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I just got back to Washington after living in Israel for the past month. By God’s grace, Lynn and our boys were able to join me for the past two weeks. Together, we worked on projects for The Joshua Fund, delivering packages of food and other essential household goods to poor and needy Israeli Jews, visiting with needy Israelis in their apartments, packing pallets of food and supplies in TJF’s warehouse, helping fix up and paint a bomb shelter, and more. It was a wonderful and moving time — especially for our kids — as we got to see up-close-and-personal just how hard it is for so many Israelis to make ends meet. It was very different side of Israel than most tourists get to see, and I wanted to share some observations with you.
In many ways, modern Israel is a conundrum:
- On the one hand, Israel’s macro economy is booming, especially compared to the U.S. Despite wars and rumors of wars and all kinds of regional instability, Israel’s increasingly sophisticated, high-tech and export-driven economy is growing faster than most other countries in the industrialized Western world. What’s more, unemployment in Israel is actually at an all-time low right now. (see stats below) That’s the good news.
- On the other hand, prices in Israel for gasoline, apartments, even cottage cheese and other food staples are high and soaring higher, and many lower- and middle-income Israelis are becoming so exasperated that they are literally taking to the streets in protest government policies that are compounding the problem. This is the bad news. For the weeks we were there, we saw protests growing in Tel Aviv, Haifa, Jerusalem and elsewhere. Young people are setting up “tent cities” to to show their frustration with an economic system that is leaving them behind and actually causing many to slip into poverty. Doctors are on strike to protest low wages in Israel’s nationalized health care system. And last Saturday — the day we flew back to the U.S. — an estimated 50,000 Israelis held a demonstration in Tel Aviv, while tens of thousands more Israelis held demonstrations in other parts of the country.
Why? One of serious problems is soaring apartment prices. Here’s short version: there’s not enough housing supply to meet Israel’s growing demand. The Israeli government owns about 93% of the land. For a variety of reasons (most originating in decades of socialist policies from the founding of the Jewish state), the government makes it extremely cumbersome and expensive for developers to purchase/lease land and then plan and build new single family homes and/or apartment complexes. Thus, as Israel’s population steadily grows — naturally, and from “aliya’ (Jewish immigration into the country) — the number of new homes and apartments coming onto the market simply isn’t keeping pace. As a result, apartment rental prices in some areas of Israel have skyrocketed by some 35% to 40% in just the past few years. Purchase prices have shot up, too. We visited families living in tiny apartments with two or three bedrooms that would cost between $600,000 to $1 million to buy. Few Israelis could possibly afford that, meaning that many young people and young couples are simply priced out of the market.
At the same time, as I wrote about on The Joshua Fund website in March, food prices in Israel are also skyrocketing:
- Canola oil prices are up 23%
- Sugar prices are up 40%
- Flour/Semolina is up 19%
- Buckwheat is up 106%
- Jam is up 15%
- Tuna is up 3.3%
In this morning’s Wall Street Journal, Israel’s leading economic reform expert Daniel Doron writes about what is becoming known as the “cottage-cheese rebellion.” Excerpts from his must-read article:
- “The cottage-cheese rebellion started after a major business publication ran a series of features comparing food prices in Israel and abroad. People realized that while salaries in Israel are about half those in America, prices of consumer goods and services are about double….Izhak Alrov, a member of the ultra-orthodox community of Bnei Brak and a cantor by avocation, was outraged by what he experienced trying to survive on a modest salary. In June, the 25-year-old opened a Facebook page and called for a consumer boycott of one staple—cottage cheese. The response was electrifying. Over 100,000 long-suffering consumers soon joined the boycott. Stores reported a steep decline in cottage-cheese sales.”
- “The cottage-cheese rebellion is transcending its immediate cause, the high cost of food. It is spreading to other goods and services, especially housing, and it has given voice to a feeling of economic helplessness.”
- “Exorbitant profits, fees and taxes make even the cheapest imported automobiles cost between $35,000-$40,000.”
- “A gallon of gas costs almost $10.”
- “A small apartment can cost the average Israeli worker 12 years in annual salary.”
- “Water and electricity costs are inordinately high”
- “Poor government-run education leads many families to spend a mint on private tuition.”
The Netanyahu government is responding slowly. They recently announced plans to bring some 50,000 new apartments onto the market by next year, but they must do more to implement free market reforms and allow the private sector to dramatically expand the housing supply. They also need to reduce taxes and reduce regulations to liberalize the economy and curb inflation. In the meantime, one-in-four Israeli citizens live below the poverty level, as do one-in-three Israeli children. The Joshua Fund is doing what we can to care for the poor and needy, because the Bible tells us to do so. We’d love your prayers, and your help. May the Lord bless you as you bless Israel and her neighbors in the name of Jesus.
AT-A-GLA NCE: THE U.S. ECONOMY VERSUS ISRAEL’S ECONOMY
- U.S. unemployment rate in May 2011: 9.1%
- Israel’s unemployment rate in May 2011: 5.7% — an all-time low for Israel
- U.S. economic growth in 2nd quarter of 2011: a paltry 1.3% (note: in the first quarter, the U.S. economy grew a mere 0.4%)
- Israel’s economic growth in the 2nd quarter of 2011: a robust 5.4%
- U.S. economic growth in 2010: only 2.8%
- Israeli economic growth in 2010: 4.5%
- Context: the average growth rate for OECD countries in 2010 was only 2.7%