Neoliberalism as a state project changing the political economy of israel

Neoliberalism as a State Project Neoliberalism as a State Project Changing the Political Economy of Israel Edited by Asa Maron and Michael Shalev OUP CORRECTED PROOF – FINAL, 23/3/2017, SPi Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2017 The moral rights of the authors have been asserted First Edition published in 2017 Impression: All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2016957136 ISBN 978–0–19–879302–1 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work Acknowledgments The publication of this volume would not have been possible without the goodwill of both longtime colleagues and new acquaintances Among the latter, John Campbell has been a source of both intellectual inspiration and wise practical advice He was kind enough to join the editors and contributors in April 2015 at a workshop in Beersheva, Israel, where we deeply benefited from his detailed commentary and friendly encouragement We are also indebted to Adam Swallow, the Commissioning Editor for Economics at Oxford University Press, for his support and encouragement In addition, it has been a pleasure to work with OUP’s editing and production teams We owe a great debt to the contributors to this volume for their patience with our rather heavy-handed editorial style They drafted and redrafted with good humor, and were always ready to help out in any way they could We specifically wish to thank Zeev (Andy) Rosenhek who, as chair of the Sociology, Political Science, and Communication Department at the Open University, arranged for the group to have an initial get-together in an inspiring setting at Zikhron Yaakov in February 2014; Lev Grinberg for generously inviting John Campbell to cooperate with us and arranging his visit; and Daniel Maman, who as chair of Sociology and Anthropology at Ben Gurion University generously hosted our workshop with John Campbell A M., Haifa M S., Berkeley November 2016 Foreword Israel, Neoliberalism, and Comparative Political Economy John L Campbell Western scholars in the fields of comparative political economy, sociology, and political science have ignored Israel This is both surprising and terribly unfortunate It is surprising because, according to the United Nations, Israel ranks among the top twenty most developed countries in the world—higher than several Western European countries studied routinely by comparativists (United Nations 2013) It also ranks among the thirty most competitive economies in the world and is the third most innovative of all (World Economic Forum 2015) But the lack of attention paid to Israel is also unfortunate because it is a country that has much to teach us about the formation of nation-states, social conflict and nationalism—issues that bear directly on the rise of neoliberalism, the subject of this volume During the 1960s and 1970s comparativists such as Andrew Shonfield focused on the large North American and Western European countries such as the USA, Germany, the UK, and France This was an effort to understand how these countries responded differently to the devastation of the Second World War and how they contributed to the formation of the post-war advanced capitalist political economy (Shonfield 1965) Later, thanks to Peter Katzenstein’s research, some smaller European countries were added to the mix in efforts to see how countries coped with the stagflation crisis of the 1970s and early 1980s (Katzenstein 1985) Soon thereafter comparativists grew interested in the leading East Asian countries, notably Japan and South Korea, as emergent competitors to western capitalist economies South American countries began to draw some attention in the wake of the debt crises of the 1980s and 1990s as did a few more East Asian countries (Haggard 1990; Haggard and Kaufman 1992) With the collapse of the communist regimes in Eastern and Central Europe, several comparativists turned their attention to these countries too (Campbell Foreword and Pedersen 1996; Haggard and Kaufman 1995) Most recently, the ascendance of the BRICs (Brazil, Russia, India, and China) among other developing economies has attracted the gaze of comparativists (Campbell and Hall 2015; Guillén and Ontiveros 2012) But Israel, not to mention the Middle East more generally, has never received much attention from them North America, Western Europe, and South America also received the lion’s share of attention as scholars became interested in the globalization of the international political economy and the rise of neoliberalism Much of this work focused on the various mechanisms by which neoliberalism diffused from one country to another; how powerful political and economic actors, such as the International Monetary Fund and World Bank, pushed neoliberalism in the guise of the Washington Consensus on to various countries; and how national institutions mediated the degree to which different countries embraced neoliberalism or not (Harvey 2005; Simmons, Dobbin, and Garrett 2008) But, again, Israel never received much attention Why has Israel been relegated to the sidelines so often by comparativists? The answer is not obvious but several possibilities come to mind One is that Israel did not join the Organisation for Economic Co-operation and Development (OECD) until 2010 As a result, data on Israel were not available in a form that facilitated easy comparisons to other OECD countries Furthermore, for whatever reason, comparativists have not been interested in the Middle East more generally This is doubly ironic On the one hand, much of their research focused on how the stagflation crisis of the mid-1970s was a watershed moment for the rise of neoliberalism and a game-changer for the international political economy But after all, this was a crisis sparked in the first place by the Organization of the Petroleum Exporting Countries (OPEC) oil embargo in response to US support for Israel during the 1973 war On the other hand, Israel and the rest of the Middle East have received a tremendous amount of attention from scholars interested in international relations So how Israel can be a focus of their work but not that of comparativists is curious indeed Another reason why comparativists may have neglected Israel is that it is a very difficult case for them to understand because its complexities challenge some of their most basic assumptions about how national political economies operate There are two reasons for this First, most comparativists have focused on class struggles rather than nationalist struggles to explain differences among national political economies For instance, many comparativists have shown that so-called liberal market economies like the USA and the UK have weak unions, poorly organized employer associations, and little corporatism so they work much differently than co-ordinated market economies like Sweden and Germany that have strong unions, well-organized employer associations, and much corporatism (Hall and Soskice 2001) Of course, this viii Foreword emphasis on class stems from the fact that the societies they often studied— North America and Western Europe—tended to be relatively homogeneous culturally for various historical reasons, not all admirable or pleasant Put differently, the question of nationalism had long been settled in the West but not in Israel As Ernest Gellner argued, class conflict inside a common culture is relatively mild because it is not mixed up with ethnic, linguistic, religious, or other forms of nationalist conflict For him the real political dynamite in modernity results from the combination of nationalist and class politics (Gellner 1983: chap 7; Dahrendorf 1957: chap 6) Although largely absent in the postwar advanced capitalist countries, such dynamite has been common in Israel where since its founding in 1948 tensions between Muslims and Jews from a variety of class, religious, ethnic, and linguistic backgrounds have festered continuously and often exploded violently Class and nationalist divisions have also been commonplace among the Jews with important effects on the Israeli political economy Nationalism is not something with which most comparativists are concerned or that fits neatly into their analytic framework even though recent scholarship suggests that the degree to which countries are culturally homogeneous does affect national economic performance—even in the relatively homogeneous Western countries (Patsiurko, Campbell, and Hall 2013) Second, the Israeli state is a stark and contradictory combination of what Michael Mann called infrastructural and despotic power (Mann 1984) It is a democratic state affording some of its inhabitants, including Muslims, Christians, and Jews, citizenship, the right to vote, the obligation to pay taxes, and other opportunities to participate in the well-ordered functioning of society But it is also an oppressive state subjecting a significant proportion of the Arab population to strict and sometimes violent control, including the suppression of free movement within the country and access to labor markets and social services This too is ironic insofar as much of what is now Israel was once under British colonial rule yet Israel practices a form of internal colonialism vis-à-vis the Palestinians living in the occupied territories in Gaza, the West Bank, and the Golan Heights The complexities involved are mind-boggling insofar as some Palestinian Arabs are citizens of Israel but others are not Furthermore, beginning with the dismantling of the military government that controlled Arab citizens toward the end of the second decade of Israeli sovereignty, state regulation of and discrimination against Palestinian citizens became less despotic and more contradictory Yet raw despotic power, unmediated by any liberal rights of citizenship, continues to be exercised over the residents of the occupied territories.1 Nevertheless, the more important point is that this blending of infrastructural and despotic state power also makes A partial exception are the residents of East Jerusalem, which was unilaterally annexed by Israel and who have a kind of halfway status as permanent residents of Israel ix Bibliography Maman, Daniel and Zeev Rosenhek 2011 The Israeli Central Bank: Political Economy, Global Logics and Local Actors London: Routledge Maman, Daniel and Zeev Rosenhek 2012a “The Institutional Dynamics of a Developmental State: Change and Continuity in State-Economy Relations in Israel.” Studies in Comparative International Development 47(3): 342–63 Maman, Daniel and Zeev Rosenhek 2012b “Mobilizing Globalization in Local Political Fields: The Strengthening of the Central Bank in Israel.” Review of International Political Economy 19(2): 317–40 Mandelkern, Ronen 2010 “Professionals Struggling for Reform: Economists and Power in Israel’s Political-Economic Liberalization (Hebrew).” PhD dissertation, Department of Political Science, The Hebrew University of Jerusalem, Jerusalem Mandelkern, Ronen 2011 “The Response of the Bank of Israel and the Budgets Division to Recession – Economic Principles and Institutional Politics (Hebrew).” Rivon Lekalkala 58(1–2): 67–90 Mandelkern, Ronen 2015a “Two-Dimensional Social Learning and the Dynamics of Change and Continuity in Macroeconomic Policymaking Following the Great Recession.” Paper presented at the SASE 27th Annual Conference, London Mandelkern, Ronen 2015b “What Made Economists So Politically Influential? 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conversion; drift; layering 218 Insurance and Saving Division see Ministry of Finance (MoF) Inter-ministerial committee on Income Support 1997 112–13 International Monetary Fund viii Investment Promotion Center 62 iterative movement 167, 170–1 Keynesianism 29, 74–8, 99, 175 Kfar Ruth Judgment 159, 160 Knesset (parliament) Finance Committee 117, 127, 132, 134, 183 Labor, Welfare and Health Committee 117, 119, 121 Labor Committee of the Knesset see Knesset Labor Contractors Law 145 Labor Court 24, 158–66 Labor Economy see Histadrut: Labor Economy Labor Party 19–20, 27–45, 83, 105, 128, 131, 149, 174, 175, 177 Labor Alignment 33 Mapai Party 29–35, 79 Lavon, Pinhas 79 layering x, 114, 118, 121, 141, 146, 155, 167, 168 Lebanon 37, 39, 85–6 Likud Party 29, 30, 35–9, 42, 44, 84, 131, 174, 177, 186 loyalty benefits 15, 17, 184 Mandatory Tenders Law 144 Mapai Party see Labor Party Mapam Party 33, 79 mediated employment 154–60, 164–70 Medical Association 133 military burden 186–7 military establishment 5, 12, 34, 35, 84 military industry 31, 33 Ministry of Defense 34–5, 43, 83, 174 Ministry of Finance (MoF) autonomy of MoF 93–7, 101–2, 105–8, 173, 178–9 Budget Division 16, 66, 115, 141, 147–8 Capital Markets, Insurance and Savings Division 54, 55, 69 Insurance and Saving Division 62, 66 Supervisor of Capital Markets 62 Ministry of Health (MoH) 131, 141–50 Ministry of Immigrant Absorption 40, 116 Ministry of Industry, Trade and Labor 56, 62, 118, 119, 162, 164, 167 Ministry of Justice 67 Ministry of Labor and Social Affairs 116 Ministry of Welfare and Social Affairs 119 Mitterrand’s, France 93 monetarism 76 Index National Health Insurance Law 18, 41–2, 124, 130–3, 141, 144 Neoliberalism explanations for its ascendance in Israel 13–14 general explanations for its ascendance 6–8, 9–12 sustainability in Israel 182–7 Netanyahu, Benjamin 29–30, 44–5, 184 Netherlands - liberalization 180 New Public Management 93, 150 non-indexed loans 34–7 Occupied Territories 34, 44, 185–6 OECD viii, 16, 17, 19, 64, 166, 181, 185 oil crisis (1973) 82, 101 Omnibus Economic Arrangements Law 16, 86, 87, 103, 117, 132, 133, 134, 146, 179, 183 Ottoman Society Law 142, 144, 148 Palestinian workers 33, 34 Patinkin, Dov 77–81, 88–90 payroll taxes 94, 105–6 pension funds Histadrut pension funds 30, 33, 35, 42, 43, 45, 173, 174 state support of pension funds 67, 103 Peres, Shimon 29–30, 38, 40, 41 Polanyi, Karl 75, 167, 183 political upheaval of 1977 see elections, 1977 privatization 9, 14, 18, 19, 30, 39, 42, 43, 47, 49, 51–2, 57–9, 63, 66, 67, 93, 103, 112, 113, 123, 154, 155, 157, 167, 174, 179 Rabin, Yitzhak 40, 41 Ramon, Haim 41–2 recession 33, 34, 37, 39, 51, 64, 81, 110, 177 Republican principle of citizenship 184 Research Fund 141–8 retrenchment 18–19, 22, 94, 95, 104, 106, 108, 123, 124, 131, 134, 154, 167 Securities Authority 50, 62, 67 Shani-Gabbai Committee see Committee for Enhancing Competitiveness in the Economy social assistance see Income Support social democracy 30, 98, 124, 163, 180 social protest (summer 2011) 162–6, 169, 183 Social Welfare and Health Committee of the Knesset see Knesset Society for Public Health Services (SPHS) 142 soldiers’ benefits 126–30 South Korea vii, 49, 51 Stabilization Plan 38–9, 64, 74–5, 85, 94–5, 151, 177–9 standard employment relationship (SER) 153 state autonomy 34, 39, 43, 44, 58, 59, 61–72, 176–8 state subsidies 30, 33, 34–40, 43, 47, 51, 55–6, 101, 105–6, 174 states as agents of liberalization 9–12 theory of 4–6 subcontracting 153–87 Supervisor of Banks see Bank of Israel Supervisor of Capital Markets see Ministry of Finance (MoF) Sweden viii, x Tamir Commission see Commission for the Reform of the Treatment of the Unemployed Recipients of Long-term Subsistence Allowances Tel Aviv Stock Exchange (TASE) 49 temp-work agencies (TWAs) 154–7, 166 Thatcher’s Britain 93, 179–80 trade unions 11, 14, 29–31, 159, 167, 174, 179–80, 180 Trajtenberg, Manuel 163 UK 179–80 see also Thatcher’s Britain Ultra-Orthodox Jews 18, 127, 129, 185 unemployment 23, 37, 63, 97, 109–21 United States vii, viii, x, 34, 36, 38, 55, 56, 75, 78, 113, 114, 123, 175, 182, 184, 186 Vaad Hapoel see Histadrut Executive Committee veto player 6, 8, 19, 22, 44, 94–5, 103, 107, 150, 176, 179 War of 1967 29–31, 35, 43, 82, 184 War of 1973 viii, 34 World War Two vii welfare state Canada 180 history and characteristics in Israel 14–15, 184–5 in neoliberal era in Israel 14–19 Wisconsin Works 113 World Bank viii, x, 175 World Zionist Organization 31, 32, 49–50 Yesh Atid Party 184 219 .. .Neoliberalism as a State Project Neoliberalism as a State Project Changing the Political Economy of Israel Edited by Asa Maron and Michael Shalev OUP CORRECTED PROOF – FINAL, 23/3/2017,... both state and non -state actors What determines the role of the state as an actor? An elementary but powerful analytical distinction has been made between the autonomy and capacities of states As. .. sense Israel has suffered the same fate as Denmark, for instance, another small state that was ignored by comparativists for a long time because most of the literature available in English about