Israel's Economic Tug of War
SALPETER, ELIAHU
HISTADRUT VS. LABOR Israel's Economic Tug of War BY ELIAHU SALPETER Tel Aviv Israel is in the midst of yet another "make it or break it" effort to get out from under its deepening economic...
...Facing near anarchy, Peres retreated...
...The sharp clash between Histadrut and a Labor Party-led government was itself something new in Israel's history...
...Previously, such controversies were thrashed out by Labor and Histadrut leaders in the Prime Minister's " kitchen cabinet" and kept quiet until they were resolved...
...During the same period productivity in the advanced countries that constitute most of Israel's export markets went up by 6-7 per cent...
...No less ominous is the prospect of stepped up emigration in the face of growing unemployment...
...As a result, it is far more vulnerable to stresses like unemployment than are older, relatively homogeneous societies...
...Kahane's call for the expulsion of Arab workers from Jewish employment already appears to be striking a favorable echo among masses of uneducated Jews in search of work...
...For proof they point to the quick petering out of the mass protests and the speed with which the fury of the " 13 big work committees" subsided...
...It was necessary to go back to the 1980 wage levels, they argued, to break the back of inflation and to make Israeli goods more competitive abroad...
...The most dramatic demonstration of his independence came July 3, when Histadrut ordered television technicians to black out the screens and thus thwarted the Prime Minister's desire to personally explain his retrenchment program to the public...
...Some cynics see the whole Histadrut-Labor tug of war as a staged affair designed to strengthen Kessar's position and/or to defuse a possibly very explosive situation...
...and a 3 per cent cut in the salaries of those remaining on the payroll...
...For several months Prime Minister Shimon Peres and Finance Minister Yitzchak Modai tried the "slow remedy" road to recovery: a combination of price stabilization plus "package deals" with the trade union federation Histadrut and the Manufacturers Association...
...They also note how tolerantly the Prime Minister took the blacking out of his television address...
...Most significantly, a large proportion of the emigrants have been young people, skilled workers and professionals...
...While going along with the 3 per cent cutback of government employees, Histadrut maintains that since the emergency is being held in abeyance, there can be no summary separations...
...Unless an accommodation is reached, having to pursue all the procedures for dismissal stipulated in existing contracts would plunge the Peres Administration into a tortuous nine- to 12-week process...
...LABOR Israel's Economic Tug of War BY ELIAHU SALPETER Tel Aviv Israel is in the midst of yet another "make it or break it" effort to get out from under its deepening economic crisis...
...The economists responded that an economically weak country is necessarily militarily a weak country, no matter how many weapons it accumulates...
...They threatened indefinite strikes, and the power station workers immediately began to irregularly disrupt the electricity supply to various parts of the country...
...He and his supporters warned that the country's present favorable strategic situation cannot be guaranteed to last forever...
...In addition, Rabin observed, all the Arab armies are obtaining increasingly sophisticated weapons that tend to erode Israel's qualitative superiority...
...Defense Minister Yitzchak Rabin countered that any larger cuts would jeopardize Israel's security...
...To begin with, there was greater rank-and-file resistance to the latest austerity plan than to earlier, milder reforms...
...Although it is too early to tell whether the latest approach will succeed, economists here say the odds are no better than even...
...Finally, last June 30, Peres and Modai presented an emergency plan to the Cabinet...
...Perhaps the most crucial of these concerned the defense budget...
...These included eliminating food and public transportation subsidies...
...The government, he said, was willing to stay the emergency if the unions would agree to negotiate voluntary acceptance of the mandated measures...
...An estimated 30,000 Israelis left the country last year, and the figure may be 50 per cent higher this year...
...Economists generally agreed that more than $500 million had to be pared from military outlays if expense reductions were to be truly effective...
...Israel is still at the stage of forging one nation out of immigrants from tens of different countries...
...One consequence of a sharp rise in the number of jobless, for example, could be thegreat-er acceptability of former American Rabbi Meir Kahane's neofascist Kach Party...
...raisinguniversity tuition fees...
...a 3 per cent reduction in the number of government employees...
...Furthermore, the small yet very vocal Likud Opposition faction on the Histadrut Executive has used the forum to tell floating voters among the lower income groups what Herut members of the National Unity Cabinet could only imply—that Likud, not Labor, is the "defender of the wage-earner...
...The dispute was terminated by Prime Minister Peres, who declared that there would be no further cuts in the defense budget...
...He is a Labor MP, but unlike most of his predecessors in the top union post he is a product of Histadrut, not the party machine...
...aregitlarNLcontributor, is a correspondent for Ha aret/, one of Israel's leading newspapers...
...Indeed, beyond any strictly political considerations, this probably accounts for the government's attempts to slightly soften its new economic measures...
...The maj or bone of contention was the government's demand that from August through October a one-time 10 per cent payment replace the usual indexed cost of living allowances...
...Once the Iraq-Iran war ends, they pointed out, Iraq's now formidable fighting force could easily turn against Israel...
...Similarly, it cannot be taken for granted that the hostility between Amman and Damascus will survive the Iran-Iraq struggle...
...No sooner was the program put forward than two things happened: Histadrut declared an open revolt against it, and a majority of the Herut Party members in the coalition government's Likud faction made it known that they opposed the scheme—thus perpetuating their populist line and preparing an alibi in the event of failure...
...At the minimum, Syria is bound to emerge from its isolation by the Arab world for siding with Iran rather than Arab Iraq...
...Cabinet members virtually sabotaged decisions to reduce the budgets of their respective ministries, making it impossible to implement the overall cut of $ 1.5 billion that the country's economists unanimously agreed was the minimum needed for any progress to be registered on the economic front...
...Finally, much discussion has focused on the social impact of the austerity package...
...They hoped thereby to reduce inflation and stem the hemorrhaging of foreign currency without sharply increasing unemployment...
...Histadrut, proclaiming victory, called off its strikes...
...EliahuSalpeter...
...Several factors seem to have brought about the radical change...
...But the government had set an important precedent: For the first time, even if only temporarily, wages will not be linked to the cost of living index...
...In explaining the program government economists pointed out that over the past three years real wages had risen 10 per cent, while average productivity had increased a mere 1-1.5 per cent...
...It called an immediate one-day warning strike and unleashed the "13 big work committees" that control the country's 13 biggest employers...
...Particularly given the upcoming Histadrut general elections, Kessar apparently has felt the need to show he is not controlled by the Labor Party leadership...
...Left-wing politicians, though, are still insisting that a more "flexible" Israeli stand on the Palestine issue would diminish the danger of war and hence the need for more arms...
...an average worker produces some $60,000 worth of goods annually, compared with slightly more than $20,000 for his Israeli counterpart...
...Whatever one's view of the Peres-Kessar confrontation, there have been other unquestionably serious aspects to the expenditure debate...
...Israel must therefore continue to spend on updated armaments and maintain the strongest Army possible...
...This was approved July 1 after an almost 24-hour session when the Prime Minister threatened to resign...
...having patients with health insurance participate in hospital and drug expenses as well as boosting premiums...
...Instead, the moderate strategy gave everybody the feeling that the situation was not really as bad as it was being portrayed...
...Aimed at trimming the elusive $1.5 billion from the deficit, it contained some tax hikes but concentrated largely on reducing expenses through emergency measures...
...Ultimately, a 14 per cent lump sum was agreed upon for the three months, to be followed by 3 per cent monthly hikes fromNovember through March...
...Add to all this the fact that Histadrut Secretary-General Yisrael Kessar was appointed just a few months ago, after Yerucham Meshel retired...
...Histadrut claimed to be especially incensed by the use of emergency regulations to achieve economic goals, a step never taken before in Israel...
...Another potentially disruptive issue, though, is still on the table...
Vol. 68 • July 1985 • No. 9
