Israel at Crossroads: Beyond Economics to Fundamental Reforms

With elections just over a week away, the Israeli public is once again being asked why economic issues are not driving the vote, despite soaring cost of living, unaffordable housing, strained healthcare, and collapsing education and transportation systems. The author argues that while such discussions are a seasonal ritual, the current election cycle is fundamentally about the nation's existential direction, not just economic policy. He contends that Israel is at a critical juncture, facing a choice between growth and decline.

The author revisits a decade-old debate with Muli Shagav, Eretz Nehederet's editor-in-chief, who argued that political and diplomatic issues must be resolved before economic ones. The author now concedes Shagav was correct, stating that Israel requires four fundamental revolutions: in education, strengthening local governance, establishing a constitution, and creating a new Middle East. He believes that replacing Prime Minister Benjamin Netanyahu is the crucial first step, as Netanyahu's political survival depends on appeasing coalition partners like the ultra-Orthodox and far-right factions, who he claims are using him to advance their own agendas.

Data from the Shoresh Institution, led by Professor Dan Ben-David, highlights a deepening economic-social divide. The top two income deciles now pay 93% of income tax, an increase from 83% in 2000. This burden is exacerbated by funds being directed towards sectors that, according to Ben-David, pull Israel backward, such as a partisan ultra-Orthodox education system that fosters ignorance and dependence. He estimates that the significant annual subsidy to the ultra-Orthodox community could instead fund eight new hospitals or ten research universities, thereby boosting productivity and reducing citizen burdens. This growing disparity, coupled with the emigration of highly skilled professionals like doctors and scientists, threatens to lower tax revenues and further destabilize the nation.

Reflecting on the 2011 social protest movement, the author recalls the failed attempt to shift national priorities under the Trachtman Committee. Despite initial government adoption of recommendations, a crucial cut to the defense budget, resisted by then-Defense Minister Ehud Barak and generals like Benny Gantz, prevented meaningful change. Subsequent efforts by Yair Lapid and Netanyahu to link welfare benefits to employment were also undermined by Netanyahu's need for ultra-Orthodox political support. The author suggests that only a coalition with an ultra-Orthodox party committed to labor and integration could facilitate such fundamental changes.

Looking ahead, the author acknowledges that even the most favorable election outcome may only initiate, rather than complete, the necessary revolutions. Each reform, in education, decentralization, constitutional framework, and regional diplomacy, is substantial enough to consume a full government term. Given the likelihood of unstable coalitions, even initiating one reform is uncertain. He stresses that without progress on these fronts, Israel risks crossing a point of no return, becoming a nation with its future behind it. With living standards stagnating since the start of the war, the author concludes that Israelis must fight for their country's future, as they have no other place to live.