Feisty Unions Drag Feet on Road to Free Market for Israelis

Until this July, there was only one phone company, Bezek, for all of Israel. A call to the United States cost more than a dollar a minute.

Then, a funny thing happened to Israeli phone bills. The telecommunications industry was opened to competition, suddenly there were three long-distance providers instead of one, and the price of the same call dropped to about 21 cents a minute.

In fact, Bezek had already come a long way in improving its services. As recently as the early 1990s, anyone trying to use a pay phone had to insert a clunky, pre-purchased "asimon" into an archaic phone that would end the call when the token ran out - with no warning to deposit more - or often for no reason at all.

Aside from the vast improvement in services and leap toward next-generation technology, long-distance phone bills have dropped about 70 percent - suggesting that nothing drives progress like choice and competition.

Prime Minister Benjamin Netanyahu believes as much. Concepts in his manifesto for next year's budget read like a page out of a textbook on capitalism: "Goods and services that compete with each other tend over time to have a lower increase in price than non-competing goods."

But there are those in Israel who contest such basic concepts, and at times they appear to be more popular than the ever-troubled prime minister.

Mr. Netanyahu's ambitions to introduce sweeping economic liberalization plans, the one thing on his agenda that pleased foreign audiences when he was elected in May 1996, keep running up against the powerful, well-organized labor federation, that disputes the notion that a freer market is a better one.

Leading that camp is Amir Peretz, chairman of the Histadrut, the umbrella organization uniting all state and some private sector workers across the country.

Within an hour, he crows resolutely, he can bring the Israeli economy to its knees. And he wields that tool often, calling wildcat, partial, and sometimes general strikes, like yesterday's, that close down virtually every bank, bus, industry, and school to protest Netanyahu's plans to privatize government companies and scale back on spending and entitlements. (Story, Page 1.)

After Mr. Peretz tried to prevent the partial purchase of Bezek by Merrill Lynch this summer, only a court injunction ended a strike in which phone company employees stopped maintaining control equipment, cut phone service at Israel's main airport and its stock exchange, and left local and international callers out of touch.

"There is no connection between the prices of calls and whether Bezek has competition or is private," says Peretz, sporting his usual tieless, short-sleeved work shirt, shock of black curls, and mustache of Stalinesque proportions.

'The big lie'

"This is the big lie the government uses against us," Peretz says. "No one has ever proved any connection between the price of a component and whether it's made in the government sector or the private sector. I don't want the state of Israel to be controlled by the private sector. It's just ideology to say that it must be."

Though some here have dubbed Peretz the "last socialist," a title he wears with pride, he says he is a practical man. He doesn't mind if some government properties are sold, as long as all workers have a fair chance to buy shares. "If you can prove to me that the distribution of capital will be equal, it doesn't matter to me if it is controlled by private people," he says.

His ideas about equal wealth and Marxist alienation are not considered realistic topics of conversation in most Western countries today, including Israel.

But the Histadrut has been putting up a feisty battle against change, perhaps through a combination of his ability to rally sympathizers, the popularity of Israel's strong basket of social-welfare benefits, and uncertainty about the political and economic direction of the nation.

"Marx took us too far in one direction and Adam Smith took us too far in another. Now we need to meet somewhere in the middle," Peretz says.

Neighbors also a concern

He says there are other reasons not to sell off government assets to the highest bidder.

Peretz argues that as long as Israel has not reached real peace with neighbors, let alone establish neighbors it could depend on in an emergency, it can't afford to risk letting defense industries or crucial utilities like electricity be run by private owners.

And he fears that in a small economy, one company could easily push prices too high without control.

Most of all, he worries that things like education and health care will become privatized and out of reach for the masses.

Nostalgia, and worry

Such concerns are a window into similar reluctance among many corners of the Israeli public.

Fears that their safety net will erode mix with nostalgia for a time in the country when people seemed to care about one another more than they do today.

All of which appears to leave the nation in an ideological funk. Many of those who came to Israel before it was founded in 1948 were not attracted to it for religious reasons, but felt akin to the secular Jews who drove communism and socialism - Karl Marx, Leon Trotsky, and many writers and activists who saw Jewish nationalism as part of the broader "liberation" movements of the day.

But the Israeli right-wing effectively declared itself all but ideologically bankrupt upon the dismantling of its "Greater Israel" doctrine.

That happened when the Likud Party's own Netanyahu signed onto the land-for-peace formula with the Palestinians earlier this year.

And the Histadrut's parent, the Labor Party, is finding that it hasn't achieved its goal of social and gender equality that its founders promised to seek.

Nor has it - as Israel approaches its 50th anniversary - achieved true peace.

Beneath the surface of such issues is the struggle that promises to amplify in the next century - here and elsewhere in the region - between secularists and fundamentalists.

There are Israelis on both sides of that divide who fear a globalized consumer culture that will water down their national identity and their values, be they socialist or religious.

"Individualism in Israel is coming more through the market than through the culture," says Yaron Ezrahi, who heads the Israel Democracy Institute in Jerusalem. "And the market is a powerful tool."

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