was cited by Netanyahu in a speech before the Jewish Federations of North America that year, a spirit of risk-taking improvisation fostered in the army and strengthened by adversity has turned Israel into “the greatest concentration of innovation and entrepreneurship in the world today.”


Israel’s high-tech industry is indeed booming: as Senor and Singer note, more Israeli companies are listed on the NASDAQ than from all the nations in continental Europe combined. Propelled by the export of software and other high-tech products, the economy grew an impressive 5.2 percent last year. But fewer than 10 percent of Israelis work in the high-tech sector. And as suggested by the level of support for the protests this summer, which ranged in polls between 75 and 88 percent, a miracle is not how most Israelis would describe what has happened to their economy in recent years. In the discussion groups that took place every night inside the tent encampments, participants traded stories about struggling to meet their expenses even as they heard ministers boast that the economy was flourishing.

Many complained that the unbridled capitalism embraced by their leaders mainly benefits those at the top, a perception borne out by some findings that do not appear in Start-Up Nation. According to a 2010 report published by the OECD, Israel has the fifth-highest level of inequality in the thirty-four-nation organization. It has the highest poverty rate of any OECD country, and ranks twenty-fifth among developed countries in health care investment.

To Palestinians in the Gaza Strip, where the unemployment rate is 45 percent, Israelis distressed about these facts may still seem enormously privileged. And compared to the average Gazan—or for that matter the average Israeli a couple of generations ago—they are. As Paul Rivlin notes in his survey of Israeli economic history, The Israeli Economy from the Foundation of the State through the 21st Century, after declaring independence in 1948 Israel had to ration basic goods under a strict austerity program. It struggled to absorb hundreds of thousands of new immigrants, who were packed into often squalid transit camps.

But in the decades that followed conditions improved, thanks in part to the inflow of capital from abroad (reparations from Germany, the sale of State of Israel bonds) but also to public investment in infrastructure and education, the development of new industries, and the cultivation of various institutions with openly collectivist aims: cooperative farms and kibbutzim in the agricultural sector, and the Histadrut, a federation of trade unions that also ran the nation’s largest health fund and numerous industrial enterprises. Like the Labor Party that governed Israel between 1948 and 1977, these institutions were always more open to Ashkenazi Jews of European origin than Mizrahi Jews from North Africa and the Middle East, to say nothing of Arabs. But in a nation founded by socialists where roughly 70 percent of the workforce was unionized, an egalitarian ethos prevailed that made Israel among the least stratified countries in the world.

“When I started my sociology studies at Hebrew University in 1961, we were taught that the difference between the income of an executive and a production worker was 2.7, and we were proud of it,” Shlomo Swirski, the academic director of the Adva Center on social equality, a research institute based in Tel Aviv, told me. “Now, a senior executive earns 90 to 95 times what a production worker earns.” A turning point came in 1985, when hyperinflation caused by oil shocks and excessive spending (much of it on military outlays) prompted the adoption of a stabilization plan that entailed deep cuts in government expenditures.

The plan worked, helping to tame inflation and to establish a new ideology that called for privatizing state enterprises, lowering corporate taxes, and shrinking the public sector. Without much domestic opposition or attention from the foreign press, Israel’s highly egalitarian social democratic system gradually gave way to a more entrepreneurial American-style one, a trend accelerated by Netanyahu, a graduate of MIT’s Sloan School of Management who, in 2003, while serving as finance minister, lowered income and corporate taxes while slashing social services.

“Netanyahu cut everything—rent subsidies, assistance to low-income families, child allowances, income maintenances, sharp cuts,” recalled Leah Achdut, an economist who was then deputy head of the National Insurance Institute, which oversees many of Israel’s public welfare programs. By 2003, she told me, public spending had already fallen substantially from the unsustainable levels of the mid-1980s—from roughly 70 to roughly 50 percent of GDP—but the country’s economic leaders were not satisfied. “People said it’s not enough, we have to reduce taxes and government more to encourage the private sector,” said Achdut. “Bibi very much believes this—in this respect, he is entirely American.”



“Swinish capitalism” is how the journalist Ari Shavit described the new system in Israel shortly after the social protests began, and seemingly everywhere one looked this summer—“Bibi you hog, give back the state!” proclaimed a sign that captured the prevailing mood—the sentiment was echoed. Much of the outrage was directed at the group of families who now control an estimated 30 percent of the Israeli economy. The shift to a more entrepreneurial model of capitalism was supposed to breathe competition into sectors of the economy once dominated by the state. But instead of free competition, what many Israelis feel they have gotten is cartel-like oligopolies that control everything from the banking industry to supermarket chains, which pass along inflated costs to consumers who are captive to them.

It is widely believed that, as in Russia, the privatizing of former state enterprises has been greased by cronyism, a form of influence-peddling documented in a film called The Shakshuka System that was screened one night on Rothschild Boulevard. An Israeli version of Roger and Me, the film follows the producer, Miki Rosenthal, around as he poses awkward questions to tight-lipped officials about the sale of state assets at bargain prices to the Ofer family, whose holdings range from shipping to chemicals to natural gas. Some of the officials who refuse to talk to him (and who helped arrange the deals) end up landing jobs with the Ofers.


Ariel Schalit/AP Images

Israeli police officers dismantling tents and other structures at a protest camp in Tel Aviv, October 3, 2011

Such revelations have not been common in the Israeli media in recent years, which is not surprising in light of how many news outlets the country’s richest families now own. While Miki Rosenthal was making his film, the Ofer family purchased a controlling interest in Channel 2, where he was working. Rosenthal soon learned his contract was not being renewed. No commercial network in Israel would broadcast his documentary. It eventually aired on a state-owned channel, along with a counter-video produced by the Ofers.

Inside the tents I visited this summer, I heard much criticism of the undue influence wielded by tycoons. Anger at another influential group that has managed to distort Israel’s economic priorities—Jewish settlers—was notably more muted. The leaders of the movement calling for “social justice” did not draw attention to the daily injustices taking place across the Green Line, in part to avoid alienating potential supporters on the Israeli center and right. At demonstrations, many people told me that the polarizing issues that too often divided the country—the settlements, the occupation—had no connection to the economic protest under way.

The problem, of course, is that there is a connection, as was underscored when forty-two Knesset members and Cabinet ministers sent a letter to Netanyahu urging him to ease the housing crisis by increasing settlement construction in the West Bank. This is indeed what Israel did in the early 1990s, luring newly arriving immigrants across the Green Line with tax benefits and cheap housing while the rest of society was burdened with the hidden costs of the occupation: bypass roads, armored transportation, infrastructure, security.

The calamitous toll the settlement project has taken on Palestinians—stolen land, pilfered water, divided cities—is well known. The burden borne by Israelis, though less familiar and certainly less extreme, has also been immense. In his recent study The Political Economy of Israel’s Occupation, Shir Hever, a researcher at the Jerusalem-based Alternative Information Center, estimates that 381 billion Israeli shekels—roughly $100 billion—was spent in the occupied territories between 1970 and 2008, money that could have gone to education, health care, or building more affordable housing in Tel Aviv. Such costs are unfamiliar to many Israelis in part because allocations to the settlements are not specified in state budgets.

Were expenditures on settlements more explicitly recognized, the protesters who took to the streets this summer could potentially achieve something the left has failed to do: convince mainstream Israelis that the occupation is unsustainable. They have already heightened popular awareness of how national priorities are skewed by the military, which consumes one fifth of Israel’s annual budget, an expense that is rarely challenged in Israel. More questions started being raised after the mass demonstrations began. The newspaper Ma’ariv published a story in August about the “lost billions” funneled to the Defense Ministry this year without any oversight or supervision, under a secret agreement with the prime minister’s office. “These lost billions…must be returned to their rightful owners—the average Israeli who works hard for a living,” wrote the journalist Ben Caspit.


Conspicuously absent from the protests this summer were some Israelis who don’t work hard for a living: members of the ultra-Orthodox community. Like Jewish settlers, they are the beneficiaries of government subsidies reserved for politically protected theological pursuits—in their case, full-time Torah study funded by the state in accordance with the wishes of Shas, a religious party that controls a crucial bloc of Knesset seats and secures the benefits on their behalf. Among ultra-Orthodox men, the rate of nonemployment has soared as a result, from 21 percent in 1979 to 65 percent today.

It’s hard not to wonder after the events of this summer how much longer this will be tolerated by Israel’s secular middle class, a part of the population that until recently was viewed as too cynical or disengaged to make its presence felt in the political arena, much less on the streets. “No one could imagine how quickly indifference would turn into involvement,” Tami Zandberg, a city councilwoman who attended many of the demonstrations, told me. Certainly not the Western press, which was curiously silent about a social movement of unprecedented magnitude in a country where minor incidents often make headline news. The sparse coverage of the protests left many Israelis feeling that the outside world pays attention to them only when a bus explodes in Jerusalem or a house is bulldozed in the West Bank.

Yet Western news outlets weren’t alone in not knowing what to make of Israel’s suddenly mobilized middle class. Equally uncertain were many of the country’s poorer citizens, including the roughly one in five Israeli citizens who are Arab. As Ilan Peleg and Dov Waxman document in their new book, Israel’s Palestinians, the poverty rate among Arab-Israelis rose from 35 percent in 1990 to 50–55 percent in recent years, owing partly to the low rate of participation in the work force by Arab women, but also to pervasive discrimination and limited employment opportunities.

No group in Israel stood to benefit more from the emergence of a movement dedicated to social justice. But the Israeli Arabs had good reason to wonder whether the vision guiding the protesters this summer included them, which is why some hesitated to participate. “Many say we shouldn’t join this struggle because it’s the Israeli middle class and we’re not part of the Israeli middle class,” Shahin Nasser told me. A journalist from an Arab neighborhood of Haifa called Wadi Nisnas, Nasser was among the founders of a tent encampment established in the community despite such misgivings. He saw the protests as “an opportunity to raise our voices,” he told me when I visited one night, which is why he’d been paying visits to encampments in Haifa’s Jewish neighborhoods. “I want them to know what it’s like for Arabs here.” I asked him if he thought people were listening. “Yes,” he said, “they are very open.”

The openness was not always on display. At a tent on Rothschild Boulevard one night, I heard a man denounce some Muslim women from neighboring Jaffa who had been invited to talk about the problems in their community (the man, who spoke in Arabic, was an Iraqi Jew). One of the women later told me she’d walked the length of Rothschild Boulevard shortly after the protests began, and come away feeling that there was no place for her there. Yet by mid-August, it was no longer unusual to hear of an Arab speaker talking of injustice at a demonstration and receiving a rousing ovation from a predominantly Jewish crowd. At one protest, poor Arabs from the Jaffa neighborhood of Ajami marched together with poor Jews from a traditionally pro-Likud neighborhood in south Tel Aviv, something few could have imagined back in June.

The demonstrations this summer have also affected the way politicians talk. In a recent interview with Ma’ariv, Tzipi Livni, the leader of the opposition Kadima party, disparaged the “piggish capitalism” embraced by Netanyahu and said he won’t deliver “real change” to the economy. She was vague about how she would change things herself, but Livni was not alone in believing that the committee appointed in early August by Netanyahu to address the protesters’ demands would deliver little that was new. “The government’s economic policy is that of a free market,” Eyal Gabai, Netanyahu’s outgoing director general, bluntly informed activists who demonstrated outside his home one day in August. “This government will not become a welfare state.”

“Bibi Go Home!” many demonstrators chanted this summer, a slogan that predictably drew cheers among the students in Tel Aviv. What is intriguing is that the frustration appeared to extend to working-class towns in Israel that have long tended to support right-wing governments, a pattern dating back to 1977 when Mizrahi Jews, estranged from the Ashkenazi elite that dominated the Labor Party, threw their support behind Menachem Begin. The watershed election that year established a precedent that has yet to be overturned. “The tragedy of Israel is that the poorest people always support the right-wing, which makes their lives miserable economically by reducing welfare, education, housing,” Yehuda Nuriel, a columnist at the newspaper Yediot Ahronot, told me.

A poll conducted by Haaretz in September showed rising support for the Labor Party, whose new leader, Shelly Yachimovich, advocates stronger social welfare policies. Another politician who may benefit from the unrest this summer is Aryeh Deri, an ultra-Orthodox Moroccan Jew who led Shas in the 1990s until he was convicted on corruption charges. Despite his black skullcap and tattered past, Deri is a moderate who, a few months ago, announced his intention to reenter politics by launching a movement that will focus on social issues. Unlike the current leaders of Kadima and the Labor Party, he could potentially appeal not only to the Mizrahi community but also to ultra-Orthodox Jews who realize that finding jobs rather than living on government handouts is in their own best interest. (More than half of the Haredim live below the poverty line and a growing number want to work, as evidenced by the four thousand who turned up at a recent jobs fair in Jerusalem.)

Whether joining the workforce would actually lift them out of poverty is another matter. Wages for most Israelis have stagnated in the past decade, and the ranks of the working poor have grown, thanks in part to the estimated 250,000 migrant laborers from Asia and Africa brought into the country to do menial jobs once performed by Palestinians.

On September 26, the committee formed by Netanyahu in response to the social protests issued a set of recommendations to address inequality that would cost $8 billion over the next five years. The plan, which calls for lowering defense spending, increasing housing subsidies, and providing free education for all children at the age of three (as opposed to the current age of five), was praised by Netanyahu as “a landmark in Israel’s economy and society.” The protesters offered a harsher appraisal, dismissing the proposals as cosmetic reforms that did not go nearly far enough. At a press conference in Tel Aviv, Daphni Leef announced that there would be more demonstrations when the Knesset returned to session in late October.

To judge by the turnout in Tel Aviv on October 15, when several hundred Israelis gathered to express solidarity with the Occupy Wall Street encampment in Manhattan, and take part in the international Global Day of Action, a second wave of mass demonstrations is unlikely, at least in the short term. The Tel Aviv rally was smaller than the protests that took place in cities such as Rome and Berlin, suggesting a waning of energy and shift to other concerns. The Israeli cabinet approved the $8 billion plan to address inequality, but the news was quickly overshadowed by the deal struck between Hamas and Netanyahu for the release of the abducted Israeli soldier Gilad Shalit.

Netanyahu surely hopes that by the time elections take place the paramount concern of most Israelis will once again be bitachon—security. But if the protests this summer proved nothing else, it’s that many citizens are no longer waiting for elections to air their grievances or for their leaders to tell them what is important. When Knesset members dropped by the tents this summer to express their (belated) support, the reaction was cool. When the protesters were advised to go home after the violence in August, they refused, not because they didn’t care about security but because the word carried a different meaning to them. “If we don’t have health care, education, housing, a welfare system, we’ll never have security,” Stav Shafir said. “You need to have a strong society to have security, and right now our society is very weak.”

—October 25, 2011