Partition and a Two-State Solution.11.04.13

Partition and a Two-State Solution 11.04.13

by

Howard Adelman

Last evening I went to hear Derek Penslar and Cliff Orwin at Holy Blossom Temple to "debate" the topic, "Is a Two-State Solution Possible? Desirable?" But it was not a debate. It was a discussion. Both speakers agreed that a two-state solution was desirable. Both also agreed that such a solution was not possible in the near future. They differed in the perspective from which they approached the issue and the degree, source and nature of their pessimism.

Derek Penslar spoke first focusing on the concept of partition. Derek is a comparative historian of modern European Jewry, Zionism and Israel. From 2002 until last year, he held the Samuel J. Zacks Chair in Jewish History at the University of Toronto and, from 2002-2008, directed U of T’s Centre for Jewish Studies. He is currently the Stanley Lewis Professor of Israel Studies at Oxford University. Derek’s historical sketch of the concept of partition in the history of Zionist thought and political action allowed him to approach the topic of a Two-State Solution through its central idea – one land divided between two people.

He began with the original vision of Zionism at the end of the nineteenth and beginning of the twentieth century. At that time, Zionist thinkers had no clear conception of borders let alone of a Palestinian nation with which to share the land. Only with the removal by the British of Transjordan in 1921 from the definition of Palestine and the fixing of the borders with Syria, Lebanon and Egypt did Palestine finally have distinct boundaries — though revisionist Zionists would erroneously insist for decades that the land east of the Jordan still belonged to Palestine.

The concept of partition was first raised in the Peel Commission appointed in response to the Arab revolt or terrorism at the time. The Commission was charged with investigating the causes of the unrest and grievances of Arabs or Jews without bringing into question the fundamental terms of the Mandate. Sir Reginald Coupland, a member of the commission, who was a professor at Oxford University where Derek now teaches and an expert in both colonial history and nationalistic politics, introduced the possibility of partition. (Except for Sir Harold Morris, Chairman of the Industrial Court in Britain and a member of the House of Commons for the Liberals from 1922-1923, the other three members of the Commission were all very experienced colonialists: Sir Horace Rumbold, an experienced politician and diplomat, Sir Laurie Hammond, a former Indian Civil Servant, and Sir William Morris Carter, an ex-Colonial Chief Justice with in-depth experience in Rhodesia and Kenya.)

Derek did not have time to go into the details of the Peel Commission Report, but it is helpful if a few of its highlights are mentioned. First, the Commission was a unanimous report that did question the fundamental terms of the Mandate and recommended that it be terminated in the interests of a "lasting settlement". Second, the Report insisted that there was no prospect of fusion or assimilation between Jewish and Arab cultures even in a federated state. "The gulf between the races is thus already wide and will continue to widen if the present Mandate is maintained." Third, the plan of partition involved three, not two entities, a Jewish state (the Galilee, the Jezreel Valley, most of Beisan and all of the coastal plain from Rosh Hanikra to Beer-Tuvia), an Arab state in the rest of Palestine west of the Jordan River that would be united with Transjordan, and a British enclave (Jerusalem, Bethlehem and Nazareth) and temporarily, until ceded to the Jewish state, Haifa, Acre, Tiberias and Safed.

Population factors were also issues — including exchanges, migration, reproduction rates and characteristics. Thus, the plan recommended a population exchange to deal with the 250,000 Arabs within the proposed Jewish state and 500 Jews within the Arab state consistent with the Nansen conception of "unmixing" ethnic groups and forced exchange of populations, a doctrine of ethnic cleansing that became preeminent between the two world wars and immediately after WWII to deal with what was then called the "minority problem". (See Ch. 2 in Howard Adelman and Elazar Barkan (2011) No Return, No Refuge, Columbia University Press.) Section 10 of chapter xxii of the Peel Commission Report, “Exchange of Land and Population,” recommended that "there should be a transfer of land, and as far as possible, an exchange of population.”

Fifth, the Jewish nation was depicted as a highly educated, democratic community for which existence as a crown colony was unsuitable while the passion and intensity behind Arab nationalism made colonial government extremely difficult if not impossible. Finally, given the closing down of immigration to the United States, the persecution of Jews in Germany and Poland, pressures for immigration by Jews to Palestine were powerful but understandably resisted by Arabs bent on self-determination and unwilling to be swamped by a Jewish majority while the growth of the Arab population, because of a high birth rate, placed an opposite pressure on Jewish national self-determination.

As Derek said, Coupland reversed his position when it came to India. What he did not add – again probably because of time – is that Professor Coupland changed, not because he later rejected the idea of partition and exchange of populations, but because he thought that it was not practicable for India. Partition there would involve millions of people, exchanged over great distances, with no natural dividing lines in a population so intermixed. There was the impossible problem of dealing with Sikhs.

In Israel, both before independence and after, Herut rejected partition and kept insisting that Jordan east of the river was part of the original Palestine. Two of the three parties that came together to form the Labour Party also opposed partition. Ben Gurion, who came from Mapai, was equivocal. Partition was accepted, not because the Zionists believed it was a good idea, but because of pragmatics. Whatever land they agreed to "surrender" in the whole of Palestine, would go to Jordan.

In 1967, everything changed. Israel had just given up being an occupying power with respect to Israeli Arabs. In 1967, Israel became an occupying power of Arabs in Gaza and the West Bank, not because of any plan to do so, though the desire, hope and aspiration were there, but because of circumstances. With the Palestinians opposed to a two-state solution and many Israeli politicians not disposed to accept a Palestinian and a Jewish state side-by-side in the area west of the Jordan, partition was not possible.

Partition became possible in the late 1980s. Mark Heller and Sari Nusseibeh in No Trumpets, No Drums: A Two-State Settlement of the Israeli-Palestinian Conflict in 1991 offered the solution. As Sari once told me, in 1988 the PLO had given him permission to put forth this proposed change in the Palestinian position. Further, in a press conference in Geneva on 14 December 1988, Yasser Arafat, head of the PLO, renounced terrorism and stated that all parties in the Middle East conflict had the right to exist in peace and security, including the states of Palestine and Israel. 
On 9 September 1993, this was followed up with the PLO exchange of letters between Arafat and the Prime Minister of Israel in which the PLO recognized the right of the State of Israel to exist in peace and security, accepted United Nations Security Council Resolutions 242 and 338, agreed to the resolution of all outstanding issues in the conflict between the two sides through negotiations and exclusively peaceful means, renounced the use of terrorism and all other acts of violence, assumed responsibility over all PLO elements and personnel in order to assure their compliance, prevent violations, and agreed to discipline violators. That exchange of letters formally ended the hostilities of the uprising of the Palestinians against occupation that was known as the first intifada that had started in 1987. 
The Palestinian Authority came into existence as a result of that historic agreement with the Declaration of Principles on Interim Self-Government Arrangements of 1993. These were followed by the Israeli-Palestinian Interim Agreement on the West Bank and the Gaza Strip of 1995, the Palestinian National Council decision in April of 1996 to cancel the articles of its Charter that were contrary to the 1993 exchange of letters, and the Wye River Memorandum of 1998 in which Arafat wrote President Clinton affirming that, "all of the provisions of the Covenant which are inconsistent with the P.L.O. commitment to recognize and live in peace side by side with Israel are no longer in effect. As a result, Articles 6-10, 15, 19-23, and 30 have been nullified, and the parts in Articles 1-5, 11-14, 16-18, 25-27 and 29 that are inconsistent with the above mentioned commitments have also been nullified."
Derek then side-tracked to refer to a number of other quasi-states that had been created by de facto partition: Cyprus, the Nagorno-Karabakh Republic (NKR) in Azerbaijan, Abkhaziand. South Ossetia in Georgia, and he could have mentioned Kosovo in Serbia. He then took up the moves on the Israeli side following the breakthroughs on the acceptance of partition on the Palestinian side. With the assassination of Yitzhak Rabin, they came much later.
At Annapolis in November 2007, the PLO, Israel and the USA agreed on a two-state solution as the basis for negotiations. On 14 June 2009, Benjamin Netanyahu at Bar Ilan University finally endorsed the establishment of a Palestinian state west of the Jordan River -- conditional on Palestine not controlling its borders, that it be demilitarized, not control its airspace, or have foreign relations with any state that did not recognize Israel, renounce the right of return and recognize Israel as a Jewish state. 

Derek then went into the issue of settlements. In 1988 when this dialectical dance of partition and mutual recognition had begun, the West Bank’s settler population was 63,000. Today it is 350,000 with another 200,000 living in the enlarged Jerusalem basin. In Derek’s narrative, up until the 1990s, the Israeli leadership was characterized as ideological zealots but real life pragmatists. Since then, that position had become inverted; they had become ideological moderates but the zealots on the ground had established the new political facts.

The historical sketch did not allow much room for optimism.

Cliff Orwin was introduced as a Straussian political philosopher and former student of Allan Bloom teaching at the University of Toronto with a keen interest in the Middle East. He focused on the prospective future rather than the past and insisted that though partition and the Two-State Solution was desirable, it was not feasible in the foreseeable future. On the other hand, various versions of a one state solution were impossible. The two-state solution was the desirable alternative because national self-determination was now the international norm. Israel was a liberal democracy and that ethos may permit occupation of another people but not on a long term basis. Occupation was a drag on security. Israel accepted its responsibilities to the international community seriously.

However, though desirable, such a solution was not feasible at this time. The two sides had incompatible aims. Further, the most powerful force in political life was inertia; without a powerful incentive for change, drift was the most likely prospect. Further, Israel was faced with far more impending issues including the irreversible Islamicization of the region, the world wide efforts to delegitimize Israel and the Iranian nuclear threat. Of those three, partition would only address the second.

For Cliff, Obama’s speeches and Kerry’s shuttling around were both irrelevant phenomena with respect to having any impact in bringing partition to a conclusion. Further, partition itself was no guarantee of stability and one could envision a much more unstable situation if the risk was taken of establishing a Palestinian state on the West Bank and Gaza. Nevertheless, Cliff thought that each side could take steps in the interim to prepare for the day when such a solution could be implemented.

Plans for the long term on the Palestinian side could include a renunciation of the right of return, redrawing its educational maps to show Israel, ceasing to treat terrorists as heroes, ending its invective against Zionism, continuing the building of the institutions of government. Israel could cease the expansion of the settlements and improve the situation of Palestinians both within Israel and in the West Bank and continually signal its readiness for a two state solution. Essentially, as Derek noted, Cliff had painted a picture of congealment. Derek, on the other hand, pointed to the possibility of a third intifada in the air and history’s tale of sudden and unpredictable seismic shifts. Israelis were approaching a half century of occupation. Two generations of Israelis had grown up as occupiers and Derek feared the undemocratic forces threatening Israel as a democratic state.

It was obvious from the audience responses in questions and the discussion that the audience had been left in a despondent move about the prospects of implementing a two-state solution in the foreseeable future. Did a resurrection of the Arab peace initiative offer some hope? What about the prospects of economic investments of Israelis in the West Bank and the increase of civil society involvement? What about the possibility of unilateral withdrawal by Israel and moving back to a self-defined border leaving the final solution to be negotiated separately? The first was treated as an important but largely irrelevant side issue, even with Kerry’s efforts to tweak the Arab proposal to make it more acceptable to Israel. As Derek said in response to the second suggestion, economics influence politics but in the end peace is a political decision about power. As for unilateral moves by Israel, the response was that Israel was unlikely to take any such initiatives; it had been left traumatized by the unilateral withdrawal from Gaza.

I myself was not left in a pessimistic mood but was interested in the way academic analysis contributed and reinforced inertia. I had not been able to raise my questions which would have focused on Cliff’s false simplistic dichotomy of either a two-state deal or virtually nothing except for the unilateral confidence building and institutional proposals he offered. There was no discussion about the progress underway to ease the checkpoints and interference in Palestinian daily life in Area B and the larger possibility of creating and strengthening a de facto partition of the ground. Nor was there any discussion of the forces working the other way to push towards a solution much more quickly than Cliff suggested or relying on a seismic event to change the situation as Derek suggested. After all, the efforts of Obama and Kerry were not just superficial irrelevencies but a distinct change in approach to tactical moves rather than a head on assault pushing for a two state solution. Europe has signalled Israel that Israel could not develop the Leviathan gas fields and establish the pipelines and infrastructure for exporting gas to Europe unless meaningful progress had been made in moving towards a two-state solution. Further, given the new policies towards the Arab-Israeli sector and the shifts already underway among Palestinian Israelis, one could envision 20% of the Israeli population playing a much more positive and creative role in pushing a two-state solution.

As erudite as Derek always is and as brilliant as Cliff was in bring his pessimistic Straussian perspective on the perpetual condition of humanity to bear on the problem, I found the array of detailed omissions and trends in the current context to be more revealing than what was actually said.

Partition.Two-State.Solution.11.04.13.doc

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Tax Loopholes and Privatization.10.04.13

Tax Loopholes and Privatization 10.04.13

by

Howard Adelman

In the 1980s Israel began an aggressive program of liberal market reforms that included the privatization of many state-owned firms. I wrote about some of that privatization in yesterday’s blog on the energy sector. However, the reforms of its 1985 Economic Stabilization Plan went well beyond privatization of state owned-firms. First, the central bank independence in setting monetary policy was enhanced. Fiscal discipline was introduced. So was government intervention in the import and export of capital. Market competition was, at least for a time, increased by reducing monopolistic practices. Finally, Israel adopted a fixed exchange rate to halt runaway inflation and to stabilize the New Israeli Shekel (NIS).

Israeli credit exploded along with housing construction. Investment increased by leaps and bounds. So did consumption levels. From 1986 to 1992, GDP doubled per capita to $14,636. After coming through a severe recession between 2002 and 2004, the GDP more than doubled again by 2012 to $31,282 compared to Canada’s $50,436. How and why then did Israel slip up again in 2012 and develop a budget deficit of 4.6% (originally estimated at 4.2%), well beyond the target of 2-3%?

One explanation is the two year budget that Finance Minister Yuval Steinitz introduced in 2010 to the applause of International Monetary Fund and the OECD who lauded the longer range ability of government ministries to plan and the private sector, both corporations and individuals, to know what to expect for their financial planning. One severe critic was Avi Ben-Bassat, a Senior Fellow at the Israel Democracy Institute (IDI) where he heads the Economic Reform Project, is President of the Israeli Economic Association and was a former Director-General of the Finance Ministry from 1999-2001. Budget planning two-and-a-half years in advance is impossible because there will inevitably be too many intervening changes and unpredictable contingencies that will emerge. That is why no other country has adopted the model however appealing it might seem to armchair economists. The assumptions were just wrong.

Growth started to decline in the second quarter of that budget cycle. Instead of responding by introducing a mini-budget for the second year, policy makers were too wedded to the idea of predictability when unpredictability emerged as the governing pattern and predictability had proven to be a chimera. Along with a decline in growth, there was the correlated decline in tax revenues. Then Netanyahu, wedded to the ideological convictions of the right and the risk that raising taxes would pose for his own re-election, refused to raise taxes. What is more, he went on a bit of a pre-election spending spree rather than considering some drastic cuts in spending.

If the exercise in reducing the deficit is to follow Ben-Bassat’s proposal of one shekel of increased revenues for every two shekels in reduction in expenditures, where is the revenue to come from if income, corporate and consumption taxes are already at an optimum? Besides, consumption and value added taxes are regressive and increase the disparities between rich and poor. One source can be loopholes – raising tax revenues from those not paying their fair share of taxes. Even if the Haredim are put to work, this process will take a while to phase in and higher revenues cannot be expected from Haredim for the purposes of the forthcoming budget. The same is true if efforts to improve the economic earnings of the Arab sector work out. (See my future blog on disparities.)

Exemptions have to be targeted. The Israeli Treasury was already considering cutting tax breaks for exporters. (Meirav Arlosoroff, "Israel’s treasury mulls cutting tax breaks for exporters," Haaretz 17.02.13) Teva Pharmaceutical Industries paid just 0.3% taxes on $1.66 billion in profits in 2012 under the Encouragement of Capital Investments Law that allow companies which export more than 25% of the output special tax breaks. This means that most small and even medium size firms pay 25% of their profits in taxes while Teva benefitted from a very questionable additional 0% special rate for global companies. The corporate tax system was clearly skewed towards the large firms and the larger the firm was, the less tax it seemed to pay.

Further, there are additional tax reductions dependent on the region in which your facilities are located – 6% as opposed to 12% if the plant was in an outlying region. Global companies did even better since they were taxed a maximum of 5% and taxes on dividend distributions were taxed at only 15%. But the corporate tax rates cannot be changed because they were given to the companies as incentives to establish in Israel and have terms built in that do not allow increases for a number of years. The reality is that corporations such as Teva as well as Amdocs, Check Point, Iscar and Israel Chemicals, pay a disproportionately small amount of taxes as a result of the inter-state competition to lure exporters to each respective country.

Even with that competition, there is still room to cut exemptions without giving an incentive for large companies to relocate. Further, developed nations can work towards tax treaties that prevent large companies from escaping paying taxes by insisting on minimum taxes in any country where they locate and sell their goods and services. Further, taxes can be raised on dividends from 15% to 20%. The differential tax rates between regions can be maintained but doubled. One can expect a combination of these methods to be used to reduce the budget deficit and raise revenues.

However, export taxes are a mug’s game as all developed countries move towards broader and deeper free trade relations with other countries. There are other loopholes, however, for escaping or reducing VAT taxes, some of which discourage direct exports and encourage companies to initially export to a distributor in another country and eventually a subsidiary charged with distribution and located abroad. I am in no position to estimate whether a combination of reforms can raise an additional NIS5 billion shekels, but I am certain that this is where the focus will be on one main source of revenues.

There is another source that may not increase state revenues but which is certain to reduce consumer expenditures. Ten years ago, the Israeli Ministry of Finance undertook a study that showed that monopolies cost the Israeli economy NIS5 billion per year that is paid by both consumers and manufacturers. Many of these were government companies. Thus, a source of revenue can come from selling off even more government monopolies raising money from the sale of capital while guaranteeing economic benefits for both consumers and corporations as well as further future tax revenues for the government. This will have to de done on a company by company basis rather than across the board. Will the Israeli Electric Corporation be sold off or subjected to competition? What about the ports?

One exception will be Better Place. The government granted Better Place an effective monopoly on electric cars, but it is hard to envision how this sector could be developed without such a monopoly. I had the pleasure of driving one of the first versions of the electric car and produced and hosted the first television special on Better Place outside of Israel. However, Better Place is now in deep financial trouble. Shair Agassi, who conceived and founded the company in 2007, introduced the revolutionary idea of the swappable battery, and invested a good part of the fortune he made in the computer software business, was driven out of the company last October along with Moshe Kaplinsky and three other top executives, the VPs of marketing, infrastructure and public relations. Over 200 staff were laid off.

The company had established 38 of the planned 45 battery switching stations, and 2000 recharging stations, but only sold about 500 cars in Israel. The company was haemorrhaging money (a half billion in losses thus far) with little insight into how one could both develop a capital intensive infrastructure yet wait for income as public confidence in the car and the integrated system grew slowly. Idan Ofer, head of the Israel Corporation, and both the largest individual shareholder (8%) and largest corporate shareholder (28%) respectively has taken over, invested more money, but it is unclear whether he will pull the plug or even can or wants to shoulder on. Monopolies may be needed to develop some concepts but the risks are much larger.

In other areas, the matter is simpler. One of the sources of the protest movement in Israel last year was the report by the trade ministry that monopolistic pricing in the food industry resulted in Israelis paying among the highest food prices in the developed world whereas in 2005 those prices had been 10-20% cheaper than in other OECD countries. Monopolistic pricing is not just a problem of government owned firms but permeates the private sector. For example, Shufersal and Mega between them control two-thirds of the market share of the sale of groceries. Thus, in spite of the anti-monopolistic laws of the Israeli Antitrust Authority and the Monopoly Chapter that prohibits the abuse by a firm of its dominant position that might harm competition or the public, the present implementation of the law has been ineffective. The effect of the May 2012 amendment to the law authorizing the Director-General to impose monetary sanctions on both corporations and individuals in lieu of criminal prosecution for violations has yet to be examined to assess the results. The Tamar gas field, that came on line at the end of last month and that I wrote about yesterday, is and has been declared by the government to be a monopoly. (Announcement, David Gilo, General-Director Antitrust Authority, 13.11.13) What significance this has I have yet to determine.

I will deal with the issue of Tycoons in a separate blog. In Israel, 20 families own and control most of the country’s resources, including Idan Ofer whom I discussed above. As in the break up of the Soviet Union, they obtained from the state and the labour unions in the process of privatization companies at bargain prices, for they were the only groups with enough wealth to buy the companies. Cross-sectoral and multi-layered conglomerates with ownerships of banks that supply the financing to vertically integrated groups distort the Israeli economy, push up prices for consumers and, through transfers and other means to subsidiaries, reduce revenues to the state. Private sector monopolization may possibly be preferable to state monopolization, though that is debatable, but monopolization has repeatedly been demonstrated as a drag on an economy while, surprisingly, incurring greater risks. These large conglomerates have higher levels of financial leverage and hence higher risks than small to medium-sized stand alone companies.

If the state revenues are affected, so is the private sector. Restraint on competition inhibits the ability of small and medium firms to expand, especially given many of the tax advantages granted to the large firms. The largest cost to consumers has been in the housing sector. But that is largely a result of the state control of land and the way land is released for development to the private sector.

The Israel Lands Authority (ILA) controls almost all the land in Israel. If more land is freed up and released with fewer bureaucratic obstacles, this could accomplish two goals – increased revenues for the state as well as reduced prices for home buyers primarily by increasing the land available for construction. Further, if the land is sold and not just leased (usually two terms of 49 years), revenues could rise much faster but at the expense of long term income that could be offset from gas royalties. Further, if the Israeli government sold off the exiting leases to the existing owners on a right of first refusal, as recommended by an April 2009 Ministry of Finance Report, significant additional revenues could be created. As well, bureaucratic government costs will be reduced while other steps could be taken to protect the environment and set aside open lands for permanent benefit to Israelis. The laws are already in place. In August 2009, the Knesset passed the Israel Land Authority Law allowing Israeli citizens to own property in Israel and not just lease it. On 21 January 2013, Netanyahu appointed Moshe Kahlon as the new ILA chairman. As the former Communications and Welfare Minister, he earned a stellar reputation for slashing the very high cell phone prices in Israel. Concerted action can be expected to implement the law, bring land prices down and enhance revenues for the state.

I, of course, do not know what combination of sources of revenues from closing tax loopholes to selling off monopolies, breaking up or imposing rules on existing private monopolies and selling leases and land to bring in a target of NIS5 billion, but this outline should indicate that there are enough sources of potential additional revenues without needing to raise corporate, income or consumer taxes.

Tax Loopholes and Privatization10.04.13.doc

Tamar and Leviathan.09.04.13

Tamar and Leviathan 09.04.13

by

Howard Adelman

Renewable Energy

Israel was once a significant leader in the production and use of alternative energies, particularly solar energy. Just see the ubiquitous solar powered water heaters on the roofs of Israeli apartment buildings. The first prototype rooftop solar water heater was developed by Levi Yissar who launched the NerYah Company in 1953. However, only with the energy crisis of the 1970s and the passage of a law by the Knesset mandating solar thermal systems did solar energy become integral parts of 85% of Israeli households. 3% of Israeli energy consumption once came from renewable energy. Israel became the world leader in the use of solar energy on a per capita basis. At the end of 2012, the Eilat-Eilot Renewable Energy Conference featured Israeli-developed (as well as other country sources) renewable energy technologies.

However, on the outskirts of Kibbutz Ma’aleh Gilboa stands one of the few wind turbines in Israel. It has been there since 1996. Aside from a few isolated periods of activity, the turbine has generally been inactive. There is another environmental factor mitigating against the use of wind energy in Israel. Israel is the flight path for a billion bird flights migrating from Europe to Africa and back again. Unfortunately, unlike planes, windmills cannot fly around those flocks. An Israeli Zoologist at Tel Aviv University, Yossi Leshem, invented a system to track migrating birds resulting in a 76 percent drop in collisions as both military and civilian aircraft, with a two hour advanced warning, re-plan their flight paths to avoid the flocks.

Nevertheless, Israel is committed to developing renewable energy. Much to the surprise of the Israeli cabinet, President Shimon Peres pledged that Israel would reduce its greenhouse gas emissions by 20 percent by 2020 at the UN Conference on Climate Change in Copenhagen in December 2009. That commitment was retroactively endorsed by the Environmental Protection Ministry. An emissions reduction plan was developed. By 2014 Israel planned to produce 5 percent of its electricity from renewable energy and 10% by 2020. By the end of 2012, less that 1/2 percent of energy needs was in fact produced by renewable sources. The target remains as illusive as Middle East. The real developments in renewable energy have been in technological innovation. For example, Power-Mod solar tents have been developed for victims of war and natural disasters.

Oil

Significant parts of the oil industry that had been state owned have been privatized since 1988 – Paz Oil, Naptha Israel Petroleum, the refineries at Ashdod and Haifa. I will deal with the significance of that privatization in my blog on Tycoons and Privatization. Petroleum & Energy Infrastructures, a state monopoly in the energy field, imports, exports, stores, as well as transports and supplies petroleum products through its wholly owned subsidiary, Oil Products Pipeline (OPP).

The big story, however, is the immanent end of Israel’s dependence on external sources for fossil fuels belying Israeli Golda Meir’s famous crack that Moses led the children of Israel for forty years wandering the desert to search for the only place in the Middle East without oil. Israel used to rely on expensive sources through long-term contracts – Mexico, Norway and the UK (oil), Australia, Columbia and South Africa (coal). This has radically changed. Though most people now know about Israel’s huge offshore gas fields (the Tamar field came on stream at the end of March), many will be surprised to learn that Israel has the 3rd largest deposit of oil shale in the world covering 245 square kilometres in the Valley of Elah in the Shfela Basin in Israeli’s Adullam region near Beit Shemesh 1000 ft. below ground where a chalk layer 600 feet thick provides an impermeable barrier between the oil shale and the water aquifier.

According to Dr. Yuval Bartov, chief geologist for Israel Energy Initiatives (IEI), Prof. Carol Parish, of the Chemistry Department, University of Richmond in Virginia (17 December 2012) and Dr. Scott Nguyen, 250 billion barrels is a very prudent figure for the find. (http://www.newenglishreview.org/custpage.cfm/frm/99429/sec…/99429) By way of comparison, Saudi Arabia has 260 billion barrels in proven reserves. Further, Israel is a technological leader in the means of accessing oil from shale and has devised a technology that will actually produce water instead of using it up to access the oil. On 24 December 2012, the Israel Supreme Court denied a petition to prevent the start of a pilot oil shale extraction project by Israel Energy Initiatives (IEI). The first drop of oil from shale is expected this year and the test phase for production is slated to begin in 2014. By 2020, IEI expects to produce 50,000 barrels per day.

Electricity

The Israel Electric Corporation (IEC), a state owned firm (99.85%), operates generating stations and sub-stations as well as transmission and distribution networks and is very similar to Ontario Hydro. Israel is in the process of radically transforming its electricity production from coal to gas fired units. By the end of 2010, 40% of electrical production came from gas-fuelled power stations. By 2020, plans call for 80%. Further, Israel is planning to export electricity to Europe through an underwater cable via Cyprus and Greece to link up to the European electrical grid. As in other areas of energy, Israelis are leaders in technological innovation such as smart energy management, the use of smart grids to manage electrical usage by electrical companies. Bar Ilan scientists have developed and are now producing nano-scale superconductors to facilitate faster and more powerful electronic devices.

Gas

In 2009, Israeli imports of energy products amounted to over 5% of its GDP per year when enormous reserves of off-shore gas were discovered. Because of environmental interests, costs, resource diversification and a modest discovery of a 33 BCM small natural offshore gas field off Ashkelon, over the previous decade gas usage went from virtually nothing to 4.2 billion cubic metres (BCM) per year by 2009 by means of liquefied natural gas (LNG), the newly built Arish-Ashkelon pipeline from Egypt and the Ashkelon offshore field. The Israel Electric Corporation had already been charged with developing gas-driven power plants, creating a natural gas distribution grid and an LNG import terminal so the huge gas discovery seemed propitious since so much of the infrastructure was already in place. Within five years, use was expected to double that of 2009 to 8.1 billion cubic metres (BCM) by 2014.

Tamar, the offshore field 90 km. west of Haifa that began production at the end of last month, has proven reserves of 188 BCM and an anticipated 10 trillion cubic feet, came on stream in 2013. Four other fields are due to be developed over the next few years: Dalit (700BCM); Leviathan 18 trillion cubic feet; Dolphin (81.3 BCM); Tanin (1.2-1.3 trillion cubic feet). Tamar will supply Israeli needs for the next two decades while supplies from Leviathan will be exported. Even if use quadruples over the next two decades, Israel has enough gas reserves to last two centuries while also engaging in the export of gas.

The Shaul Tzemach Committee released a final report in August of 2012 which recommended placing no reserves on exports from sources with only 25BGM or less, permitting 75% of reserves between between 25-100 BCMs, 60% of reserves between 100-200 BCMs and 50% of reserves greater than 200 BCMs.

Self-sufficiency is a security issue as well since blowing up the Arish-Ashkelon pipeline a dozen times disrupted fossil fuel gas supplies to Israel. This supply source was subsequently suspended. Israel is now assured of security in both supply and infrastructure. Israel has a major initiative to expand its energy port facilities with additional sea-to-shore inlets, natural gas intake, the construction of a LNG plant and creating more and better handling facilities, expand its storage facilities by constructing strategic reservoirs and storage units, connecting the offshore reserves to the national distribution system and increasing the capacity, reach and security of that internal distribution system that will in turn facilitate the further development of industry.

Last year, the Israeli government decided to follow Alberta’s lead and set up a sovereign wealth fund with royalties to invest in education and defence as well as set up a capital fund with domestic and overseas investments.

Infrastructure

Massive infrastructure investment for pipelines, liquified natural gas plants and new oil exporting outlets are underway on both the Mediterranean and Red Sea, the latter for oil and gas exports to India and China. In addition to getting rid of the need to use Israeli shekels to pay for imported energy, in addition to a large capital inflow of investment for oil shale, gas and infrastructure development, in addition to the savings in foreign currency as Israel dispenses with its reliance on foreign sources of energy and shifts to self-reliance, in addition to large increases in job opportunities at well paid positions, the coal-fired electricity plants will be phased out much sooner and replaced by clean-burning gas fossil fuel.

As well, Israel will for the first time have energy security. As a downside, Israel will not likely be developing its renewable energy at nearly the rates planned. On the other hand, the large savings in subsidies will also benefit the economy since currently a kilowatt of gas-produced electricity costs 20 agorot (about 5 cents) versus 55 agorot for solar-produced energy without taking into account the indirect subsidies for gas production. Add to these savings the increase in investment and the offsets of energy imports, GDP will be boosted and the economy will also expand because of spillover effects from the demand for domestically-manufactured equipment and increased high-wage employment. The budget deficit will be eliminated and there will be a positive balance of payments assured well beyond its current balance surpluses from its value-added economy as exported gas is expected to bring in $3billion in 2017.

International Disputes

The gas and oil deposits offshore have created inter-state disputes. Though Israel has settled with Cyprus, the disputes with Turkey and Lebanon are ongoing with the Lebanese dispute the most serious. The latter is akin to the Beaufort Sea dispute between Canada and the U.S. An international law of the sea ruling on that dispute would predict the outcome of the Israeli-Lebanon dispute. The U.S. claims a border equidistant from the land border while Canada claims that the maritime border should simply be an extension of the land border. In parallel, Israel’s position is the same the American one while Lebanon takes the Canadian position. Precedent seems to favour an equidistant ruling.

There is one possible side effect on the peace front. As Israel’s need to protect its fossil fuel sources grow, as well as the export market that will be necessary to make the exploitation of those fields economically viable, peace with the Palestinians may become more imperative.

Tamar and Leviathan.09.04.13.doc

Parashat Shmini Leviticus 11:1-11:47 – Clean and Unclean Food 05.04.13

Parashat Shmini Leviticus 11:1-11:47 – Clean and Unclean Food 05.04.13

by

Howard Adelman

I was brought up in a kosher home. The first time I ate treif (food that does not conform to Jewish kashrut dietary laws) was when I was 16. A bunch of us committed the sin together. We went down to 91/2. That was a restaurant on Elizabeth Street in Toronto (#91/2) located on the second floor of an old house in the old Chinatown which is where Nathan Philips Square is now located. I had sweet and sour pork spareribs. I can taste them until today. I am sure I had the same sensation as others when eating delectable but forbidden food, all the more delicious because it was forbidden and never before eaten, as I broke God’s and, more importantly, my mother’s commandments to never eat treif. Pork is treif for though pigs have cloven hooves, they do not ruminate (chew their cud). Mohandas Gandhi in his biography recorded the same type of sensation when he was in London as a student and ate meat for the first time in his life. His best friend, a Muslim, accompanied him and ate pork. We were all sinners.

When I reread this section in Leviticus, my only surprise was the following passage: There are, however, some flying insects that walk on all fours that you may eat: those that have jointed legs for hopping on the ground. Of these you may eat any kind of locust, katydid, cricket or grasshopper”(Lev. 11:21-22). Up until now, I never recalled reading that passage. I did not know that locusts, katydids, crickets and grasshoppers were kosher. I thought of being in Bangkok at the market and holding my nose in disdain at the idea of eating a deep fried katydid or grasshopper sitting on a tray of a street vendor. As I read the passage, I thought: I should have tried that grasshopper. After all, they are kosher. But locusts are evidently more meaty than the crunchy grasshoppers. They are probably too salty though for me. In any case, they are a taste sensation I have never had.

Quite aside from impurities indicated by defects or improper slaughter, why are some animals, mammals, fish, birds and insects considered unclean or impure while others are classified as pure and suitable to eat? Or is looking for rationality in this list itself a stupid question? My daughter Rachel, an Orthodox Israeli biblical scholar who now teaches at a rabbinic college in Boston and checks my commentaries for egregious errors but disdains taking any responsibility for my wild writings, keeps kosher. It creates minor complications and inconveniences when she eats here or at the homes of one of her siblings. But she accommodates and adapts with a smile while the hosts – her sister or my wife – are very considerate but less amused by what they consider an idiosyncrasy but one for which I have a nostalgic indulgence. However, I have heard from modern families who are so upset that one or two of their children have returned to eating kosher food that it totally upsets the family harmony. They think their children have joined a cult and that deciding to eat kosher divides the family at Friday meals and holiday occasions.

If some animals were impure, why did God save them from the flood and tell Noah to bring all the animals on the ark, both the clean and unclean? When I was a kid, we were told the reasons were for standards of health. Pigs in particular were regarded as filthy. Yet pigs are one of the most intelligent and friendly animals and are, in fact, very clean. This is very evident if you visit a modern pig farm. Pigs don’t like to wallow in mud except to cool off from the heat (they don’t sweat to cool off) and prefer to be clean. Jews, and probably Muslims as well, have given pigs a bad rap. Just as homosexuality is regarded as an abomination in the Torah, so are pigs. I recall insults that called friends "dirty pigs". Though not equivalent to being anti-Semitic, we were certainly guilty of prejudice against pigs; we were anti-porkers. And with very little if any justification! However, by not eating pigs, the lives of the pigs were saved and they were not sent to be slaughtered. Perhaps the Bible designating animals as clean was the real disservice for those animals got eaten.

Modern health foodies and especially vegans are more kosher than Jews for they are conscious of everything they eat and are wary of putting anything in their bodies that defile it for they regard their bodies as temples. I am a heathen in comparison who worships eating fresh bagels – though I am now on a deprivation diet for four months. If I stop eating bagels, I lose weight. However, I regard anyone who toasts a fresh bagel as being not simply unappreciative of this magnificent food but as a real defiler and sinner. That is what for me is really unkosher – toasting a bagel – my God!

More seriously, if hygiene was a rationale for these divisions, it may have been valid to some degree for pork in a hot weather climate but has little if any validity today. If, more likely, the designation ‘kosher’ was used to draw a fat dark and definite line between the ethical and the unethical, the worshipper and the pagan, between affirmation of life and attachment to death, between the sacred and the profane, or to formalize the separation between Jews and gentiles, my own suspicion is that in the present world it only works to some degree with respect to the last dichotomy.

But I do not believe kosher laws necessarily have a heuristic purpose. They are chukim, laws without a rational explanation but which may have a functional result, namely to help Jews maintain a distinct and separate existence from other peoples and inhibit intermarriage with non-Jews by serving as daily reminders to those who keep kashrut as Jews.

They may be right.

Leviticus Chapter 11:

11 The Lord said to Moses and Aaron, 2 “Say to the Israelites: ‘Of all the animals that live on land, these are the ones you may eat: 3 You may eat any animal that has a divided hoof and that chews the cud.

4 “‘There are some that only chew the cud or only have a divided hoof, but you must not eat them. The camel, though it chews the cud, does not have a divided hoof; it is ceremonially unclean for you. 5 The hyrax, though it chews the cud, does not have a divided hoof; it is unclean for you. 6 The rabbit, though it chews the cud, does not have a divided hoof; it is unclean for you.7 And the pig, though it has a divided hoof, does not chew the cud; it is unclean for you. 8 You must not eat their meat or touch their carcasses; they are unclean for you.

9 “‘Of all the creatures living in the water of the seas and the streams you may eat any that have fins and scales. 10 But all creatures in the seas or streams that do not have fins and scales—whether among all the swarming things or among all the other living creatures in the water—you are to regard as unclean.11 And since you are to regard them as unclean, you must not eat their meat; you must regard their carcasses as unclean. 12 Anything living in the water that does not have fins and scales is to be regarded as unclean by you.

13 “‘These are the birds you are to regard as unclean and not eat because they are unclean: the eagle,[a] the vulture, the black vulture, 14 the red kite, any kind of black kite, 15 any kind of raven, 16 the horned owl, the screech owl, the gull, any kind of hawk, 17 the little owl, the cormorant, the great owl, 18 the white owl, the desert owl, the osprey, 19 the stork, any kind of heron, the hoopoe and the bat.

20 “‘All flying insects that walk on all fours are to be regarded as unclean by you. 21 There are, however, some flying insects that walk on all fours that you may eat: those that have jointed legs for hopping on the ground. 22 Of these you may eat any kind of locust, katydid, cricket or grasshopper. 23 But all other flying insects that have four legs you are to regard as unclean.

24 “‘You will make yourselves unclean by these; whoever touches their carcasses will be unclean till evening. 25 Whoever picks up one of their carcasses must wash their clothes, and they will be unclean till evening.

26 “‘Every animal that does not have a divided hoof or that does not chew the cud is unclean for you; whoever touches the carcass of any of them will be unclean. 27 Of all the animals that walk on all fours, those that walk on their paws are unclean for you; whoever touches their carcasses will be unclean till evening. 28 Anyone who picks up their carcasses must wash their clothes, and they will be unclean till evening. These animals are unclean for you.

29 “‘Of the animals that move along the ground, these are unclean for you: the weasel, the rat, any kind of great lizard, 30 the gecko, the monitor lizard, the wall lizard, the skink and the chameleon. 31 Of all those that move along the ground, these are unclean for you. Whoever touches them when they are dead will be unclean till evening. 32 When one of them dies and falls on something, that article, whatever its use, will be unclean, whether it is made of wood, cloth, hide or sackcloth. Put it in water; it will be unclean till evening, and then it will be clean. 33 If one of them falls into a clay pot, everything in it will be unclean, and you must break the pot. 34 Any food you are allowed to eat that has come into contact with water from any such pot is unclean, and any liquid that is drunk from such a pot is unclean. 35 Anything that one of their carcasses falls on becomes unclean; an oven or cooking pot must be broken up. They are unclean, and you are to regard them as unclean. 36 A spring, however, or a cistern for collecting water remains clean, but anyone who touches one of these carcasses is unclean. 37 If a carcass falls on any seeds that are to be planted, they remain clean. 38 But if water has been put on the seed and a carcass falls on it, it is unclean for you.

39 “‘If an animal that you are allowed to eat dies, anyone who touches its carcass will be unclean till evening. 40 Anyone who eats some of its carcassmust wash their clothes, and they will be unclean till evening. Anyone who picks up the carcass must wash their clothes, and they will be unclean till evening.

41 “‘Every creature that moves along the ground is to be regarded as unclean; it is not to be eaten. 42 You are not to eat any creature that moves along the ground, whether it moves on its belly or walks on all fours or on many feet; it is unclean. 43 Do not defile yourselves by any of these creatures. Do not make yourselves unclean by means of them or be made unclean by them. 44 I am theLord your God; consecrate yourselves and be holy, because I am holy. Do not make yourselves unclean by any creature that moves along the ground. 45 I am the Lord, who brought you up out of Egypt to be your God; therefore be holy, because I am holy.

46 “‘These are the regulations concerning animals, birds, every living thing that moves about in the water and every creature that moves along the ground.47 You must distinguish between the unclean and the clean, between living creatures that may be eaten and those that may not be eaten.’”

Shmini Leviticus 11.5.04.13.rev..doc

Canadian Jewish Voting and Israel.04/04/13

Canadian Jewish Voting and Israel 04.04.13

by

Howard Adelman

Frank Dimant, CEO of B’nai Brith Canada and a newly minted writer for the Huffington Post, published his first opinion piece on 4 April in the form of a question: "Will the Jewish Community Choose Trudeau Over Harper?" It is not a real question for a number of reasons, but primarily because the Jewish community is not a voting monolith. It never has been. When I attended Harbord Collegiate years ago, in my row of seats there was my politically unaligned self in the first seat (my name began with an A) and a communist sitting behind me. Behind him sat a supporter of the CCF and behind that a Liberal Party and then a Conservative Party supporter. We were all Jewish. This high school during the 1950s was 95% Jewish. All those behind me went on to become practicing physicians. Their political ideologies and voting patterns probably also started to converge.

By the end of the twentieth century, the pattern of a wide diversity among the Jewish electorate had dissipated and the largest majority of Jews in Canada voted for the Liberal Party, although fracture lines had begun to show in both the Pierre Trudeau government and the Jean Chretien government from 1993 to 2003 that succeeded the Conservative interregnum government of Brian Mulroney. However, Joe Clark in 1979-80 with his stumbled initiative on moving the Canadian embassy to Jerusalem and Brian Mulroney in spite of his very strong support for Israel were never able to take advantage of those cracks to develop a significant opening for Tories to broaden their support from Jews. The Tory party under Mulroney was still too much of a mismatched collection of prairie traditional conservatives, Ontario Red and Big Business Tories and soft Quebec nationalists. Chretien’s Liberal government had supported a two-state solution and Israel’s right to exist within secure borders but opposed expanding Jewish settlements in the West Bank and Gaza as well as the building of the security fence on West Bank territory and in East Jerusalem. The Liberals always condemned Palestinian terrorism but then offset this by criticizing Israeli retaliation as disproportionate or excessive. Further, at the UN, when Howard’s government in Australia (and the USA) backed Israel, Canada either abstained or voted for UN resolutions critical of Israel.

The crack then became an actual gap as Jewish voters began to slip away and no longer voted for Liberals at rates 20% higher than the average other minority group; the rate, though still overwhelming in its support for the Liberal Party, had slipped to just 10% above as Frank Dimant well understands for he co-edited the 2001 volume with Ruth Klein, From Immigration to Integration, The Canadian Jewish Experience: A Millennium Edition in which David Goldberg initially pointed to this slight shift in his essay, "The Post-Statehood Relationship: A Growing Friendship". Ezra Levant had already asked in 2000, "Is the Jewish love affair with the Liberals over?" in the National Post (13 October).

Canada had just voted on 7 October 2000 to condemn Israel at the United Nations by using its seat on the UN Security Council to endorse Resolution 1322 that condemned Israel’s "excessive use of force" against Palestinians; there was not even a balancing criticism of Palestinian terrorism. This was just the pinnacle of 10 out of 12 resolutions that Canada supported and the USA and Israel opposed to maintain Canada’s ostensible role as a "neutral" party, including resolutions that condemned Israel for violating the rights of the Palestinian people, condemning the settlements in the Golan, Gaza, the West Bank and even East Jerusalem as illegal, endorsing Palestinian refugee rights to their property and income without any balancing statement about Jewish refugees from Arab lands. To still the Jewish backlash, Chretien wrote a letter to the Jewish community that regretted the consternation caused by the UN vote but not the vote itself. Further, he did not suggest any change in policy direction. This is strong evidence suggesting that Frank is wrong in claiming that the Liberal establishment did everything it could to maintain its Jewish adherents. In the Jewish rally in Montreal in support of Israel, Irwin Cotler, a former president of the Canadian Jewish Congress and Justice Minister, had to vocally criticize the members of his own government. In Toronto, Elinor Caplan did not show her face and the large rally loudly booed the Liberals. The opening for the Tories was clear.

As everywhere else in the west, the propensity to vote centre-left became strained as the delegitimization campaign against Israel heated up in the twenty-first century, as the second intifada and wars in Lebanon and Gaza took place in which many civilians were killed, and as conservatives in Canada, the United States and Europe demonstrated stronger support for Israel. The Jewish community voting pattern began to demonstratively shift as conservative parties increasingly attracted more votes, especially from members of the organized Jewish community for whom Israel ranks extremely high in their self-identification. Stockwell Day began to make inroads as head of the Canadian Alliance Party as Frank Dimant acted to promote links between evangelical Christian supporters of Israel and Jewish groups. These challenges were recognized. (Dennis Stairs (2003) "Challenges and opportunities for Canadian foreign policy in the Paul Martin era," International Journal LVIII:4, Autumn, 481-506) The Martin government had regrouped and voted against rather than abstaining on UNGA resolutions condemning Israel for violence and its occupation of Gaza and the West Bank and began a pattern of openly opposing one-sided resolutions that hampered the peace process.

Once the Conservative government was elected in 2006 in spite of a movement by the Liberal Party away from the Chretien bias that had shifted against Israel, the Stephen Harper government began to attract more Jewish supporters. Harper expressed the strongest support for Israel even among conservative parties in the west. Everything else being equal, the Harper government should have pulled the most Jewish voters to become supporters of the Conservative party of Canada if Israel had been the only defining issue. Initially, the movement of Jewish voters to the right continued at a very slow pace even after Canada took a number of very prominent positions on the Palestinian-Israeli conflict that favoured Israel — beginning with suspending aid to the Palestinian Authority (Canada was the first country in the West to do so) when Hamas obtained a majority in March of 2006 and unequivocally defending Israel’s reprisals in Lebanon when Harper was in Europe for the G-8 and Israel attacked Lebanon after Hezbollah kidnapped two Israeli soldiers in July of 2006. Even though the Israeli 34 day massive attack that killed more than a thousand Lebanese and displaced a million, and even though 50,000 Canadian citizens were in Lebanon that Canada had to evacuate, and even though eight members of a Montreal Canadian-Lebanese family were among the casualties, Harper defended Israeli military actions as "measured".

The shift, though still relatively lethargic, had become noticeable as prominent Jewish Liberals announced that they had torn up their Liberal Party cards and joined the conservatives – the film producer, Robert Lantos, was a prominent example. At the same time, in August 2006, Heather Reisman, Gerald Schwartz, and other Jewish Liberal plutocrats published an open letter praising Harper for his brave stand. Heather Reisman subsequently cancelled her membership in the Liberal Party and joined the Conservatives. Michael Ignatieff made the biggest political gaffe of his short political life and his many other gaffes by accusing Israel of war crimes.

When Harper was re-elected with another minority government, Canada was the first country to withdraw from Durban II in January of 2008. On 8 May 2008, Stephen Harper insisted on Canada’s unshakable support of Israel; those who threaten the Jewish state were also threatening Canada. Ezra Levant with his acerbic pen on 23 November 2009 mocked the small group of non-notable notable Liberals who criticized Harper for practicing divisive policies over Israel. At the beginning of 2009, Steven Harper’s government publicly supported Israel’s military response to the rocket attacks from Gaza and was the lone dissenter on the UN Human Rights Committee’s criticisms of Israel’s actions. In the same year, the Harper government withdrew its financial support for Kairos presumably but not ostensibly because of its political bias against Israel. Peter Kent, Minister of State for Foreign Affairs on the 31st anniversary of the Islamic Revolution in Iran in February of 2010, reiterated Harper’s stated alignment with Israel and said as much directly to Riad Malki, the Palestinian Authority’s Foreign Minister, on a visit to Ramallah in September of that same year, much to the consternation of the Palestinian Authority. Probably as a result of this stand, the next month Canada lost its bid for a seat on the Security Council even though Canada had received assurances that 135 countries would back the Canadian bid. (Cf. Paul C. Merkley (2012) "Reversing the Poles: How the Pro-Israeli Policy of Canada’s Conservative Government May Be Moving Jewish Voters from Left to Right," Jewish Political Studies Review 23:1-2, 13 April; see also Donald Barry (2010) "Canada and the Middle East Today: Electoral Politics and Foreign Policy," Arab Studies Quarterly, October, 191)

The cracks were widening. The indications could not be missed. In the September 2007 by-election, Jewish support for the Liberal Party in Montreal’s Outremont riding collapsed. In March 2008, in Vancouver Quadra with a small but significant Jewish constituency, the Liberal candidate barely won and Jewish Liberals openly said that they had switched their voting pattern. In the 2008 elections, the Conservative outreach to various ethnic urban ridings the Conservatives won 18 of 80 ridings. On 2 May 2011, the Tories leapfrogged ahead. The Harper government got its majority. The government had attracted significant support from ethnic groups. For the first time ever, a majority of Jews (52%) voted for the Conservatives. Irwin Cotler who was first elected in Montreal with 92% support was barely re-elected. A tectonic shift had taken place. (Cf. Jeffrey Simpson (2011) "How the political shift among Jewish voters plays in Canada," The Globe and Mail, 28 September 2011 who agrees that, "Mr. Harper’s position is driven by profound personal conviction rather than political calculation.") However, it is incorrect to say that, "In the past two years, Jewish public opinion has rallied heavily behind the Conservative Party." There has indeed been a tectonic shift in Canadian politics but Jews voted for the Tories by a bare majority.

Frank Dimant’s article presumed a monolithic Jewish community while contradicting that assumption in the body of the essay. The article did not probe voting pattern shifts and their explanation. Jews, like other voters, share the same concerns with the state of the economy, social policy or a perception (incorrect) of rampant crime. Instead, Frank focused only on political appeals in terms of Israel, but rather than suggesting that they were opportunistically motivated, he insisted, correctly in my mind, that they were principled. But he also claimed that the elites in the Jewish community were in bed with the Liberal Party of Canada when, in fact, the plutocrats had begun to desert the Liberal Party in 2006. The opinion piece insists that a shift took place from the Liberals to the Tories because of a grass roots revolt. The reality is that, by his own admission, the shift was advocated by Frank Dimant much earlier and predicted by Ezra Levant even earlier. Further, Frank cannot be exactly characterized as grass roots however convenient a posture in serving as a contrarian to the historic dominant propensity of the Jewish community.

However, Frank was correct on another matter. The beginning of the realignment of some of the elites and others in the Jewish community took place because, under the leadership of Stockwell Day of the Alliance Party, then a small opposition party separate from the Tories, had a record of the strongest pro-Israel support though its own supporters came from rural and small town voters in Ontario and the West where there were very few Jewish voters to be garnered. Initially the shift built slowly. It accelerated when the Jewish voters became convinced that the Tory positions on Israel were sincere and deeply felt and not just politically opportune appeals. The fact that this shift was accompanied by serious errors from the other side certainly helped overcome old voting habits.

Frank insists that the mandate of the Centre for Israel and Jewish Affairs (CIJA) that replaced the Canadian Jewish Congress, the Canadian Zionist Federation, the United Israel Appeal and the Federations – a mandate never publicly professed – was to keep Jews voting Liberal. It is hard to criticize a mandate that was never expressed let alone give credibility to its existence, or even the larger even more conspiratorial claim (one that was certainly not expressed) that the mandate included a policy of discouraging any dissent within the Jewish community. Significant elite shifts of the financiers of CIJA – which B’Nai Brith stayed away from – to the Tories belies Frank’s claims and suggests another possible spur behind Dimant’s blatant animosity and conspiracy theories. One of the ironies in reading Frank is one is surprised to find that he shares with strong supporters of the Palestinian cause that the Jews are led by an elite cabal with an inordinate political and financial influence. (See the various writings of Kristin Szremski who is the director of media and communications for the American Muslims for Palestine.)

Frank insists that "Jewish public opinion has rallied heavily behind the Conservative Party". Although the shift was tectonic in terms of Canadian politics, it was still just a bare majority. Harper attracted the strongly identified and socially conservative Jews but the urban secular Jews had shifted to the New Democrats in significant numbers. Frank claims that this shift will be counteracted by a concentrated effort to realign the Jewish agenda with the Liberal Party, not Liberal Party policy with the organized Jewish community agenda, by focusing on other issues than Israel. The purpose of these set of claims is not offered to raise the consciousness within the Jewish community that their elite leadership is leading them astray as one might suspect, but a warning tothe Conservative Party not to take Jewish community support for granted and to understand the dynamics at play within the heavily-politicized atmosphere that prevails in the Jewish community. Before the Conservative Party accepts his advice, I advise the members to critically examine Frank’s claims.

Frank is right that he and B’nai Brith Canada led an open campaign to shift Jews from voting Liberal to voting Conservative. Second, as I tried to demonstrate, there has been a shift in voting patterns among Jews and it has been significant. Most Jews in the nineties voted for the Liberal Party and did so disproportionally to their share of the population and, as in the United States, contrary to what might be expected given their incomes. Further, even when Brian Mulroney was Prime Minister and was a strong supporter of Israel, the majority of Jews voted Liberal. The shift took place in the twenty-first century, proceded gradually as Frank Dimant wrote and in the 2011 election became a rout. But as stated above, in the 2011 elections, the Ipsos Reid poll claimed that for the first time, a majority of Jews (52%) voted for Stephen Harper; 24% voted Liberal and 16% supported the NDP. (The enormous data set from that poll has been donated tothe Laurier Institute for the Study of Public Opinion and Policy at Wilfrid Laurier University in Waterloo, Ontario.)

Why did it happen? Not because, as Frank Dimant would lead one to believe, a Jewish elite is trying persistently to lead the Jewish community to a Liberal Madagascar rather than the promised land of a Likud-led Israel, but because of persistent and internally divisive Liberal policies while the Harper Tories have been clear and consistent and sincere strong supporters of Israel even before it was to their political advantage. Further, the Tories have abandoned their white rural base as their exclusive foundation and have successfully infiltrated most of the ethnic communities. In the case of their appeal to mainstream Jews, it is not clear that it is to their political advantage since there are now three times as many Muslims in Canada as Jews and Tories did worst in garnering Muslim votes than the Liberals. Only 12% of Muslims voted Conservative; 46% voted Liberal and 38% NDP.

At the meeting of the Canadian Political Science Association in June of 2012, Patrick Kelly and Professor Livianna Tossutti presented a paper that asked "How the Liberal Party of Canada Lost its Electoral Dominance in Canada’s Immigrant Communities?" Harper in discussions with Tom Flanagan had stated at the beginning of the twenty-first century that Conservatives could not get a majority unless they attracted significant numbers of immigrant voters. TheTory vote was rooted in older men and women, traditional occupations and the Protestant churches and could also be correlated with higher income groups with some notable exceptions. However, at the turn of this century, half of the constituencies had at least 10% of its electorate who were immigrants. In one-third, 20% were immigrants. In one-fifth, 30% were immigrants. The Liberals had successfully branded themselves as the party of diversity and multiculturalism. Harper set out deliberately to challenge that branding. Stockwell Day had not succeeded because he was too closely identified with traditional community conservatives of an evangelical Christian persuasion. Harper bracketed that sort of appeal to stress economic conservatism plus more generally shared conservative values promoted by family-centred policies – child care allowances and support for traditional marriage, the latter receding as time went on and gay marriage established itself as family-centred. Nevertheless, if you have a non-traditional living arrangement, are secular, work in the arts or a helping profession, are young and female and an environmental activist, you will almost certainly not vote Tory and most likely vote NDP.

Interesting, the initial beneficiary of the shift in ethnic voting patterns was the NDP which picked up the vast majority of the 23 point drop in Liberal support in 2004 with the sponsorship scandal haunting the Liberals. But by 2008, it was the Tories who benefited from the 10 point further drop in ethnic Liberal support. The outreach to the immigrant communities was clearly paying off. (Cf. F. Ellis and P. Woolstencroft (2009) "Stephen Harper and the Conservatives campaign on their record," in Jon H. Pammett and Christopher Doran (eds.) The Canadian Federal Election of 2008, 16-62, 37-8) The Tories picked up ethnic voters who continued to identify with their ethnic communities in a strong way and who regularly attended their place of worship but did not appeal to those who opted for integration and adopting an un-hyphenated identity. This increased significantly in 2011 and Jews were part of that trend, though perhaps in increased proportions because they were more established and because Harper went out of his way to express his strident support of Israel. Conservatives garnered almost 40% of the overall vote and even more of the immigrant voters who had been in Canada more than ten years (43%). With some communities, the percentage was much higher because Conservatives did not make significant inroads with visible minorities, including Asians, Hispanics and Blacks born outside Canada. The Tories had won the votes of immigrants who had established themselves economically as middle class Canadians.

Laura Rosen Cohen in the National Post (30 July 2012) asked, "Will American Jews follow the example of their neighbours to the north?" There is no indication that the Republicans have a leader as politically astute and with the deep convictions as Stephen Harper or a Democratic leadership as accident prone as the Liberal leaders with the exception of Bob Rae have been. Further, whereas Stephen Harper kept his evangelical community conservatives in check, the Tea Party took control of the steering wheel of the Republican Party in the USA. In contrast, Barack Obama is the most Zionist president in American history. Further, as Irwin Cotler has pointed out, Canadian Jewry consists predominantly of much more recent immigrants for whom the memory of the Holocaust is personal and more intense, are affiliated in much higher proportions with Orthodox Judaism, live in a country much more dedicated to hyphenated integration than a melting post assimilation and 74%, twice the ratio of Americans, have visited Israel.

I believe that as long as Harper remains in power, his leading role as an advocate for Israel will remain intact. He will undoubtedly consolidate support for the Tories by strongly affiliated Jews. Since politics in the west, especially in Canada and the USA, has devolved from brokerage parties that paste together coalitions of regional interests and appeals to national unity into left-right parties divided by values and economic interests (in Canada, the NDP supporters are merely the hip side of the American democratic party but have similar values to the Liberal Party of Canada), given the divisions on the left in Canada, there is no reason the Conservatives cannot enjoy not only long term majority support from Jews, but a long stay in power in this century, especially if they increase their support from Catholic voters who represent 40% of Canadians.

Canadian.Jewish.Community.Frank Dimant.doc

Current State of the Israeli Economy 03.04.13

Current State of the Israeli Economy 03.04.13

by

Howard Adelman

One of the most prominent issues in the run up to the election was the cost of living in general and the cost of housing in particular. Yair Lapid vowed to tackle that issue. Let me offer some examples.

Thus, a cheap restaurant in Israel is more expensive than in Toronto but a good restaurant costs about the same. Basics, like milk and bread, are cheaper in Israel, but eggs and cheese are surprisingly more expensive. Fruit and vegetables are much cheaper in Israel and so is transportation even though a litre of gasoline is 60% dearer in Israel. Brand clothes are much more money in Israel but apartments are almost 20% less to rent but more than 20% more to purchase. The latter figure is astonishing but I am somewhat sceptical of its accuracy for in my experience in Toronto the rents are higher and the costs of purchasing apartments I believe is also about 20% higher. But the most important revelation is that salaries in Israel are about 40% less when the cost of living overall, except for the cost of purchasing an apartment, is about the same.

Inexpensive restaurants are a bit more costly in Israel but good restaurants cost about the same.

The real issue in Israel is that salaries are not comparable to the cost of living. Other than the cost of housing, which I will deal with in a separate blog, it is not clear how Lapid can tackle this problem. Lapid raised several other issues in the campaign concerning government expenditures. He provocatively asked: “How dare they sit there with 34 ministers and deputies and then come to the middle class and tell them they’re taking another NIS 1,800?” He claimed that ministers without portfolio cost the taxpayers NIS 60 million, the same amount parents of autistic children requested in social aid. Lapid in negotiating with Netanyahu did succeeded in reducing the number of ministers and deputy ministers, but at the cost of clout for his party.

On another issue of what are called entitlements or tax loopholes in American political parlance, Lapid called for an end to the annual practice of “Hok Hasederim”, the distribution of large sums of money not provided for or allocated within the budget. Yet Lapid`s first action as Finance Minister on 21 March was to order $13 million transferred to the foundation to assist Holocaust survivors – the Foundation for the Benefit of Holocaust Victims. It is very hard for anyone to object to directing funds to meet quality-of-life needs for aging survivors, including at-home nursing care, especially since it was an integral part of the coalition agreement, but the process appears to me as a naïve outsider to be a continuation of “Hok Hasederim”. At least the cut of three hours of nursing services per week can be restored and no one surely begrudges that expenditure.

But these are small potatoes. One deep historic fear in Israel is of runaway inflation, the rise in prices based on the Consumer Price Index (CPI) indicating how much less you can purchase with the same number of dollars as the year before.. However, the fear seems exaggerated. Both in terms of historic inflation figures (the overall increase from the year before) and average inflation (the average rate of increase in each month over the full year), the rate of inflation in Israel is not that much higher than Canada`s.

Since interest rates are so low, those on fixed incomes who depend on interest from deposited monies to earn income are effectively earning no money since inflation wipes out the value of anything earned. In fact, deposit income in the current period is even less than the rate of inflation. So pensioners and others on fixed incomes suffer.

Israel also suffered from the global economic slump when its growth rate was only 2.4% in the final quarter of 2013, the slowest rate of increase in three years but one that many industrialized countries might envy in these perilous economic times. Israel has had a spectacular rate of growth and is a model of convergence for a country that not very long ago was poor and now has caught up and passed a number of developed countries. Economists long ago dispensed with the Solow model in which economic growth depended on physical and human capital. Total factor productivity (TFP), the measure of an economy’s long-term technological change or technological dynamism, is now perceived as the main agent for stimulating growth. Israel has and continues to excel in this area, particularly with respect to improving innovations along quality ladders more than simply expanding the variety of products made and sold. Further, productivity improvement also accelerates capital accumulation thereby multiplying the positive effects.

Further, Israel continues to expand its free trade regions that also may help stimulate growth since Israeli economists pioneered in the nineties in the research that demonstrated that a country gains more from another country in proportion to the R&D of the other country if you trade with this country more. Israeli institutions have also evolved to reinforce and enhance technological change, but there is a general fear that the institutions that foster the accumulation of knowledge are too underfunded, an issue that will be discussed in the blog on education. This is important because there exists a robust relationship between the quality of institutions and economic performance. Further, though economic incentives are widely in place to enhance knowledge accumulation, a side effect has been a growing disparity between those in the knowledge economy and those outside of it, a topic that will be discussed in the blog on disparities in the Haredim and Israeli-Arab sector.

As Deloitte reported in 2011, Israel excels in the supply of financial and business services and in high tech manufacturing in electronics, software, communications and pharmaceuticals as well as low tech industries such as chemicals and plastics. Where it enjoys the greatest comparative advantage is in the high levels of investments in education and R&D, particularly through the military which creates not only basic innovation and knowledge but networks that subsequently go on to create businesses and new qualitative improvements in products.

Israel once offered a myriad array of investment incentives that may have attracted capital but, at the same time, created economic distortions and a bureaucratic nightmare for some. The Encouragement of Capital Investment Law that came into effect on 1 January 2011 has eliminated most of the previous incentives, rationalized the tax rate, reduced the number of development zones, and simply reduced corporate tax rates for those businesses that export at least 25% of production. Corresponding changes were made in the distribution of dividends. With the rationalization of the taxation system, Israel has experienced enhanced rates of investment. However, middle class savings rates have declined as incomes have not kept up with increased costs.

The biggest change in the Israeli economy is on the doorstep and will be the subject of a separate blog. In the Deloitte 2011 report, Israel was described a country with few natural resources. With the discovery of the huge gas fields offshore with one on the verge of coming on stream, this is no longer the case. Israel will save US$2-3 billion in imported energy bills. This will have a tremendous impact on the Israeli economy but requires a separate discussion. The reality is that Israel has become a country of the energy equivalent of a land of milk and honey that will enhance its great lead in its booming high-technology sector complemented by the structural reforms that reduced controls on foreign currency exchanges and profit remittances.

However, Israel faces the problem of many other developed countries – a stubborn unemployment and underemployment rate, particularly among young people. Further, the 2011 unemployment rate of 5.6% rose to 6.3% in 2012 and currently sits at 6.5%. Though not as high as the American rate of 8% with America still not quite over the great recession, or even Canada`s rate, unemployment in Israel did reach a thirty year low in 2011.

As the last remaining item on the overview of the Israeli economy as the lead up to understanding the budget that Lapid can be expected to introduce, we come to the budget deficit. On 1 July 2012, the Former Finance Minister, Yuval Steinitz, received approval from the Israeli cabinet to double the 2013 targeted budget deficit from the initially proposed 1.5% of GDP with an absolute ceiling of 2.5% to a new target of 3% of GDP, with the expectation that it would come in at 3.5-4%. The actual deficit came in at about 4.2% of GDP or a 39 billion shekel budget deficit or AM$10.8 billion. The cabinet was accused at the time of being reluctant to cut spending and raise taxes ahead of the then October 2013 scheduled elections. The Bank of Israel governor, Stanley Fischer, warned that both inflation and interest rates would increase. The bank’s base interest rate had fallen to 0.5% in 2009 at the height of the financial crisis, rose to 3.25% in the middle of 2011 as Israel’s economy recovered, but has since been cut to and hovers around 1.75%.

The shekel immediately dropped from almost 4 to the dollar to 3.9 and continued to drop to its current exchange rate of 3.56 after having remained steady for a number of years. In a final meaningless rhetorical flourish, the cabinet then voted to set a 2014 budget deficit target of 2.75%, of 2.5% in 2015, of 2% in 2016 and 1.5% in 2019. There was never any discussion of a balanced budget. However, Israel’s debt-to-GDP ratio remains relatively stable and less than that of many developed countries – though that is not saying a great deal these days. The country’s debt burden, however, is higher than most developed countries because the government pays a relatively high rate of interest on government debt. The Israeli government is undoubtedly banking on the shekel strengthening when natural gas begins to glow from its offshore wells.

Yesterday, Stanley Fischer, while praising Israel`s economic performance and the monetary policy maintained by the bank, stated in its report on 2012 that Israel`s budget deficit was the main economic problem. (Moti Bossok Outgoing Central Bank Chief: Israel`s fiscal situation economy`s main problem, Haaretz, 2 April 2013.) He also urged the government to create a sovereign wealth fund from its anticipated new found gas wealth. Lapid may increase taxes to cover part of the deficit but he will have to do so without inhibiting business and prospects for economic growth.

Lapid`s main problem will be how to increase government revenues and where to cut expenditures. Certainly, defense will be cut. Netanyahu and Lapid already have agreed that defence cuts will cover 4.5 billion shekels over the next 18 months. Where those cuts will be made is yet to be determined.

Current State of the Israeli Economy 03.04.13.doc

The Budget Challenge for Israel.02.04.13

The Budget Challenge for Israel 02.04.13

by

Howard Adelman

Yair Laipid as Finance Minister has stated his priorities on his Facebook page:

1. Reduce the cost of living by every means at its disposal (part of the coalition agreement);

2. Enhance free market competition and reduce the concentration of power;

3. Reduce economic disparities and launch a fight against poverty.

Yesh Atid controls four other ministries that have a significant impact on the economy: the Education Ministry headed by Rabbi Shay Piron; the Health Ministry headed by Yael German; the Social Affairs Ministry headed by Meir Cohen; and the Science Ministry headed by Jacob Perry. Further, except on the issue of whether housing needs to be expanded in the settlements on the West Bank or within the State of Israel, Lapid and Naftali Bennett share the same perspective on the economy. Bennett is Minister of Economy and Trade and his party controls the Housing Ministry. So Lapid has the political resources to get a radical economic package through the Knesset. There have been a lot of rumours that Netanyahu gave Lapid the economic ministry to allow him to fall flat on his face and destroy both himself and Yesh Atid as a political force. But the result would be that Netanyahu will also go down with the ship. They not only have an agreement to work together but common interests.

However, Netanyahu comes from the George W. Bush fiscal school for whom it is anathema to raise taxes. On the other hand, Netanyahu oversaw tax increases that came into effect in January. Lapid in the election campaign railed against those tax increases in his famous line: “The Israeli middle class has turned into [Prime Minister Binyamin] Netanyahu’s ATM.” However, as I will later show, Israeli direct income taxes and indirect value added taxes now offer few incentives for any increase. More importantly, there are more than sufficient revenues available by simply closing what in North America are called loopholes and in Israel are called incentives. I will deal with sources for increased revenue in the blog on the day after tomorrow.

If Lapid tries to cut out incentives, he will be subject to immense pressures from outside. If he tries to cut from ministries, he will face opposition from within, and the most formidable will be the Department of Defense. One is wary of trusting his toughness given how poorly he did in the bargaining over ministries but mostly over other positions in the government. But so far he is talking tough. And saying No is relatively easier than getting someone else to say Yes.

The greatest challenge Lapid faces will not be those who pressure him both from within and outside government but from those who are indifferent to the size of the deficit and, in any case, cynical about the possibility of structural changes. After all, in a budget of NIS 350 billion largely locked into a third for interest payments on debt, another third for salaries and the other third with little room for flexibility, how can any finance minister come up with NIS 15 billion in cuts and additional revenues of about NIS 30 billion?

Part of the answer lies in the power of the Finance Ministry as every Canadian knows who watched Paul Martin in the Chretien Canadian Liberal government and Jim Flaherty in the Tory Harper government work their budgets to ensure Canada was not dragged down in the whirlpool of gross indebtedness. The Finance Minister is not just a traffic cop who turns lights red for ceasing expenditures and green for resuming them. First of all, he has a powerful influence on the amount of traffic. Secondly, the Finance Ministry is not just a set of stop lights but a detailed manager of the economy with veto power over every expenditure as well as responsibility for setting the overall budget for each ministry.

I will try to answer the question of how I think Lapid will approach the problem by future blogs under the following planned headings:

1. Israeli Economics – A New Dawn (yesterday)

2. The Budget Challenge for Israel (today)

3. Current State of the Israeli Economy (tomorrow)

INCREASING INCOME AND PRODUCTIVITY

4. Tamar and Leviathan

5. Tax Loopholes and Privatization

6. Monopolies and the Tycoons

7. Technology

CHANGING PATTERNS OF EXPENDITURES

8. Housing

9. Military

10. Disparities – Haredi and Arab Israelis

11. Education

12. Health

I will try to wrap the whole discussion up by evaluating whether such changes will make Israeli a fairer and more equitable society while, at the same time, increasing both opportunities and incentives. Will it be more humane as well as more competitive or will one objective be at the expense of the other? Everyone might expect me to write on these questions, but on the economy? In undertaking these series of blogs, I will have the benefit of world class economists both in Israel and abroad who have contemplated these issues, written on them and undoubtedly some of them will have influenced both Lapid and Bennett in their political platforms.

These experts include: Professor Avi Ben-Passat, a former Director-General of the Finance Ministry (1999-2001), a Senior Fellow at the Israel Democracy Institute (IDI) and a Professor at Hebrew University; his colleague and collaborator, Momi Dahan, at the same institute, Head of the Federmann School of Public Policy & Government at Hebrew University and an expert on macroeconomics and finance as well as economic inequality; Mordechai Kremnitzer who is a Professor Emeritus from Hebrew University, a former Dean of the Law Faculty and currently ice-President of Research at IDI where he heads the Constitutional Principles, National Security and Democracy as well as the Arab-Jewish Relations projects.

Below I have provided a selection of some of the economists whom I will cite with respect to the various topics I plan to cover. I list them to ask you to submit other experts whom I should read in preparing my blogs.

Energy Resources: Tamar and Leviathan (04.04.13)

Philip Hemmings, OECD

Dr. Michael Gardosh, Geophysical Institute of Israel,

Dr. Yehezkel Druckman

Tax Loopholes and Privatization (07.04.13)

Fudim Shrem Kelner, Professor of Finance, IDC, Israel

Daniel Czamanski Technion

Monopolies and the Tycoons (08.04.13)

Oded Sarig, Treasury Commissioner for Capital Markets

Arik Peretz

Yoav Bar-On

Fudim Shrem

Daniel Tsiddon Staggering and Synchronization in Price-Setting

Technology (09.04.13)

Daniel Tsiddon Leapfrogging

Manuel Trajtenberg – Product Innovation and Patents

David Shamah

Shlomo Gradman, Chairman of the Israeli High Tech CEO Forum

Housing (10.04.13)

Manuel Trajtenberg

Daniel Tsiddon

Hosny Zoabi

Z. Eckstein

Yosef Mealam

Military (14.04.13)

Shmuel Even

Yaakov Lefshitz

Disparities – Haredi and Arab Israelis (15.04.13)

Eran Yashiv

Daniel Tsiddon

Manuel Trajtenberg

Health (17.04.13)

Neil Gandal

Tomorrow I will discuss the Current State of the Israeli Economy to show why new sources of revenue must be found as well as cuts made on the expenditure side to meet a target, not of a balanced budget – there are no Tea Partiers in power in Israel – but of a deficit of 3% of the gross national product. The deficit ran at over 4% during 2012 and perhaps even exceeded that amount in the first quarter of 2013.

The Budget Challenge for Israel.02.04.13.doc