The Political Economy of Israel’s Occupation


Paul Jay: So, in talking to people in Israel, one thing I hear constantly is the fight here is about national identity, it’s about the defense of the Jewish state.  I don’t hear very much about economics of Israel or the economics of occupation.  So how does national identity relate to the economics here?

Shir Hever: Well, the economic reality of Israel, of course, plays a part in every aspect of Israel’s existence — in politics, in society, and, of course, also in identity issues as well.  The occupation of the Palestinian territories defines Israel’s economy in a large way.  About two-thirds of Israel’s history, it has been an occupying power, controlling Palestinian territories.  But even before that occupation, Israel had created a very particular system of economic control which is designed to promote the idea of a Jewish state.  The Jewish state is not merely a cultural idea; it’s not merely a symbolic idea; it’s a material reality which is designed to redistribute wealth in order to draw as many Jews as possible to this area and to maintain a sustainable control of the Jewish population over a piece of land which is by nature bi-national.

Paul Jay: Now, in terms of the Israeli economy, what percentile at the top controls the majority of the Israeli economy in terms of ownership?

Shir Hever: Israel is very centralized in terms of capital, far more than most developed economies in the world.  About 18 families in Israel control roughly 60 percent of the equity value of all companies in Israel.  So it’s concentrated in the hands of 18 families.  Of course, there are other rich people in Israel who control some more of that other 40 percent.

Paul Jay: So what are we talking about?  What kind of things do they control, in terms of what makes up the bulk of the Israeli economy and the ownership?

Shir Hever: The Israeli economy has a very strong banking sector and financial sector, which also includes insurance companies, so that’s a very big part of the Israeli economy.  But Israel is also one of the world’s biggest exporters of diamonds, Israel is one of the world’s biggest exporters of chemical fertilizer, and there are a lot of high tech industries.  Much of that high-tech industry actually ties with a very large and very famous industry in Israel, which is the arms trade, the arms industry.  A lot of the high-tech development in Israel is actually for what is known as homeland security technology.  And so a lot of companies, especially companies set up by former military officers, specialize in developing homeland security products designed to track individuals and to help governments or corporations — .

Paul Jay: Which we know have been sold in the past to South Africa, to Colombia, to Honduras.

Shir Hever: Yeah.  Well, until the year 2000, Israel was about the tenth biggest arms exporter in the world, but the fourth biggest arms exporter to the developing world, because Israel was willing to sell weapons to clients, to customers which other countries were reluctant to sell to, such as South Africa during the apartheid and so on.  But after September 11, after the attacks, there was a famous quote by Benjamin Netanyahu, who is currently Israel’s prime minister.  He said these attacks are good for Israel; they show the world that Israel fighting terrorism — or fighting Islam, basically — is a good thing.

Paul Jay: So these 18 families, we’re talking families that are all billionaires, then, in terms of — amongst the families — the wealth that’s been accumulated.  In terms of the size of the fortunes on a global scale, are they significant fortunes?

Shir Hever: Well, they are significant in those sectors.  In the diamond sector and the weapons sector and in the fertilizer sector Israel is a global player.  In the high-tech sector not so much, but definitely in the homeland security sector.

Paul Jay: So, then, these families, in terms of the Israeli politics, political parties, and the various governments that come and go, are the families split?  Or are they involved in all the parties?

Shir Hever: Well, all the Zionist parties in Israel — starting from the so-called Zionist left or the liberal parties and all the way to the extreme right-wing, almost fascist parties — are actually almost indistinguishable from each other.  And the controlling, wealthy families know that.  They contribute about equally to the centrist parties, or the so-called centrist parties, because they know that it doesn’t really matter whether it’s going to be Likud or Labor or Kadima.  These parties have the same agenda, the same strategy, and the same platform.

Paul Jay: Now, to what extent does the struggle with the Palestinians take attention off the 18 families?  Or how visible are the 18 families in terms of popular perception?

Shir Hever: Well, they are visible. I think people know to a certain extent that there are these people who own the companies that they pay money to every day.  You know that your cellular phone comes from a very large and powerful company — you see their signs every day.  And so they do know about these companies.  Many people also know even the names of the owners of these companies.  But when you want to tie it to the struggle with the Palestinians, then, of course, that plays a role through different ways.  You hinted that perhaps the struggle with the Palestinians helped to draw attention from the centralized capital.  In the year 2002, the chairman of the Manufacturers Association in Israel said that because of the struggle with the Palestinians, because of the intifada, Israelis have to learn that they cannot expect an increase in the minimum wage, or perhaps even they should expect a decrease in the minimum wage, meaning that the security constraints are used as a justification to stifle social struggle.

Paul Jay: So 18 families, you said, own 60 percent of capitalization in Israel?

Shir Hever: Yeah.

Paul Jay: Now, in terms of general social programs, social safety net, how much redistribution takes place amongst Israeli citizens?

Shir Hever: Well, Israel is the most unequal country in the developed world, second only to the United States.  In the year 2009, Israel bypassed Mexico for the first time, as more unequal than Mexico, making Israel indeed one of the most unequal countries in the world.  And that is because, while most countries in the developed world spend some of their budgets in redistributive efforts such as health care, unemployment benefits, infrastructure, creating jobs, that sort of thing, Israel actually spends about 75 percent less, in ratio comparisons with most of these countries, with OECD countries, and that is because Israel spends so much on security, on the military.

Paul Jay: Well, how much is it because they spend so much on security, and how much is it because of the accumulation of the 18 families?  I guess, let me ask the question the other way: how taxed are the 18 families?

Shir Hever: Well, they are slightly less taxed than in most developed countries, mostly because Israel created a system of loopholes which allow, especially, wealthy Jewish people from around the world to bring their property to Israel with no questions asked.  So there have been many cases of very wealthy Jews coming to Israel with their property, saying they’re doing a Zionist act, but in fact there were standing lawsuits against them in other countries.  Israel will not extradite them. . . .  And that was one of the reasons that Israel was able to draw a lot of capital in the past two decades.

Paul Jay: So if great concentration of ownership and wealth in the top tier, not that much taxation, not very much social safety net — so to what extent is there a social movement demanding more economic justice for Israelis?

Shir Hever: Well, Israel historically had a very strong social movement and was considered an almost socialist state.  In 1965 there was a survey of all countries in the world in terms of equality, and Israel was ranked between the Netherlands and Finland — one of the most equal countries in the world.  Today, as I said before, Israel is one of the most unequal countries in the world.  So something did happen.

Paul Jay: Okay.  So in the next segment of our interview let’s find out what happened.

Shir Hever is an economist at the Alternative Information Center and the author of The Political Economy of Israel’s Occupation (Pluto Press, August 2010).  This video was released by The Real News on 6 July 2010.  The text above is an edited partial transcript of the interview.

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