Israel and the Current Capitalist Crisis
By Daniel Rosenberg
The financial crisis has not skipped over Israel. The country that has been integrating itself in global capitalist markets in the last decades is once again seeing the ugliest side of capitalism, as the stock markets have dropped over a stunning 10 percent since the beginning of the month and the GDP growth forecast for the next couple of years has been slashed.
The crisis finds the Israeli society in worse shape than it was during the last recession, that of 2000-2003: currently about a quarter of Israeli citizens live below the official poverty line, among whom the percentage of minority groups, such as Israeli Arabs and orthodox Jews, is extremely high. A large part of the Israeli poor population are defined as "working poor," meaning people who are employed and yet do not earn a minimum living wage, a phenomenon which is usually regarded as a symptom of the crumbling of the middle classes.
Despite the fact that many governments around the world, from Europe to Mexico, are intending to increase spending in order to combat the oncoming recession, the Israeli government has already declared that it will keep a balanced budget and that, to do so, further cuts in social spending will be necessary. The government has not yet revealed its 2009 budget, but as in the 2003 emergency economic plan, it is likely to include reduction of state support for education and welfare, shutting down hospitals, schools, and community centers.
The current crisis also has a direct effect on the pensions and long-term savings of many Israeli workers and retirees. In the last decades, Israel underwent a series of financial reforms aimed at integrating the Israeli society in the international financial system. Thus, the major pension funds, which until 1995 were held by the Israeli labor confederation, were privatized in 2004. The era also saw the acquisition of major financial institutions, such as the country's biggest insurance company and second-largest bank, by foreign holders. The financial institutions, now fully integrated in international finance, have poured investments into foreign financial markets rather than government bonds, as well as securities that enriched major Israeli tycoons, who are themselves heavily invested in foreign financial equities. The losses that the global financial sector has suffered in the last several weeks have had major impacts on the Israeli institutional investors' earnings, resulting in the pension savings shrinking by an average of eight percent – and the worst is yet to come. Many workers, especially those nearing retirement, simply don't believe they will be able to maintain a decent standard of living, so they are forced to work in their older age.
http://www.politicalaffairs.net/article/articleview/7610/--This slightly edited article was originally circulated by the international relations department of the Communist Party of Israel, of which Daniel Rosenberg is a member.
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