Sidestepping Gilo

Washington’s response to plans to advance the building of 1,100 housing units in the Jewish east Jerusalem neighborhood of Gilo was relatively subdued. US Secretary of State Hillary Clinton called the Gilo project “counterproductive to our efforts to resume direct negotiations between the parties.”

Statements coming from Berlin were worded more sternly.

Following a phone call between Prime Minister Binyamin Netanyahu and Chancellor Angela Merkel about the Gilo project, the German Foreign Ministry issued a statement saying that Merkel told Netanyahu that she “lacked any comprehension for the approval of new construction plans for Gilo near Jerusalem just days after the Quartet declaration [calling for a new peace plan] had been passed.”

No matter the precise wording of the responses, it is abundantly clear that America, Israel’s most important international ally, and Germany, a country that came out early and strongly against Palestinian efforts to receive UN recognition for a Palestinian state along the 1949 armistice lines – which include Gilo on the Palestinian side – were both upset by the timing of the Gilo project announcement.

It is equally clear that unlike the surprise surrounding the March 2010 Ramat Shlomo debacle that coincided with Vice President Joe Biden’s visit to Israel to jump-start direct talks, Netanyahu and the Americans were both forewarned that Interior Ministry’s District Planning Committee would be approving the Gilo project. And Netanyahu was also aware that it would arouse international rancor.

In a Rosh Hashana-eve interview with The Jerusalem Post’s Herb Keinon, the prime minister was specifically asked about the claim that it was bad timing to announce Gilo now. Netanyahu rejected this.

“We build in Jewish neighborhoods, the Arabs build in Arab neighborhoods,” he replied. “That is the way the life of this city goes on and develops for its Jewish and non- Jewish residents alike.”

Still, perhaps Netanyahu should have played his hand differently.

Of course Israel has every right to build in Gilo. But perhaps he should have quietly postponed approval of the Gilo project.

After the Ramat Shlomo crisis, Netanyahu put in place oversight procedures allowing him to do precisely this. If he had postponed Gilo, claiming technical difficulties or some other non-political explanation, the Palestinians would have had no excuse for avoiding direct talks as recommended by the Quartet.

Delaying Gilo would have also made it easier for the US and Germany and other European countries to back Israel’s demand to resume talks without any preconditions and would have sent out a message that we are appreciative for their support in the UN against the Palestinian bid for statehood.

And even if Interior Minister Eli Yishai, who has authority over construction planning, had publicly objected, claiming that Netanyahu was bowing to international pressure, this would have been good for Netanyahu diplomatically.

He would have come out looking like a prime minister pursuing peace despite opposition from inside his own government coalition.

True, there is no good time to build in Gilo.

International opinion is opposed to any Jewish construction beyond the Green Line. No distinctions are made between outlying settlements in Judea and Samaria and Gilo, a neighborhood 10 minutes away from downtown Jerusalem that will remain part of Israel in a final-status agreement according to every peace plan put forward in the past 18 years, including the 2000 Clinton parameters and the Geneva Initiative.



Even the Palestinians have privately accepted the idea that Jewish neighborhoods in east Jerusalem will remain part of Israel, according to about 1,600 documents revealing the content of negotiations that went on in 2008 between high-ranking Israeli and Palestinian Authority officials leaked to Al Jazeera in January, known as “PaliLeaks.”

Meanwhile, Israel faces a major housing shortage. Even a short delay in construction further widens the gap between inadequate supply and skyrocketing demand.

Nevertheless, from a tactical perspective, it would have been wiser to temporarily delay the Gilo project.

Doing so would have shifted international pressure and attention from Jerusalem to Ramallah and demonstrated that Palestinian intransigence – not the apartment buildings in Gilo – is the real obstacle to peace.

Consumer power

The Great Israeli Cottage Cheese Uprising has taken a new and promising turn. Itzik Elrov, the haredi man from Bnei Brak who started it all back in June, could not have imagined that his lone Facebook call, spurred by shock at the jacked-up price of cottage cheese at his local grocery store, would set in motion a revolution in the local dairy market.

The latest chapter in a saga demonstrating the tremendous power that can be wielded by engaged and united consumers is the resignation of Zehavit Cohen, head of the dairy giant Tnuva. The resignation, pending an investigation by the Israel Antitrust Authority into allegations that Tnuva might have hidden documents revealing that it abused its monopoly status to gouge prices, was accompanied by an announcement by Tnuva, which controls well over half of the NIS 8.6 billion dairy market, on a 15 percent price cut starting Tuesday. White cheeses, hard yellow cheeses and pudding are some of the products that will become more affordable.

But while it is encouraging to know that the grassroots protest started by Elrov and picked up by several university student unions in recent months succeeded in getting the attention of big businesses, the impact made by Elrov et alia might be even more farreaching, resulting in no less than a complete revamping of the entire dairy market.

It has been an open secret for some time that the prices of dairy products here are disproportionately high. But it took the Great Israeli Cottage Cheese Uprising to push this fact to the forefront of public consciousness.

For instance, in July, just weeks after the uprising began, Prime Minister Binyamin Netanyahu made headlines when he expressed astonishment during a visit to Romania that Tnuva cottage cheese sold for NIS 2 less in Bucharest than it did in Beersheba.

Reports released by the Treasury and by the Knesset research department over the summer provided data on the 45% hike in cottage cheese prices between 2006, when price controls were removed, and January 2011, when a 250-gram container cost more than NIS 7. In June, Elrov’s grocery store charged NIS 8. In contrast, the wholesale price of milk increased by less than 10% during the same period.

These reports, and a thorough study published in July by Keren Harel-Harari of the Jerusalem Institute for Market Studies, listed the reasons for the price distortions in our dairy market. Tnuva, Tara and Strauss – the three largest dairies – as well as other producers of agricultural products – were said to be exempt from the sorts of anti-trust laws that applied to most sectors of the economy. Also, various tariffs and obstacles to imports – such as a 150% to 200% tax on imported milk powder and butter – protected the local dairy and agricultural market from international competition.

But perhaps most disturbing was the revelation that in March this year, the Netanyahu government – usually so strongly pro-free market – pushed through the Law for the Planning of the Dairy Market. In the 50-0 vote, the Knesset ratified legislation reminiscent of now-defunct centrally planned economies. Instead of allowing free market forces to sort out supply and demand in the market, a special “quota committee” would determine annual dairy output.



Though the law gives the industry, trade and labor minister the authority to open up the dairy market to international competition, Shalom Simhon, the present minister who is seen as representing the interests of moshavim, many of which are big producers of milk, has said publicly that doing so would be ineffective and would take too long.

It appears, however, that the forces set in motion by Elrov’s Great Israeli Cottage Cheese Uprising are unstoppable. The same grassroots pressure that brought about Cohen’s resignation and Tnuva’s hasty announcement of a price cut will inevitably lead to more substantial and desperately needed changes in the dairy market. And it all began with one disgruntled consumer who refused to be taken advantage of any longer.

In praise of the 'Irvine 11' verdict

Democratic traditions have been around for several centuries. And in the United States, unlike most places in the world, democratic ideals – freedom from religious coercion, freedom of assembly, freedom of expression – are deeply entrenched and second nature for most people. Nevertheless, even in America there remains a surprising amount of confusion regarding the basic tenets of democracy.

A case in point is the controversy surrounding the “Irvine 11” case.

After two days of deliberations, a jury in Orange County, California, handed down last Friday a guilty verdict for 10 members of a group known as the Irvine 11. These young men, who belonged to the Muslim Student Union at the local University of California campus, were charged in February of this year by Orange County’s District Attorney Tony Rackauckas with two counts of misdemeanor for planning to trample and then trampling the freedom of speech of Israeli Ambassador Michael Oren.

On February 8, 2010, while trying to deliver a speech at the university, Oren was repeatedly interrupted by the Irvine 11. Instead of waiting to express their disagreement with Oren during a Q and A session at the end of his remarks, the Muslim students, who had planned the incident days in advance, took turns standing up and shouting epithets such as “You, sir, are an accomplice to genocide!”” and “Murder is not free speech!”

At least 10 times the ambassador was forced to stop his speech. Superior Court Judge Peter Wilson sentenced the students to 56 hours of community service and three years of probation, which can be reduced to one year if they complete their community service by the end of January.

Both the verdict and the sentence were eminently reasonable and reflect the real need to vigilantly protect freedom of speech, a right taken for granted in the US, but almost nonexistent in most of world.

Unfortunately, reactions to the decision reflect either a shaky grasp of the meaning of the First Amendment to the US Constitution or a deliberate attempt to distort and manipulate democratic freedoms to disparage and delegitimize Israeli policies, or both. Organizations such as Harvard College’s Palestine Solidarity Committee and Harvard’s Graduate School of Arts and Sciences’ Alliance for Justice in the Middle East claimed it was the Irvine 11’s freedom of speech, not Oren’s, that had been trampled.

Convinced, apparently, that the ends justify the means, the two Harvard-affiliated organizations declared in a statement that the Irvine 11 should be commended for forcibly silencing “Oren’s propaganda effort to whitewash Israel’s criminal actions and policies in front of college audiences.”

Jewish Voice for Peace also failed to draw the distinction between exercising one’s own freedom of speech and preventing someone else from doing so, and claimed the verdict was a result of Islamophobia.

More surprising, however, was an editorial that appeared in The Orange County Register criticizing what it felt was the “arbitrary” use by the court of the First Amendment to quash offensive speakers – namely the Muslim students. The editorial wondered if the district attorney would have filed criminal charges against individuals who “had interrupted a campus lecture on chemistry or biophysics.”

Apparently, The Register is unaware that unlike the teaching of chemistry or biophysics, the Israeli-Palestinian conflict is one of the world’s most heatedly debated issues which regularly commands extensive media coverage. The need to carefully protect the right of both sides in the conflict to express their views freely without being unfairly interrupted is all the more pressing precisely for this reason.



Israel’s many detractors are rightly given ample opportunity to freely voice their anti-Israel views on US college campuses without being forcibly silenced. The annual Israeli Apartheid Week is just one example of various Israel-basing fests on campuses across North America.

Organizations such as StandWithUs, the David Project, Hasbara Fellowships, the Israel on Campus Coalition and Masa Israel Journey, along with AIPAC-trained student activists, Hillel-Jewish Agency Israel fellows and others, are taking to the campuses of America to present a different, more accurate picture of Israel while respecting the right of those more critical of Israel to their freedom of speech.

Only through the vigilant protection of a free market of ideas will college students be able to formulate informed opinions on Israel. The Orange County jury and Judge Wilson understand this. Unfortunately, many Americans still don’t.

Trajtenberg and fiscal responsibility

Several activists connected with this summer’s socioeconomic protests have voiced supreme displeasure with the Trajtenberg Committee’s recommendations released Monday.

Some of the criticism was characteristically vague, particularly among the younger activists.

There was much griping about how the Trajtenberg Committee had offered nothing more than “minor adjustments” to the economy’s ills and not the hoped for “revolution,” without specifying what this “revolution” would entail.


Others, such a Prof. Yossi Yonah, a member of Ben-Gurion University’s education department and head of the “alternative team of experts” set up to counterbalance the Trajtenberg Committee, were a bit more specific.

In an interview to Army Radio Monday, Yonah declared that “more far-reaching steps” were in order. The professor of education, fearlessly venturing outside his field of expertise, called to significantly increase the size of the public sector as a percentage of GDP.

In fact, attacks on the Trajtenberg Committee began weeks ago, long before the recommendations were even published, when Prof. Manuel Trajtenberg made it clear his committee would exercise fiscal discipline and would not call for a breach in state budget guidelines.

For Histadrut Labor Federation Chairman Ofer Eini, Trajtenberg’s commitment to fiscal discipline was proof that the committee’s recommendations, whatever they were, would be poorly inadequate. Instead, Eini called on the government to bankroll greater welfare benefits by adding at least NIS 20 billion annually to government expenditures.

Thankfully, Trajtenberg Committee members have ignored irresponsible figures such as Eini, Yonah and others on the economic Left who have failed to internalize the lessons of the Israeli economy’s short history.

Trajtenberg and his fellows are familiar, for instance, with the sort of excessive government spending fueled by a bloated and highly inefficient public sector that, together with other factors, led in 1984 to 450 percent inflation.

No one who knows anything about fiscal policy wants to return to the days when public-sector expenditures made up nearly 60% of GDP, compared to less than 43% today.

Implementation of the Stabilization Plan in July 1985 – which introduced, among other reforms, fiscal restraint – helped reduce inflation and prevent a collapse of the economy.

Trajtenberg and his fellows also recall how in the mid-1990s, an abandonment of fiscal discipline at a time when Israel was absorbing hundreds of thousands of immigrants from the Former Soviet Union led to doubledigit inflation and economic instability.

The severe economic downturn beginning in 2001 led to further fiscal cuts, particularly in welfare benefits. Though it can be argued that in some cases welfare cuts went too far, nevertheless, as a whole it was largely thanks to Israel’s responsible fiscal policies in the first part of the 2000s that helped the Jewish state weather the 2008 economic crisis.

Countries that pursued a less responsible fiscal policy, such as Greece, Spain, Portugal and Ireland, are now endangering the stability and integrity of the entire European Union.

While there is room for a measured reallocation of our limited budgetary resources – perhaps by cutting from our huge defense budget as suggested by the Trajtenberg Committee – we must be vigilant against breaching the fiscal framework.

Finance Minister Yuval Steinitz has set the ambitious goal of ensuring that the 2011 budget deficit does not exceed 3% of GDP, down from 3.7% in 2010. Back in February when the government – in a move that largely catered to populist sentiment – added NIS 1.1b. to the budget in the form of fuel tax cuts, public transport discounts and water tax cuts, Bank of Israel Governor Stanley Fischer was quick to warn the government to stick to its budget deficit goal for 2011.

Activists on the economic Left are correct when they declare that the Trajtenberg Committee’s recommendations are not revolutionary – that is precisely what makes them so laudable.

We do not need a radical revamping of our economic system.

This summer’s socioeconomic protests made a major contribution to Israeli society by bringing to the forefront, perhaps for the first time in such a forceful manner, the importance of socioeconomic issues.

But while there is room for reevaluating how we determine our society’s list of priorities in the form of fiscal budget expenditures, we must also remember economic history’s painful lessons about the consequences of irresponsible spending.

The Trajtenberg Committee certainly has.

Post-UN blues

Where do we go from here? That is the question Israelis and Palestinians who yearn for peace are asking themselves after the showdown at the UN this weekend. And the answer to that question is hardly encouraging, judging from Palestinian Authority President Mahmoud Abbas’s speech.

In outlining the causes for the recent stalemate in peace negotiations, Abbas placed the blame squarely on Israel’s shoulders while ignoring the Netanyahu government’s unprecedented 10-month building freeze during 2010 in Judea and Samaria.

Abbas went on to portray Yasser Arafat as a man of peace, without mentioning the deceased PA president’s rejection of the 2000 Camp David initiative backed by former US president Bill Clinton and former prime minister Ehud Barak.

Nor did Abbas mention Arafat’s collaboration, shortly after his rejection of Camp David, with Hamas and other anti-Semitic terrorist groups in the launching of the suicide bombings, shootings and other assorted lethal violence directed at Israelis that became known as the second intifada.

Finally, the PA president neglected to explain why he has to this day refrained from responding to a peace offer made during negotiations in 2008 with former prime minister Ehud Olmert, which, like Camp David, offered the Palestinians the equivalent of close to 100 percent of the West Bank, after land swaps, and the sharing of Jerusalem as the capital of both a Jewish and Palestinian state.

No less disconcerting – though not particularly surprising, based on PA-sponsored propaganda in the past – was Abbas’s omission during his speech of the Jewish people’s connection with the land of Israel.

Perhaps Abbas cannot be expected to see the building of settlements in Judea and Samaria as the return of the Jewish people, after nearly two millennia of exile and prayerful waiting, to a land resonant with historical, religious and cultural meaning. But at the very the least, he could have mentioned that the Holy Land, in addition to being “the land of Palestine, the land of divine messages, ascension of the Prophet Muhammed, the birthplace of Jesus Christ,” had meaning for Jews as well. But he did not.

During his speech, Abbas also rejected the request put forward by Prime Minister Binyamin Netanyahu that Israel be recognized as the homeland of the Jewish people. Disingenuously, he argued that meeting this demand would “transform the raging conflict in our inflamed region into a religious conflict,” as if it weren’t already.

And though Israel strives, and generally succeeds far better than many countries in the region, including the PA, to protect the rights of minorities, Abbas claimed that recognizing Israel as the homeland of the Jewish people would threaten “the future of a million-and-half Muslim and Christian Palestinians, citizens of Israel.”

Abbas is apparently unperturbed by the double standard inherent in his rejection of recognizing Israel as the homeland of the Jewish people, while at the same time defending the Palestinian demand that any future Palestinian state must, of necessity, be Judenrein.

And Abbas also continues to demand the “right of return,” which, if implemented, would flood pre-1967 Israel with millions of Palestinian refugees from Lebanon, Syria, Jordan and elsewhere in the Palestinian Diaspora, effectively upsetting Israel’s Jewish majority.

These elements in Abbas’s speech, which taken collectively make up the “Palestinian narrative,” present an insurmountable obstacle to reaching a peace agreement.

Palestinian leadership must begin preparing its people for peace with Israel by acknowledging that the Jewish people’s connection to the land of Israel is profound on historical, religious and cultural levels.




Only then will Palestinians bring themselves to recognize Israel’s right to exist in peace as a homeland for the Jewish people, alongside a sovereign Palestinian state. Willingness to compromise on issues, such as the right of return, will follow.

It is, after all, only fair that Palestinian refugees be resettled in Palestine, which would be the 22nd Arab state, and not in Israel, the world’s only Jewish state.

Abbas and the rest of the Palestinian leadership might believe that submitting to the Security Council an application for the admission of Palestine as a full member of the UN brings the Palestinian people one step closer to statehood.

Unfortunately, elements of his speech reveal the extent of the chasm that must still be bridged before peace is finally achieved between Israelis and Palestinians.

Israel is not to blame

There has been a tendency by some to blame the Netanyahu government for Israel’s growing diplomatic difficulties, in particular over the Palestinian statehood bid in the UN. If only the architects of Israeli foreign policy had put forward some sort of peace initiative, these critics claim, the Palestinians would have aborted their campaign to be recognized by the UN as a state along the 1967 lines.

Opposition leader MK Tzipi Livni said in response to US President Barack Obama’s exceptionally pro- Israel speech before the UN General Assembly Wednesday that “[Prime Minister Binyamin] Netanyahu must initiate the peace process, not as a favor to the Palestinians but for our own welfare...Only the renewal of negotiations will block unilateral measures in the UN and prevent Israel’s isolation.”

Meanwhile, in an op-ed that appeared in Thursday’s New York Times, former prime minister Ehud Olmert criticized Netanyahu for “expending all of his political effort to block Mr. Abbas’s bid for statehood” instead of pursuing a two-state solution.

And Shelly Yacimovich, in her victory speech after clinching the Labor leadership vote Wednesday, said that Netanyahu should call for the creation of a Palestinian state alongside Israel. “Don’t let the state be declared unilaterally," said Yacimovich. “It’s in your hands to prevent it.”

In contrast, the US president was careful during his 20-minute speech to avoid placing the blame for the breakdown in negotiations on either side. Instead, Obama called and Israelis and Palestinians to enter into direct negotiations, without mentioning any preconditions.

Apparently, President Obama understands better than our own opposition that the Netanyahu government is not to blame for the absence of peace.

After all, what could Netanyahu conceivably offer the Palestinians that would jump-start talks? Netanyahu already agreed, under American pressure, to an unprecedented 10-month building moratorium in Judea and Samaria – including in consensus settlement blocs such as Ma’aleh Adumim, Efrat and Ariel. But the Palestinians squandered nine of these 10 months, refusing to talk unless the building freeze was expanded to include Jerusalem neighborhoods such as French Hill and Ramat Eshkol, neighborhoods that a majority of Israelis would never give up in a peace deal.

And though Olmert claimed that “the parameters of a peace deal are well known and they have already been put on the table,” he failed to mention that these parameters – which include the creation of a Palestinian state on the territorial equivalent of the pre-1967 lines and the splitting of Jerusalem as the shared capitals of both Israel and a Palestinian state – were already offered in 2000 and 2008 by then-prime ministers Ehud Barak and Olmert, respectively.



Yet Palestinian leaders rejected these offers because they refused to concede the “right of return,” which, if honored, would undermine the Jewish majority by flooding Israel with millions of Palestinian refugees instead of resettling them in a future Palestinian state. In fact, the Palestinian leadership, which refuses to recognize Israel as the national homeland of the Jewish people, has done nothing to prepare its people for peace with Israel. Instead, Palestinian media and political leaders continue to glorify terrorists and foster hopes that the Palestinian people will someday return to Jaffa, Haifa and other places inside Israel.

As we approach Rosh Hashana and Yom Kippur, it is only natural to engage in self-reflection and self-criticism. An integral part of Jewish culture is the acceptance of personal responsibility for one's actions and the need to repent for failures so that they are not repeated. However, in the case of Israeli-Palestinian negotiations, there is little, if any, room for self-recriminations. If peace depended solely on Israel, it would have been attained long ago.

Balancing big business and free markets

Perhaps one of the thorniest obstacles to free-market competition in smaller economies around the world is the rise of a relatively small number of big conglomerates with diverse holdings in both industrial and financial firms that enjoy extraordinary economic clout. The Israeli economy is no exception.

In a 2009 annual report, the Bank of Israel said Israel had the highest concentration of corporate power in the developed world. A scathing parliamentary report from June last year found that 10 large business groups control 30 percent of the market value of publicly-traded companies, while 16 control half the money in the entire country. And the Organization for Economic Cooperation and Development, which last year admitted Israel as a member, said Israel’s level of corporate concentration is problematic.

On Monday a committee appointed by Prime Minister Binyamin Netanyahu, and headed by outgoing Finance Ministry director-general Haim Shani, published its interim recommendations for improving free-market competition.

One of the recommendations is that conglomerates will not be permitted to have very large holdings in industries with annual revenues more than NIS 8 billion, while at the same time controlling shares in financial institutions that manage NIS 50b. or more.

Also, it will be forbidden for a person to be appointed to the boards of directors of both financial and industrial firms. Measures will also be taken against what the OECD called “cascading ownerships, pyramidal structures and cross-holdings” through which large conglomerates enjoy inordinate control in firms where they have minority share holdings.

And unlike previous reports which failed to lead to reforms, the Shani committee’s recommendations – which still might be modified over the next three months as big businesses are given a hearing – have a good chance of being implemented as is. The tycoons will undoubtedly enlist lobbyists, PR firms and influential political insiders to fight the recommendations.

But this summer’s socioeconomic protests, which griped specifically about the sorts of high costs of goods and services caused by Israel’s oligopolies, have provided the ideal social climate to encourage politicians to take up the popular fight.

Huge conglomerates such as Yitzhak Tshuva’s Delek Group, Nochi Dankner’s IDB Holdings, Shari Arison’s Arison group and various firms controlled by Muzi Wertheim and the late Ofer brothers, which combine holdings in both financial institutions such as banks, insurance companies and investment companies with controlling shares in industries such as shipping, telecommunications, real estate development and retail, will face the prospect of divestment for the sake of fairer competition.

Presently, conglomerates with holdings in both industry and financial institutions have easy access to credit – often at the expense of smaller, more worthy businesses. And this credit, extended by banks, insurance companies, pension funds or investment firms, is made up overwhelmingly of the savings of the wider public.

With a relatively small number of businessmen enjoying a large percentage of the outstanding loans, a situation is created in which one mistake can be huge and incredibly costly to many people.

Still, as the prime minister pointed out, big business is by no means the enemy of the Israeli economy. Indeed, entrepreneurship is the driving force behind growth and prosperity that provides jobs and opportunities and technological development.

However, in order to realize the full potential of our society’s many talented individuals, protect the economy from undue risks and provide citizens with affordable goods and services, it is absolutely essential to ensure truly free and fair competition.

Over the past two decades Israel has undergone an amazing transition from an economy dominated by the Histadrut Labor Federation, nationalized industry, state-owned banks and a stifling gauntlet of bureaucracy to a modern, efficient, free market economy.

As part of that transition a small number of large conglomerates have accrued enormous power and indirectly created a number of market failures that need to be fixed.

Let’s hope that the atmosphere created by this summer’s socioeconomic protests will lend a hand to the present government in its push to make the necessary reforms.