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<PRE>THE HOFFMAN WIRE
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>From a reader: "Zionism has suffered a big PR loss. All their horses and
all their men cannot contain and shape the story that reaches captive
American audiences." --S.H. Dear S.H: You're right about that, but only
in the here-and-now. The public have a short memory. Without movies
about the slaughter of Palestinians, without some indelible
memorialization (like a museum), it will mostly be forgotten. In the
1980s Israelis launched Operation Iron Fist against Palestine. For about
three months the US media was awash in graphic images of Arab civilians
beaten to a pulp. It was hailed at the time as a sea change in how
Americans would view the Holy State--and then quickly forgotten. The
serious repercussions for the Zionists are the economic consequences of
Sharon's war. It's bleeding them dry.-Ed.
-----------------------------------------------------------
Conflict Puts Israel in Recession: Straining Nation's Social Fabric
Wall Street Journal, May 3, 2002, pp. A8 & A9.
GIVAT KOACH, Israel - For the past two decades, Yitzak Avraham has
tilled the rich soil of this farming community outside Tel Aviv -- much
of that time with the help of 15 Palestinians he hired so his oldest son
wouldn't have to work and could focus on his studies. When violence
broke out between Palestinians and Israelis 20 months ago, the Israeli
government forced him and other farmers in the region to fire their
Palestinian laborers as a security precaution. The price of water, and
more recently, gasoline skyrocketed. Mr. Avraham's 17-year-old son now
works beside him in the fields most days instead of going to school. "I
can't make money anymore," says the 47-year-old father of four,
strolling through a field of rotting tomatoes and cucumbers he wasn't
able to harvest. "Life has become very difficult."
For now, Mr. Avraham supports Israel's recent military sweeps through
the West Bank because he believes the strategy has brought Israelis a
measure of security. But he also knows that the hard-line Prime Minister
Ariel Sharon has taken against the Palestinians is destroying his
livelihood. Eventually, he says of Israel's standoff with its Arab
neighbors, "we will have to compromise." Through nearly all their
flare-ups with Arab neighbors in the past, Israelis could count on one
thing to hold them together: a resilient economy. No more.
For the first time, the conflict has been accompanied by a deep
recession. Hotel vacancy rates hover around 90%. Restaurants, the
frequent targets of suicide bombers, aren't doing much better.
Unemployment has soared past 10%, leaving a record number of Israelis
out of work. The government's budget deficit has exploded. For the first
time in three decades, the economy contracted by 0.6% last year. And the
outlook is growing worse by the day. "Our country is in an economic
crisis," says Amir Peretz, chairman of Israel's labor federation, known
as the Histadrut.
But the current conflict has done more than pinch pocketbooks. It is
fraying social bonds that have long defined Israel's sense of national
identity -- and held its population together during past security
crises. Crime is soaring as more citizens slip below the poverty line.
Growing numbers of wealthy Israelis are taking tax dollars and jobs with
them as they invest more of their money overseas. Divisions between the
country's religious and secular populations are sharpening. Even within
the military, a bastion of national pride, signs of strain have emerged:
absenteeism among army reservists rose 30% last year due to economic
hardship at home, the Israeli military said earlier this year.
"The current situation is not sustainable. It's become explosive," says
Eytan Sheshinski, a former adviser to several Israeli governments and a
current economics professor at Hebrew University in Jerusalem and
Princeton University in New Jersey.
One of the biggest problems is that confrontation hasn't only plunged
the country into its worst recession in three decades. It has also
scuttled economic reforms once widely viewed as crucial to Israel's
prosperity. A sweeping plan to privatize dozens of inefficient
government-run companies, for instance, has been shelved. So has a plan
to turn over Israel's ports to a private company. And key aspects of a
once-promising plan for tax reform have also been delayed, leaving
Israelis among the highest-taxed populations in the world.
Mr. Sharon is familiar with the pitfalls of trying to unravel Israel's
economic problems. Before the recent military sweeps, his popularity had
plunged to the low point of his term in office as the extent of Israel's
recession became clear. Critics connected the decline to Mr. Sharon's
hard line against the Palestinians.
Israel's largest ground operation in two decades has made many Israelis
overlook their dissatisfaction with Mr. Sharon's economic policies. His
popularity has soared. He has solidified his coalition by bringing in
the National Religious Party, whose vehement support for settlements and
desire to push Palestinians into neighboring Jordan put its members on
Israel's extreme right wing.
But the military action has also made the economic difficulties -- and
the social tug-of-war they create -- more acute than ever. In newspapers
and in sidewalk cafés, in the financial markets and even the Knesset,
talk of the unrelenting economic slide now competes with security
concerns. Mr. Sharon's cabinet has met through the night to discuss
economic remedies. And even before the military retreat is complete, Mr.
Sharon himself is being forced to return to these problems. How he
handles them could shape how Israel approaches the next phase in dealing
with the Palestinians.
His administration is now assembling an "emergency economic package"
that would raise already-high taxes and cut already-shrinking welfare
benefits. That would help finance the recent military operation and
prevent the nation's finances from imploding. But it would also almost
certainly slow Israel's economy further, economists say. That, in turn,
could make Mr. Sharon's delicate balancing act between Israel's right
and left unsustainable, forcing him to move one way or the other, or
pulling his coalition government apart all together.
The package is already drawing fierce opposition from both sides.
Proposed cuts in some worker benefits and a proposed freeze in the
minimum wage are being sharply criticized by the powerful, left-leaning
labor federation Histadrut. Mr. Peretz, its chairman, is threatening to
call a general strike in the next two weeks if the government doesn't
alter the plan. He also wants more money set aside to boost employment.
A strike would deal another heavy blow to the economy, shutting down
ports, the airport and public buses, among other things.
Meanwhile, the head of the religious Shas party, a powerful member of
Mr. Sharon's coalition, has threatened to try to topple the government
over a part of a plan that would trim benefits for ultra-orthodox Jews,
who make up about 10% of the population. Those subsidies, however, are
increasingly creating resentment among secular Jews, since the
ultra-orthodox population neither works or serves in the military. "We
work very hard for our money and the government just gives it away,"
complains Ofra Bar, a 22-year-old office worker in Tel Aviv.
But if the economic woes have increased the strains inside Israel, they
have also driven home a thorough recognition of how intertwined Israeli
security concerns are with the country's economic well-being. Mr.
Avraham, the farmer, is a strong supporter of the military's aggressive
tactics in the West Bank, and he backs Mr. Sharon. But neither has
helped him or the many other small farmers in his region. The government
encouraged him to hire Israelis to replace his fired Palestinian
workers. But he says Israelis are more expensive, and they consider the
work too difficult. The few he has hired have left within days, he says.
He has received government permission to hire workers from Thailand, but
it isn't clear when they will arrive. Even if they do, he says it won't
be enough to turn things around.
Meanwhile, Mr. Sharon's next step in his plan for protecting Israelis
from Palestinian attacks includes putting a "buffer zone" between Mr.
Avraham and his former Palestinian workers -- indeed between all
Israelis and Palestinians. That would be expensive. Hundreds of miles of
fencing and guards would be needed, requiring more financial sacrifice
from Israelis like Mr. Avraham. Despite backing Mr. Sharon and loathing
Palestinian leader Yasser Arafat, Mr. Avraham says he can't help but
worry that prospects for some sort of reconciliation may be getting lost
in the current confrontation. "Maybe they just don't want peace," he
says.
<end quote>
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