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Herzliya Diary

UPDATED: Israel’s central banker delivers a blunt warning to Israeli Arabs and the ultra-Orthodox: Get to work, or the state will be jeopardized

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An ultra-Orthodox man on Jerusalem’s light rail system, August 2011. (Ahmad Gharabli/AFP/Getty Images)

Feb. 2, 2012: Stanley Fischer, the governor of Israel’s Central Bank, delivered a harsh message yesterday to Israel’s ultra-Orthodox and Arab citizens: Stop having so many children and get to work.

OK, Israel’s banker-in-chief didn’t put it quite that way in his keynote speech on the second day of the Herzliya conference, Israel’s premier national-security gathering. Fischer instead called the skyrocketing growth of these two distinct minorities “unsustainable.” He expressed particular concern about the ultra-Orthodox, who don’t work or serve in the army but receive a disproportionate share of government benefits.

While claiming to “very much appreciate our religion and our religious people,” he argued that having so large a group that does not work “cannot continue.” If it does, Fischer warned, “in the long run it’s going to be very difficult in our economy to supply our citizens with a standard of life that keeps improving.”

The numbers are all too well-known to Israelis, but less so abroad, where Israel is known largely as an economic miracle, given its small population and lack of oil and other natural resources. Indeed, most of the economists who spoke at a succession of panels yesterday highlighted aspects of Israel’s impressive economic performance, particularly in light of the global recession. The Jewish state enjoyed a growth rate of 4.8 percent in 2011, with low inflation (2.2 percent).

But Fischer stressed, and others agreed, that the country’s growth—not to mention its social cohesion—would be seriously jeopardized unless the country finds a way to address the challenge posed by these two burgeoning sectors of society.

The numbers he and others cited are truly staggering. In 1980, non-Orthodox Jews constituted 80 percent of the population. Since then, that population had dropped by some 12 percent. By contrast, in 1980 ultra-Orthodox Jews constituted 4 percent of the population; today they account for over 7 percent. While Israeli Arabs made up 15 percent of Israel’s population in 1980, they are over 20 percent today. Only 40 percent of ultra-Orthodox men are employed, while among Arab Israelis, less than a quarter of the women work. Such non-participation rates in the Israeli economy are stunning considering that unemployment in Israel hovers around 5 percent.

The growth of such large ultra-Orthodox and Arab families living off government pensions and other benefits has triggered a sharp rise in poverty in Israel, a situation that Prof. Alex Mintz, the dean of the Lauder School of Government at the Herzliya Interdisciplinary Center, called “intolerable” in his talk. The Israeli government, he said, had to declare a “war on poverty” before the gap between have and have-not Israelis grew even more dramatic.

Fischer and other economists stressed that poverty rates are tied to the growing number of unemployed ultra-Orthodox and Arab-Israelis: The larger the number of children a family has, the more likely it is that the children will be poor. In families where two parents were working, he said, there is little poverty. In families where no one works, poverty rates stand at 80 percent.

How is Israel’s middle class faring? Not great, it turns out.

A recent study by the Finance Ministry published by Haaretz found that wage mobility has been declining for decades and fell particularly sharply over the past 10 years. The study’s authors, Galit Ben Naim and Alex Belinsky, found that Israel had relatively little socioeconomic mobility compared to other Western countries. Tracking salary data for over a million Israelis between 2003 and 2009, the study showed that 65 percent of the people in the bottom 10 percent on average in a given year were likely to remain there in the following year. It also found that overall mobility decreased during the 6-year period they studied. While 49 percent of those in the lowest economic rung remained there a year later in 2004, 56 percent of those in that same category in 2008 remained there in 2009.

Dahlia Moore, dean of the department of behavioral science at the College of Management Academic Studies in Rishon LeZion, called this the “sticky floor.” But there’s apparently a sticky ceiling in Israel as well: Some 86 percent of the top 10 percent of earners were likely to stay there the next year. The lack of downward mobility was even higher for the top 1 percent and the top 0.1 percent. These lack of mobility rates are far higher than those of the United States and the European Union.

Such inequalities helped trigger the middle-class protests last summer in Tel Aviv and around the country—Israel’s own version of “Occupy Wall Street.” While the demonstrators did not openly blame the ultra-Orthodox for the growing financial pressures and rising housing prices they face, resentment about what secular Israelis consider a “leech” class, as one young student at the conference called them, runs deep.

The solution to such growing poverty and income inequality depends on “changes in behavior,” Fischer told the conference. Other experts spelled out what he implied: having smaller families, joining the army, and getting jobs. Some 6,000 ultra-Orthodox Israelis are now in college, Fischer said, a good indication that they might work after graduating. He added that there are already signs that reduced government welfare payments were having a positive impact on Arab-Israeli families: More Arab men are now starting their own businesses or seeking work.

Fischer’s tough warning is consistent with his blunt style. Greatly admired within the business community for his creative, but cautious, stewardship of the central bank, he is credited with having helped Israel avoid the financial bubbles that have swamped Europe in recent years by keeping credit tight and buying up billions of dollars in foreign currency reserves to ensure that, in a time of financial stress, Israel would not run short of hard currency reserves. Prime Minister Benjamin Netanyahu’s government has run a responsible fiscal policy, he has said. Such policies may serve Israel well in an unpredictable region where political earthquakes can easily trigger economic and financial upheavals.


Jan. 31, 2012: The hottest ticket in town right now is the revival of Cabaret, the iconic musical set in 1931 Berlin about a star-crossed romance between Sally Bowles, a young nightclub singer at the Kit Kat Klub, and a naïve young American writer named Cliff Bradshaw. While the play was staged in Israel over 20 years ago, this is the first original Israeli production of the Broadway classic. Based on euphoric reviews and word-of-mouth in a country that hates the sound of silence, the run at Tel Aviv’s Cameri Theatre is sold out for the next three months.

This being Israel, the revival focuses less on the ill-fated romance between Bowles and Bradshaw, and more on the equally doomed Weimar Republic and fascism’s rise in what had been the most liberal and cultured city in Europe. This production has been updated with black-and-white photos of Berlin before and after the war and video sequences of German Jews in coats carrying suitcases as they board the trains to Auschwitz.

The terror of this Cabaret is how ordinary and inevitable that transformation seems—and how its major characters try to avoid seeing the implications of what is so obvious to the audience. This was, of course, the director’s intent. “I wanted to provide a political and moral lesson about the dangers of living in a bubble,” director Omri Nitzan told me over the weekend.

“I’m not by any means equating Israel of 2012 with Germany of the 1930s,” he added quickly. “But there is a strong lesson here.”

“Inside the Kit Kat Klub, life is beautiful, the performers are beautiful,” he said. “But it was all theater. The ugly reality of Germany eventually could not be denied. In Tel Aviv, too, life seems normal—sensual, dynamic, and liberal. But it’s not normal. Only a short distance away is the occupation and Israel’s political reality.”

“Israelis should wake up and be aware of the situation that threats to our life and democracy are all around us,” Nitzan said. “And that it is dangerous to do nothing, to prefer to live in illusion.”


That same sense of profound uncertainty—if not foreboding—pervades the 12th annual Herzliya Conference, which began yesterday in a tony suburb of Tel Aviv. Usually a buoyant assembly of Israel’s best national-security experts, globe-trotting defense analysts, talented pro-Israeli politicians, and policy wonks, this year’s almost weeklong conference opened last night with intense, worried discussions about the country’s future and the many challenges facing the region.

Humility is not a widely admired trait in this crowd. But speaker after speaker at the meeting’s early sessions offered long lists of unknowns. They also revisited a litany of predictions about the Arab Spring offered at last year’s conference that turned out to be dead wrong.

The revolution in Egypt—the first Arab state to have made peace with Israel—was greeted with some euphoria at last year’s conference. Many experts claimed that freedom and democracy were finally coming the Arab world. While some conference participants—many of them American—still claim that, in the long run, Arabs and Israelis will benefit from the political earthquake on the Nile and in other Arab capitals, the majority this year have so far expressed skepticism.

Many of the experts noted that almost no one in Israel had predicted the dramatic upheavals that have transformed the political map of the Middle East. Egypt alone is stunning to consider: A truly democratic election resulted in Islamists garnering over 75 percent of the vote. The September raid on the Israeli embassy in Cairo, the Jewish state’s first diplomatic presence in an Arab land, led to the temporary withdrawal of Israel’s ambassador. (A new envoy has recently returned to Cairo, but with a heavy security presence and diminished political expectations.) The Sinai, where tourists once flocked for vacation, has become a dangerous, crime-infested “no-go” zone for Israelis, as is most of the country. The pipeline providing Egyptian gas to Jordan and Israel has been bombed at least 10 times. The Jordanian government announced this week that due to the disruptions, the government is raising gas prices by 9 percent, another hardship on its already hard-pressed citizens.

Martin Kramer, a senior fellow at the Shalem Center in Israel, listed in an interview the dramatic changes that had taken place since the 2011 conference. Last January, he noted, Hosni Mubarak was still the embattled president of Egypt. Bashar Assad of Syria was telling the Wall Street Journal that he had nothing to worry about. Libya was still intact, and “the London School of Economics was still proud to have Saif al-Islam Gadhafi as an alumnus.”


Amidst tremendous regional uncertainty, Israel has begun to address at least one source of its military insecurity: It has deployed its “Iron Dome” air-defense system to counter the shorter-range rockets and artillery that Hamas has been accumulating in Gaza and that Hezbollah has stored by the thousands in northern Lebanon.

The day before the conference opened, some participants were invited to tour the anti-missile and rocket defenses—a source of enormous national pride, but still highly sensitive.

The tour began not far from Ashkelon, a city of about 110,000 in the Negev, which the anti-aircraft system is supposed to protect. Developed by Rafael Advanced Defense Systems, the system is mobile and is designed to intercept and destroy short-range threats up to 70 kilometers no matter the weather. Initially deployed last March, the system reportedly intercepted a Grad rocket launched from Gaza for the first time last April. Late last year, the Jerusalem Post reported that the system had succeeded in bringing down three quarters of rockets launched by Hamas from Gaza.

Both the command and control center—the heart of the system, which picks up signals from a fired rocket or heavy artillery—and the launchers it commands are mobile and can be moved on short notice. The wireless command and control center we visited was in the midst of a carrot and cabbage field a few miles from Gaza. While barking dogs protected the adjacent fields, Iron Dome was protecting Ashkelon’s citizens. Scanning the airwaves for signals of rocket fire, the system is monitored by soldiers who watch computer screens inside the command and control center. The command center’s only distinguishing feature is a tall antenna.

The launcher, which resembles a tilted dump truck, was parked next to a tree in the midst of a wheat field. Even closer to the Gaza border, the deceptively innocent-looking interceptors can hit incoming targets at least 300 meters above ground—high enough to avoid hitting civilians on the ground with falling debris. (It only takes between 8 and 9 seconds for a rocket from Gaza to reach the southern area of the city, and between 20 and 30 seconds to strike northern Ashkelon.)

The Iron Dome system will be even more effective when it is integrated with the rest of Israel’s air defense system: the Patriots, which can destroy rockets with a range of up to 200 kilometers; the David Sling, to counter targets with a range of 350 kilometers; and the Arrow, which destroys rockets and missiles with a range of up to 1,000 kilometers.

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Joachim says:

Maybe the original Cabaret story should have been redone to focus on the ill-fated romance of Saif ul-Islam and Orly Weinerman.

1931 was also the year that Kreditanstalt Bank failed in Vienna. Its failure turned central Europe’s recession into a very painful depression and helped the Nazis win a plurality of votes in national elections in Germany in 1932.

These days, we have to worry about the Greek debt crisis and what it might do to banks worldwide and to the world economy. It’s Greece’s debt, but the world’s problem.

As I was reading the article, I thought to myself, how long will it be before the Haredi morality police start closing down musicals such as “Cabaret”? These days, Haredi teenage gangs beat up on 8 year old boys and insult 8 year old girls. In Israel, it appears that tomorrow belongs to them. The paper Haaretz is not long for this world, at least not in its current form.

esthermiriam says:

Tablet readers may appreciate this very informative/intelligent review of the production:

Thank you, Judith, for making these details of Israel’s defenses public.
Let us hope that Israel has sequestered a few more essential details of its arsenal for its own survival.

Dubala says:

Miller missed the Cabaret analogy. The danger is in Israel’s domestic move toward fascism.

“The numbers he and others cited are truly staggering….By contrast, in 1980 ultra-Orthodox Jews constituted 4 percent of the population; today they account for over 7 percent”

a “staggering” 3%..

Stephan Pickering/Chofetz Chay says:

Shalom & Erev tov…the refusal of both population blocs to participate in Yisra’eli life, and to curtail their breeding, is anti-Torah. They know it. I know it. You know it. It is not just being a ‘leech’ class (which they are), but placing themselves in profound danger. They are not being asked to betray their often fascist Charedi anti-Torah paradigms…but to assist in sustaining their own country. If they don’t like Eretz Yisra’el, why don’t they migrate elsewhere. haKodesh Barukh Hu gave Yisra’el to all Jews, not just those who betray the Torah, Talmud, and Midrash. STEPHAN PICKERING / Chofetz Chayim benAvraham

Shalom Freedman says:

The warning is not exactly couched in the language that is apt to get the ‘warned’ move. And this is because a good share of those warned couldn’t care less if ‘the Zionist entity’ God forbid, disappeared. Both a good share of Israeli ( Palestinian to their own conception) Arabs , and ultra- Orthodox Jews regard the state as their enemy.
The real object of the warning has to be the political authorities. They must through economic means move more of these two populations into the workplace. It would also be wonderful if ultra- Orthodox Jews could understand that their own survival in Israel depends on their contributing to the Jewish state in a positive way.

It is offensive that you use ambiguous terms in America that confuse the public. Seriously, the special terms used under color of law include employed and unemployed. Clear the ambiguity by using semantically correct words and not special terms.

In the United States is quite ambiguous since the Supreme Court confirms that term has three separate and apart meanings that I happily supply.

The term “United States” may be used in any one of several senses. [1] It may be merely the name of a sovereign* occupying the position analogous to that of other sovereigns in the family of nations. [2] It may designate the territory over which the sovereignty of the United States** extends, or [3] it may be the collective name of the states*** which are united by and under the Constitution. Hooven & Allison Co. v. Evatt, 324 U.S. 652 (1945)

So now there is now ambiguity, to which do you refer when you say “the United States”?

Since by definition “employed” means one who works in a “trade or business” (licensed in accordance with the TRADING WITH THE ENEMY ACT) within the United States** that is limited to the District of Columbia when such construction is necessary for prosecution. Yes, that Act declares war against all American States Citizens who do not want to be federal “citizens of the United States” of the corporation called the United States**.

Not to mention that the definition of a “citizen of the United States” is found at 26CFR31.3121(e)-1. The term “citizen of the United States” includes a citizen of the Commonwealth of Puerto Rico or the Virgin Islands, and, effective January 1, 1961, a citizen of Guam or American Samoa.

Need I continue? Would you like a copy of the IRS papers of incorpoartion? It’s really called THE INTERNAL REVENUE TAX AND AUDIT SERVICE, INC.

Well gotta go for now.

“Get to work or the state will be jeopardized.”

In other words: black is beautiful, tan is grand, but white is the color of the big boss man.

“Good fences make good neighbors”

Thank you Stanley Fisher for adding fuel to the anti Haredi fire.
Who says Hareidim don’t work. Don’t tell me that raising eight plus children (average Haredi family size) isn’t working!
Lets face it. Like it or not, the Haredim are keeping the Jewish nation afloat while the rest of Jewry is content to reproduce below sustainability levels.
Instead of pouring millions into “Birthright” why not give grants to haredi families so that can provide their kids with proper food, medical care, dental care etc. Lets get real and acknowledge their contribution as the first line of defense in Israel’s demographic war–a population corps. The government could start by reviving the kitbat yeladim (grant to families) which Bibi slashed so drastically during his first round as PM.

Miller as usual missed everything.

The narrative never changes…

Wow, it seems most of the commenters on this board really missed the message. Israel as we know it is changing dramatically. And yes, doubling the Haredi population from 4% to 7% is dramatic – it’s not 3%, it almost 170%. And no, they don’t work. Raising children who then raise more children while no one produces anything of societal value or contributes back to the state isn’t working – its leaching. Fischer is doing his job, and doing it well.

One Jew’s teach is another Jew’s leech…is that what you’re telling us David?

Eloquent as always David eloquent as always…I was looking for the content but couldn’t find it.

David is right and so is Stanley Fischer. Ronald Reagan demonized the welfare queens in the US back in 1980. But Republicans these days have no problem falling all over each other expressing their love for Israel. Whatever happened to ending welfare as we know it? Young secular Jews who see no economic future in Israel will try to move abroad. In recent years, thousands have moved to Germany.

So did Ed Kock for that matter. The 80’s went from nifty 50’s to where we are now which is nitty gritty.

And sittin’ pretty.

Bill Pearlman says:

Off your medication today Jules? Your even more of an asshole then usual

Have you finished smoking your hash bar Bill because if you are others would like a hit.

David – the haredi used to work and are now going back to work. At the end, the majority will integrate in the Israeli society (many already are). More and more serve in the army, study at universities, and get a job.
The change is here, going faster than anticipated. The media hysteria is just hiding it but the reality is stronger than all the spins.

Jayman says:

Arab birthrates have dropped to 3.3 children, and continue to drop. Jewish birthrates have risen to 2.9 and are rising. It won’t be long before the Arab birthrate dips below the Jewish one, and this is because Arabs are receiving more education and are desiring better material prosperity, which does not go hand in hand with having many children. It also puts an end to all fears of the Arabs outbreeding the Jews. The high Jewish birthrate cannot be explained by the ultra-Orthodox alone, because the ultra-Orthodox birthrate has actually dropped from 7.5 to 6.5. The higher Jewish birthrate is due to secular women having more children.

Barry Hirschfeld says:

Nu, so I’m Charadei (“Ultra-Orthodox” to the masses), worked for more than 13 years for the IDF in an officer’s slot in a (classified) office marked “Out of bounds to all ranks” (in Hebrew of course), have a PhD in engineering – YET – have not found work in my fields (algorithms, programming, applied math) for years now. So I’m 72, so what? What are Fischer et al doing about age discrimination? You’re a bunch of hypocrites, calling me a “leech” but not letting anyone over 67 register to find work at the Unemployment Office.


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Herzliya Diary

UPDATED: Israel’s central banker delivers a blunt warning to Israeli Arabs and the ultra-Orthodox: Get to work, or the state will be jeopardized