When Israeli Prime Minister Binyamin Netanyahu launched his aerial offensive against Palestine’s Gaza Strip territory on November 14, he justified it as a defensive and retaliatory measure directed against rocket attacks originating in Gaza, despite the fact that not a single Israeli had been killed by such a rocket attack for more than a year, and only two had been killed by rockets since the beginning of 2010.

This contradiction raises the question of the true motivation for what Israel called “Operation Pillar of Cloud.” One possibility is what scholars of International Relations call “diversionary foreign policy,” which is a government’s use of war to increase its popularity and distract the public from its serious failings on domestic issues like economic prosperity. In fact, Israel’s economic woes provoked massive social protests against Netanyahu’s government during summer 2011 and Netanyahu has called early legislative elections for January 22, 2013.

Now, the highly respected Taub Center for Social Policy Studies in Israel has released its annual State of the Nation Report for 2011-2012, which reaches the bleak conclusion that Israel is losing ground relative to other developed nations: “Though it has been rising in absolute terms during the past several decades, Israel’s standard of living has been falling further and further behind, in relative terms, the living standards in the leading western countries.”

The report details several structural problems of the Israeli economy, including its lagging labor productivity, which is in the lower rank of OECD countries, just behind crisis-ridden Greece; growing  employment gaps between Israel and leading western countries; and high interest payments on its debt, which last year were higher than the country’s entire education budget.

Addressing the July 2011 social protests, the report points to what it calls a “collapse in the relative economic standing of young Israeli families,” a phenomenon clearly related to significant salary declines\, a growing share of 25 to 34-year-olds living with their parents, and a substantial drop in home ownership rates among the young middle and upper classes.

According to Taub Center Director Dan Ben-David, “Last summer’s protests represent only the tip of the iceberg when it comes to challenges faced by Israel in the realms of labor, productivity, education and income gaps. Without a change in national priorities, Israel will remain on trajectories that are not sustainable over the long-term.”

Confirming the peril to Netanyahu, Labor party leader Shelly Yacimovich, who hopes to replace him in January, called the report a “serious scientific indictment” of Netanyahu’s economic policy. “Beyond the fact that it emphasizes serious and well-known problems—social inequality, unfair taxation and failed privatization—we are now witnessing the fact that the future is now in jeopardy…If the youth were holding on to anything, it was their hope, and this morning that too has vanished, as long as Netanyahu continues to govern.”

Whether Prime Minister Netanyahu’s foray into diversionary foreign policy is successful will not be finally determined until the ballots are counted in January. For the time being, however, it has surely helped him: a Haaretz-Dialog poll released on November 28 showed Netanyahu’s right-wing coalition retaining its majority in the Knesset.

-Matt Bewig

To Learn More:

“Israel Falling behind Western Living Standards” (by Danielle Ziri, Jerusalem Post)

State of the Nation Report – Society, Economy and Policy 2011-2012 (by Dan Ben-David, Taub Center)

One Israeli Soldier Equals More Than 1,000 Hamas Fighters (by David Wallechinsky and Noel Brinkerhoff, AllGov)