Israel’s Bids to Modernize Economy Fly in Face of Traditionalists

For investors, Israel’s national airline, El Al, would seem like a great catch. Its assets include sleek new jets, an occasional profit, and flights that are routinely packed to capacity.

But El Al cannot fly on the Jewish Sabbath. Grounding the carrier from Friday afternoon to Saturday night, every week, has been costing millions of dollars and, the government claims, drives away potential financial backers.

Israel’s eternal struggle to reconcile its character as a Jewish state with the competitive demands of the modern world is being played out these days both in the skies and on the ground. A biblical command to let the land lie fallow every seven years will this year bedevil Israel’s multibillion-dollar agricultural industry; Israel regularly pays higher energy bills to customize daylight saving time to accommodate those who don’t wish to say morning prayers in the dark.

Israel prides itself as a regional powerhouse boasting a vibrant high-tech industry and solid international credit ratings. Successive governments have made great strides in transforming the country from a hidebound socialist state to a capitalist success story.

But every so often, Israel’s efforts to modernize its economy hit up against ancient traditions--traditions that many here believe define this nation of Jews but that others see as archaic holdovers that impede progress.

At El Al, top executives resigned recently to protest the government’s failure to go ahead with a long-promised plan to privatize the airline.

“For an airline to exist, it needs to fly on Shabbat--it’s obvious. Even my 4-year-old granddaughter understands that,” El Al President Joel Feldschuh said in an interview at his company’s corporate headquarters at Ben Gurion Airport in Lod, outside Tel Aviv. Feldschuh’s resignation is effective Oct. 30.

The government sees his point.

As Prime Minister Ehud Barak put it, according to a statement issued by his office this month: “There is no government in the world that knows how to run an airline, and there is no buyer who will agree to purchase an airline that does not fly 15% of the time.”

And so Barak announced that the airline will begin flying on the Sabbath to expedite its privatization and as part of a broader “civil revolution” aimed at reducing the influence of ultra-Orthodox rabbis on the lives of average Israelis.

Although recent polls show that most Israelis support the move, it drew an uproar from religious leaders. Politicians representing the ultra-Orthodox are demanding a special session of parliament to block the move, and others are threatening to boycott the national airline.

Allowing El Al to fly on the Sabbath, says Rabbi Avraham Ravitz, is the beginning of a slippery slope of insidious measures that will erode Israeli Judaism. If El Al violates the Sabbath, he says, it’s only a matter of time before all public transportation runs on Saturday, and kosher laws could be next.

“To be a Jew is not so easy,” Ravitz, who leads one of four religious parties in the parliament, said in an interview in his Jerusalem apartment. “We believe in certain values, and you have to pay a price for these values.”

Even Moderates Prefer Sabbath Restrictions

God gave Jews this land, Ravitz says, because they are a special people who are obliged to remain special by upholding their traditions and laws--even if it costs the state more money to do so. And El Al is a symbol and an envoy of this unique state.

Ravitz’s party, United Torah Judaism, is an ultra-Orthodox grouping that broke with the Barak government some time ago. But even in the Meimad party of moderate observant Jews--the last religious party that remains in Barak’s withering coalition--there was widespread condemnation of moves toward loosening Sabbath restrictions.

“We are losing a lot of money by preferring not to work seven days a week,” conceded Meimad’s Rabbi Yehuda Gilad, but “this is the whole idea of Shabbat. This is one of the great contributions of Judaism to the culture of the world.”

Sabbath restrictions permeate numerous spheres of society, including the way doctors may work at hospitals, the number of public buses that may operate and the duties soldiers are allowed to perform. Many--though not all--restaurants, theaters and stores close by sundown Friday and don’t reopen until nightfall Saturday.

Israel’s Zionist founding fathers established a state based on tenets of socialism and secular Judaism that coexisted with little trouble. Over the years, and especially in the last two decades, however, religious factions have gained enormous political power and sought to impose stricter rules on the broader society. Many Israelis now consider the secular-religious divide to be Israel’s greatest challenge.

El Al flew seven days a week until 1983, when religious political parties demanded that the airline suspend flights on the Sabbath. The government at the time, eager to curry favor with the ultra-Orthodox, complied.

Losses incurred by the once-a-week--plus holidays--grounding range from $24 million to $55 million annually, according to estimates submitted to a public commission charged with investigating the privatization of El Al. While there is no accurate estimate of how many ultra-Orthodox fly on the airline, industry analysts say the losses from any religious boycott are likely to be offset by gains in the additional passenger and cargo business.

El Al is only one venue for these skirmishes.

Rabbis take very seriously the Bible’s command that the land lie fallow every seventh year. The so-called shmita year begins at the end of this month, and observant Jews are prohibited from buying fruits or vegetables grown in biblical Israel.

Normally, the prohibition is evaded when Jewish farmers symbolically sell their land to non-Jews. But this year, with the power of religious parties on the rise, several leading rabbis have demanded a stricter observance of the shmita rules. The measures could cost as much as $20 million in additional imports of produce from Jordan or other Arab farmers, including the cost of agents to inspect for dangerous pesticides banned in Israel but used in neighboring countries.

Other Practices Hamper Development

Religion is the oldest tradition that clashes with Israel’s steps to modernize. But other practices, similarly entwined with Israel’s identity, also interfere.

The engine propelling Israel’s economy is, indisputably, its high-tech industry, which has helped drive a 5% real growth this year. The broader economy, however, continues to be saddled with state-owned companies and monopolies--ports, electricity, transportation and oil refineries--along with powerful labor unions, protectionist policies and heavy regulation. It is a product of decades of the brand of Israeli socialism espoused by the Zionist founders.

Economists and business experts warn that Israel could be left behind in the global race for markets and profits if it doesn’t sell off its monopolies and ease the constraints, whether religious or bureaucratic. Underlying the government’s ability, or inability, to do so is Barak’s current political weakness.

“Privatization in Israel is very much like Mark Twain’s description of the weather: Everyone talks a lot about it, but no one does much,” said Daniel Gilerman, chairman of the Israeli Chamber of Commerce.

“The labor unions have been able to wield power in disastrous ways, and the ultra-Orthodox parties, when it comes to issues such as El Al, are very, very destructive. I am very worried because I think Barak is committed [to economic liberalization], but the failure to do it over time creates an atmosphere of real frustration in the business community.”

The government’s proposal last year to build and privatize a third port, for example, was crushed by striking unions. A mere threat of a strike two months ago forced Finance Minister Avraham Shohat to scrap a tax reform plan.

Israel has proposed privatizing electricity production for more than a decade but has put out tenders with conditions so onerous that no investor has shown interest. Economists say Israel, given its current rate of growth, will suffer power shortages in two years if independent producers do not come on line soon.

The field of telecommunications has seen more success. Competition among numerous private mobile phone companies, for example, has given Israel one of the cheapest cellular services in the world. Privatization of the state telephone company, Bezeq, has begun, albeit slowly.

The government has issued lofty economic goals for itself that include bringing Israel’s budget deficit and inflation rate into line with European Union standards by 2003. That means slashing the deficit by as much as half; inflation has already come down remarkably from triple-digit highs of the 1980s to a historical low today.