It’s the economy, stupid

Op-ed: So why are Israelis happy? Because our economic situation is excellent

Sever Plocker|Published: 10.05.11 , 10:05

According to polls published by Yedioth Ahronoth on the eve of Rosh Hashana, Israelis are happy. The rate of people satisfied with their lives in Israel is breaking records. Meanwhile, according to polls published recently in the United States, Americans are miserable and dissatisfied by their personal situation and the direction taken by their country.

Foreign media outlets came up with complex explanations for the Israeli happiness, which seems to be incommensurate with the geopolitical siege, with the rift in our ties vis-à-vis the Palestinians, and with our social protest. Please allow me to present my own, rather simple explanation: The vast majority of Israelis are happy because they are doing well economically. The Americans are crying because they’re not doing well.

In September, two income surveys were published, one by the Central Bureau of Statistics in Jerusalem and the other by its Washington counterpart. The surveys provide illuminating figures about the economic situation of an average (median) family in Israel and in the US. The comparison is amazing: While the real income of an average American family did not rise at all since 1997, the real net income of an average Israeli family rose by 28%.

Moreover, during the financial crisis of 2007-2010, the real income of a typical American family declined by 6.5%. On the other hand, the real income of a typical Israeli family in the same period rose by 3.5%.

You’re providing us with average or median figures, but what about inequality? Some readers may ask, and rightfully so. Here is the answer: Since 1997, the inequality index (Gini Index) rose by 3% in America. In Israel, during the same period, inequality decreased by 3%. It is not market forces that made the relative situation of our poor worse, but rather, government policy.

Israeli capitalism is better

Unlike us, the Americans live under the dark shadow of unemployment: In the past four years, some 10 million Americans lost their jobs. During the same period, some 250,000 Israelis joined the workforce. For the first time in history, Israel’s employment rate is now higher than America’s. Some 72% of Israelis aged 25 to 64 are working, compared to 71.5% in the same age group in America. A decade ago, it was the opposite: Only 67% of Israelis worked, compared to 77.5% of Americans.

And what about the cost of living? Some readers may ask. Here is the answer: In the past year, the consumer price index in Israel rose by 3.4%, compared to 3.8% in the US. The food price index rose by 4.2% here, compared to 6% in America. In the past five years, the inflation rate in Israel was a little higher than in America – 11% there, compared to 15% here. This is the price we paid for full employment and rapid growth.

The statistical figures reflect reality: The Americans were pushed back a whole generation. Even if the recession there suddenly ends, at least a decade will pass before unemployment rates decline to the level defined as full employment and until an average American family can pay off its debt and improve its standard of living.

Super-competitive American capitalism, which so many people wanted and still want to install and promote in Israel, failed in the final analysis. Israeli capitalism, with all its drawbacks, is better than America’s version. The reckless American-style competition, as it turned out, has negative implications not only for equality, but also for growth and employment.

So there is work, inflation is low, and the standard of living is rising – here are good reasons for non-poor Israelis (that is, not the ultra-Orthodox and not the Arabs) to be happy. They are so happy that they are able to repress the occupation and the diplomatic isolation round us.

Yet perhaps this is not so: Maybe just like Freud noted, the repressed existential-political distress erupts in an unexpected channel of socioeconomic protest. People fear for the Jewish State’s future, but hit the streets to protest against cottage cheese prices.