Friday, July 17, 2015

'The Trouble With Israel'


The following article, "The Trouble with Israel," is just out in the August Harper's. I try to make sense of things after the election and in anticipation of the Iran deal. (There is a pay-wall; but Harper's is well worth the 50 bucks a year.)

One day this April, two weeks after the Israeli elections gave Benjamin Netanyahu a fourth term as prime minister, the morning after the framework for a nuclear agreement with Iran was worked out — the morning, as it happened, of the Passover seder — I dropped in at my local cheese shop, which is set back from the main street of Jerusalem’s German Colony. The neighborhood, once the heart of the city’s secular community of Hebrew University faculty and government workers, is now dense with yeshiva graduates wearing the signature knitted yarmulkes of the settlers, the ultra-Orthodox, and the affluent “modern Orthodox” from Toronto, Paris, and Teaneck, New Jersey. The clerk behind the counter — we’ll call him Shachar — the clever, chubby grandson of Polish Jewish immigrants, whose eyes told you he thought he was meant for something better, had hooked me on truffle cheese some years ago, and we often had pleasant conversations when I came in for regular fixes. We did not normally talk politics, except for the occasional sigh over news of corruption or violence. (His grandfather, he had told me, had been a cadre in the Irgun, the militant Zionist underground group.) This time, however, he was buoyant, expectant. “Are you pleased with the election?” he asked me, using the Arabic colloquialism mabsoot for “pleased,” as casually as if he were asking whether Passover came in spring. 

“Are you out of your mind?” I erupted. “I feel shame for this country.”

Shachar stared at me, more surprised than wounded. I was taking advantage of him: I was his customer, after all. I shifted my tack toward patriotism. “Shachar, how can we be pleased? We think we are the only people in the world who live with threat, but we have to work with regional leaders who will work with us. Bibi is taking the country into unprecedented international isolation.” This gave Shachar his opening.

“No,” he replied, “the problem is with Obama. Experts say relations with America have never been better except for him. He doesn’t understand what we’re dealing with here. People on the left” — he meant me, but graciously kept away from the second person — “think they know better but never learn. My other customers from America say he is the worst president ever. Soon we’ll have missiles at Ben Gurion Airport.”

I stiffened my back and told Shachar what I thought of his government, his experts, and his other American customers. But even before I ended my disquisition, I thought: I am missing the point. One lesson the Israeli left has refused to learn is that elections are not so much a clash of arguments as an occasion for trafficking in fear. Shachar’s instincts were closer to primordial, and it was such instincts that determined the vote in Jerusalem, and much else in Israel. Netanyahu played on this fear by warning about “Arabs voting in droves” during the election’s closing hours — but Shachar’s real impulse was to find safety in affinity: the sense that things very nearby were dangerous, or could suddenly be made so; that understanding both sides of an argument weakens resolve; that believing in negotiations makes you unfit to conduct them.

Read on at Harper's Magazine


Tuesday, July 14, 2015

Does Greece Need The Euro? Ask Israel.

"The Greek financial nightmare is a reminder of why countries benefit from having their own currencies,” David Ignatius wrote in the Washington Post last Tuesday, before the government of Alexis Tsipras grudgingly accepted terms for another bailout. This was “a reminder,” presumably, because there was no need to debate something so axiomatic. “In the old days,” Ignatius continued, “a flexible drachma could have been devalued to boost exports and economic growth.” Economists from Martin Feldstein to Paul Krugman have proposed this cause and effect as a solution to Greece’s crisis since it began, in 2009. Krugman made the point forcefully in his column on Friday, lashing out at European and American austerity hawks and pointing to Canada’s devalued dollar as the reason for its recovery from the 2008 meltdown. “Greece, unfortunately, no longer had its own currency when it was forced into drastic fiscal retrenchment,” Krugman wrote. “The result was an economic implosion that ended up making the debt problem even worse.”

There can be no doubt that, in the case of Greece, critics of radical austerity have the better side of the argument. All agree that the Greek economy has to grow at an accelerating rate if the country is to have a chance of meeting a good part of its debt obligations, however generously they are restructured. Krugman notes that the national debt, which was roughly one and a quarter times G.D.P. in 2009, is, after austerity, one and three quarters times that today. Almost a million people, in a country of just over ten million, worked for the government in 2009. You could insist, as advocates of austerity have, that this was unsustainable, but throwing a third of those employees out of work, cutting remaining public-sector salaries by a third, and drastically reducing pensions, as advocates of austerity did, inevitably suppressed local demand. They could not have expected private-sector entrepreneurs to invest in consumer businesses, either. Creditor banks in Germany will almost certainly have to take some losses to get the Greek government’s ledgers back into balance.

The supercilious tone of northern European bankers regarding southern European profligacy makes austerity proponents’ arguments hard to take, too. To make German unification possible, East Germany effectively received a one-time infusion of three hundred and twenty-billion Deutsche marks, in the early nineties, the equivalent of almost two hundred billion dollars at the time, which included a deal that allowed East Germans to trade their own pathetic marks for West German Deutsche marks at par. It is true, as many European Union leaders have suggested, that there is the issue of precedent with Greece: the more the European Central Bank proves willing to transfer wealth to poor southern economies, the shakier the euro will become. Then again, if the euro were the currency of the richer northern European economies alone, or, for that matter, if a united Germany’s engineering-rich, high-export economy were still on the Deutsche mark, a Volkswagen Golf produced in Wolfsburg would be too expensive to sell competitively in either the U.S. or Asia, no matter how many robots were put on the line. The connection between the value of currencies and the capacity to export cuts both ways.

None of this means, however, that the euro and the free-trade eurozone are inherently bad for weaker economies like Greece’s. On the contrary, the counter-proposal of cheapening exports through devaluation presumes an economy that makes things the rest of the world wants. That’s Canada’s, but not Greece’s: the sun can only do so much. Aside from tourism, the Greek economy mainly rests on exporting refined petroleum and processed agricultural products while importing crude petroleum and everything from cars to computers. You can’t devalue the drachma to the point that gasoline production, or olive oil and cheese production, would generate sufficient earnings for Greek workers to pay for cars and computers. (That’s why so many Greek workers borrowed euros on easy credit to buy them.)

Read on at The New Yorker