Does Israel’s economy work?

The merits of the Israeli meritocracy are very much in question.

"Metropolis" by www.brevestoriadelcinema.org is marked with Public Domain Mark 1.0.

My new book, Self Defense: A Jewish Manifesto, is now available at Amazon via Wicked Son Books and the Z3 Project.

Recently, I wrote a piece responding to an essay by my friend Alex Stein that dealt with the seeming contradiction that, beset by antisemitism, Diaspora Jews are looking to Aliyah as a redemptive option, while Israelis appear more prone than ever to yeridah—that is, leaving Israel for the Diaspora.

Both Stein and I looked at the various reasons for this. One of my contentions was that besides issues like Israel’s rightward political shift and the exploitative nature of the status quo regarding the Haredi community and the settlers, there are systemic problems with the Israeli economy at work. Namely, skyrocketing inequality, low wages, high taxes, lack of opportunity for the “losers” in the inequality sweepstakes, and other problems that push ordinary Israelis out of the country in search of better opportunities.

Over the last week, I was put in mind of this issue again after reading philosopher Michael Sandel’s book The Tyranny of Merit, in which he examines and fundamentally rejects America’s ideology of meritocracy.

Although meritocracy appears both fair and moral, Sandel asserts, the idea that those with talent and ability should be allowed to rise as far as their gifts will carry them constitutes something like a false God.

Despite claiming to be a species of egalitarianism, Sandel contends, meritocracy is a moral disaster, separating people out into “winners” and “losers,” and fostering the idea both “deserve” their lot in life. This creates hubris in the “winners” and despair in the “losers,” ultimately resulting in widespread human misery.

Israel, of course, is not the United States, and in fact has something like a hybrid system. While groups like the Haredim and the settlers are exempted from the prevailing meritocracy, receiving massive state subsidies to maintain their lifestyles, secular Israelis are hurled into the meritocratic maelstrom, often with less than sanguine results.

As I know from 20 years of personal experience in Israel, the overwhelming majority of secular and traditional Israelis, including those who do not live in poverty, struggle mightily every day to make ends meet, with social results that foster both desperation and a growing sense of injustice that undermines Israel’s social solidarity—essential to a nation at war—and fosters substantial yeridah, which is a long-term threat to Israel’s existence.

In other words, the “Start-Up Nation” myth, which has a largely meritocratic basis, is just that: a myth, a “noble lie” that uses the appearance of a macroeconomic miracle to mask a microeconomic crisis that could easily metastasize into a disaster for the Jewish state.

Nonetheless, there is substantial opposition to facing the reality behind this myth, and not only in practical terms.

There is, of course, the free market fundamentalism at work behind neoliberalism that always makes prophecies of doom in the face of any alternative to itself. But there is something more fundamental at work, which is the idea that meritocracy is, in fact, the only moral economic and social system, mainly because it is fair.

That is, it parcels out the goods of society to those who deserve them and denies them to those who do not, and this is as it should be. Any other way of doing things constitutes an injustice to the “winners” and grants a parasitic undeserved affluence to the “losers.”

Sandel asserts that such a morality is most problematic because it undermines what he calls the “common good,” but I think there is a more pragmatic consideration at work. That is, does a meritocratic system actually function? Does it work? It may indeed be “moral” in the abstract, but detrimental to society in practical terms.

In other words, we must face the question of whether organizing a society according to “morality” is actually better than arranging a society according to functionality.

Clearly, Israeli society does function, at least for the moment, but there is reason to think that it will not function forever. For example, secular and traditional Israelis today largely make ends meet—to the extent they do—through ready credit, but the credit bubble will burst eventually. Thus far, they have accepted the Haredi and settler exemption from the meritocratic system, but there are increasing signs that they will not do so for much longer. The level of yeridah may be acceptable for now, but it could eventually affect Israeli demography to such an extent that it becomes an existential threat—the last thing Israel needs, after all, is fewer Jews. Israelis may come together in war, but sooner or later, they may look at their country’s extreme inequalities of wealth and wonder if they are not fighting for a Jewish state but to protect the property of others.

In other words, what happens when Israel’s meritocratic system ceases to function, as it almost inevitably will? After all, it is very unlikely that the “losers” of Israel’s meritocracy will tolerate being “losers” forever.

It would seem, then, that some kind of system that serves Sandel’s “common good” would be preferable to Israel’s current meritocratic system. Precisely what policies would accomplish this is not clear. Certainly, there are communitarian measures that would do at least some good, such as cutting off subsidies to the Haredim and the settlers, ending the Haredi draft exemption, strengthening the social safety net, instituting a living wage, and raising taxes on the very wealthy while taking measures to contain capital flight.

I think it is very likely, however, that in Israel the solution will come through the study and adoption of certain principles of Judaism itself, which has a very great deal to say about issues of economic justice that are profoundly alien to the meritocratic creed.

What is clear, however, is that the process of searching for alternatives must begin now. The solution will likely require considerable original thinking and some measure of risk, but these are things Israelis tend to excel at. Up to now, they have largely been applied to saving Israel through military means, but perhaps it is now time to apply them to socioeconomic issues if Israel is to save itself as both a Jewish state and a just society. The first step is to acknowledge that the struggle against the depredations of meritocracy is no longer an issue of morality, but survival itself.