Israel’s Economic Gloom

When the peace process grinds to a halt, this city feels the stoppage through all of its pores. The fear of more suicidal violence has nearly brought the downtown to a standstill. Many stores on Jaffa Road, the main street along the spine of downtown in West Jerusalem, don’t even bother to open at night, knowing they won’t have customers. And with the Israeli government’s policy of closure, it is nearly impossible for Palestinians to travel from Ramallah to East Jerusalem to work.

The economic situation here is grave. My hotel has so few guests that the room where breakfast is usually served is not used, replaced by one much smaller. It is the same everywhere in town. Tel Aviv hotels are even emptier. In the Palestinian territories, things are worse, with widespread starvation suddenly seeming like a real possibility.

So where are all the American Jews who march and rally by the thousands to support Israel and the current Israeli government? A few staunch leaders still make pilgrimages--as have conservative Christian activists like Gary Bauer, whom I saw in the lobby of my hotel deep in conversation with former Israeli Prime Minister Benjamin Netanyahu. But the rank-and-file Jews and conservative Christians who shout their support for Ariel Sharon while safe on U.S. soil are unwilling to risk a visit.

The “situation,” as Israelis call this new intifada, has cost the Israeli economy 2 million tourists a year. Economic growth is expected to be less than 1% in the coming year, while unemployment is projected to hit nearly 14%.

The combined weight of security costs, lack of tourism and general gloom has slowed the economy dramatically. According to the Likud finance minister, Silvan Shalom, foreign investment has almost completely dried up, and Israeli investment is also slowing. The situation has prompted Shalom to call for steep cuts in the defense budget.

The only Israelis holding their own economically--at the expense of the rest of the country--are settlers in the West Bank and Gaza, because their schools, housing and transportation are heavily subsidized as part of this government’s desire to keep them in place, rather than offering them incentives to leave.

A terrible feeling of stalemate hangs in the air here--a feeling exacerbated for all but the most hard-line by President Bush’s recent speech, which many believe added to the lack of movement on both sides. There is also a profound disconnect between Israeli public opinion and the current Knesset leadership, with consistent public support, even among the right wing, for a two-state solution, for a cold peace, if not a warm one. About 60% of the public supports unilateral withdrawal to the 1967 lines, and a clear majority even supports unilateral evacuation of most of the settlements. But with the Labor Party a participant in the current government, and with Sharon managing the Labor members of his Cabinet with the skill of a master puppeteer, there is no leadership strong enough to rally support for the kind of policy changes that could alleviate Israel’s security and economic concerns. The new head of Labor, Binyamin Ben-Eliezer, who still sits as defense minister in the current right-wing government, hopes that the economy will resurrect Israel’s center-left from oblivion when new elections are set. But real change will take more than hope.

The only growth industry currently in Israel is security services, as every business requires a guard. Young soldiers patrol the Jerusalem streets intermittently in their green army jeeps. With Palestinians in the territories on virtual lockdown, suicide bombings were certainly slowed, but as Israelis learned last week, they have not been eliminated. And the human suffering among Palestinians is becoming intolerable.

It is just a matter of time--as even Israeli security officials acknowledge--before Palestinians, frustrated by the lack of movement, attempt attacks on the Israeli army that is occupying Palestinian cities. These same officials also realize that the reserve soldiers necessary to staffing the occupation will soon become frustrated with their security duties.

Even the wildly popular fence currently under construction to separate the bulk of Israel from the Palestinian territories points up the contradictions in the country’s current policies. The fence is being constructed essentially along the “Green Line” marking Israel’s pre-1967 boundaries. It excludes most of the settlements, which will become even more vulnerable to attack, raising tough political questions about their viability.

Sharon has announced that Israel has no plans to end the occupation, which means that Israel will have to take charge of civil administration for the Palestinians. The Palestinian Authority, with or without Yasser Arafat, has been shattered by Israel’s actions, leaving it unable--even if willing--to institute the reforms called for by Bush and others.

It’s understandable that people feel nervous about venturing to Israel, but if that is the case, one must ask how to resolve this stalemate, because as the empty streets attest, Israel is in a dire state. Just last year, Jews in Argentina considered Israel a possible refuge from that country’s economic collapse. Now, one hears comparisons between the Israeli and the Argentine economies.

For those who have dreamed of a strong Zionist state that could take in the world’s Jews in need, blanket support for the Sharon government is simply not good enough.