As economy grows, Israel's poverty spreads

The developments have some longing for the days of egalitarian ethos.
JERUSALEM (AP) -- The fissures in Israeli society have traditionally been defined by religion, ethnicity and how to make peace with the Arabs. Now economics are threatening to create an even wider divide.
New free-market policies have swollen the underclass, and for many who remember the egalitarian ethos on which the Jewish state was founded, the tonic of welfare cuts, mass layoffs and conspicuous consumption is hard to swallow.
The government's National Insurance Institute, which handles welfare payments, reported recently that shrinking social spending, coupled with tax cuts that have primarily benefited the wealthy, are widening Israel's social gap. Between 2002 and 2004, social security payments sank 16 percent in inflation-adjusted terms, fueled mostly by a 40 percent drop in allowances paid to families with children, and a 43 percent decline in unemployment benefits, the report showed.
But Benjamin Netanyahu, the former prime minister who is now Israel's finance minister, is sticking with his policies of the last two years, saying market economies are "the greatest tool for social justice." He thinks Israel, per capita, could become one of the world's 10 wealthiest nations in 10 to 15 years if his policies are maintained.
The U.S.-educated Netanyahu calls his critics "paleo-socialists," and they are many, starting with the center-left Labor Party who called the policies "swinish capitalism."
"We may have growth, we may have lower unemployment levels, we may have a higher standard of living for the middle and upper classes," said John Gal of the School of Social Work and Social Welfare at the Hebrew University of Jerusalem. "But what he's creating is a very, very large working poor and poor population, which has very little chance of ever improving their lot."
Impoverished
One of these is Marcel Seri-Levy, a divorced 33-year-old mother of three living in a poor Jerusalem neighborhood. Her monthly welfare payments have nearly halved to $330, supplemented by $380 a month in alimony. She also has lost other benefits, including discounts at nursery schools and on medical co-payments.
"Things have gotten tougher since Bibi came to power," Seri-Levy said, using Netanyahu's nickname.
Israel's underclass has been growing as a proportion of the population, and not just in absolute numbers, even though benefits ballooned through the 1990s.
In 1998, 17.5 percent of all Israeli families were living below the poverty line -- defined as $400 a month for an individual, and $1,000 for a family of four, according to National Insurance Institute statistics in November. Five years later -- the latest figures available -- the proportion was up to 19.3 percent.
In 2003, 30.8 percent of all children in Israel were living in poverty, up from 22.8 percent five years earlier.
Point of view
Netanyahu looks at these bleak statistics against the backdrop of an economy whose state was dire when he inherited it two years ago.
Economic growth, pummeled by Palestinian-Israeli violence and the global economic downturn, had contracted by close to 1 percent in both 2001 and 2002, and the jobless rate was nearly 11 percent.
Netanyahu vowed to turn that situation around by cutting taxes and social spending, getting people off unemployment rolls and into the job market, and breaking union power.
The economy has indeed rebounded, growing 4.3 percent in 2004. The jobless rate dropped to 9.8 percent by February, its lowest level in 3 1/2 years, and some 114,000 new jobs have been created.
But although the business community is thrilled with his policies, ordinary Israelis are uneasy.
Netanyahu's approach caps a slow-moving revolution away from the egalitarian community the country's founders aspired to, where leaders lived modestly, conspicuous consumption was beyond the pale, and the kibbutz, or communal farm, was the utopian ideal.
Today, fancy homes are no longer isolated to tiny enclaves. Israelis dine at fancy restaurants and drive expensive cars, and marinas burst with yachts. Bank presidents earn more than a million dollars a year, and technology has produced a new economic aristocracy.
Under Netanyahu, even mass sackings -- a notion that once couldn't even be broached because unions were so strong -- have become part of the Israeli experience. Most prominently, 4,500 teachers recently received dismissal notices.