The elephant in the room: Social Inequality

Years of focusing on GDP growth at the expense of other important goals have led to the destruction of long-term cohesion

A few weeks ago, along with hundreds of other economists, I signed the public statement addressing the expected damage to Israel’s economy that would result from the proposed judicial reforms. Among the group of international economists, this act of issuing an “emergency” statement is far from radical – there is little doubt that undermining the country’s central institutions, in a swift manner and without a broad consensus no less, will harm the economy. How long would it take to see the ramifications and how bad will they be? Time will tell.

While the statement addressed the effect that politics can have on the economy, I want to consider the inverse association – from the economy to politics – by discussing the deep economic inequality in Israel. Of the 38 members of the OECD countries, Israel ranks 9th in regard to the level of income inequality, and since income inequality in Israeli society is closely linked to cultural group divisions, the risk to society as a whole is significant. Although inequality exists everywhere, when it is closely linked to specific population groups, as is the case in Israel, a strong group identity significantly limits empathy for groups outside of one’s cultural group, and social cohesion is further damaged.

To understand the relation between inequality and what’s happening in Israel today, it’s helpful to go back in time to the middle of the 17th century. In 1651, Thomas Hobbes wrote – in his book, Leviathan – that even the weakest member of society has enough power to kill the strongest. Hobbes used this argument to justify the need to unite around one person who will establish a reasonable social order, aka the king. In doing so, he contributed to one of the most interesting debates in political philosophy – the organization of society. About a century later, Jean-Jacques Rousseau joined the debate with his book, The Social Contract, which presents an optimistic portrayal of social life based on understanding and cooperation. According to Rousseau, it is precisely because of the tensions that exist in society, that cooperation serves as society’s lifeline. Although Rousseau’s vision does not seem particularly relevant to Israel today, we are experiencing a contemporary version of Hobbes’ idea, such that even the weak have the power to vote in elections and determine the fate of the strong. In this regard, we were, and we remain, a society that is dependent on all of its members.

If we accept the importance of Interdependence in society, then we need to seriously and thoughtfully address the matter of inequality in Israel. The typical discourse surrounding inequality includes notions of compassion and fairness, as well as the economic impact that policies addressing inequality have on the weak and the economy as a whole. This is an important and meaningful conversation, but the part that is most pertinent to what is happening in Israel right now is the enormous political significance of inequality. Just as you don’t need to be an expert in economics to understand the potential negative impact of the government’s actions, you also don’t need to be an expert in sociology to understand the importance of social cohesion for a functioning society.

In my view, the years spent narrowly focusing on increasing GDP at the expense of other important goals, such as reducing inequality and increasing well-being, has significantly contributed to the unfavorable situation we are in today. That is, a situation in which every discussion related to making progress on these other goals, especially progressive ones, such as increasing teachers’ salaries, ends with a response claiming insufficient funds and a continued focus on the high-tech industry’s potential for great success. The high-tech industry is indeed successful, but what about everyone else who’s not in high-tech? The result is short-term economic growth alongside a lack of social cohesion that is potentially destructive for society – the impact of which we are perhaps only starting to see.

The State of Israel excels in preparing for, and defending itself against, what it likes to refer to as threats – the Israeli-Palestinian conflict, the Iranian threat, terrorism and cyberattacks. I assume that Israel’s National Security Council is handling these matters and likely also has a contingency plan for dealing with North Korea. But, what’s the plan for investigating the political consequences of inequality? And what about the political consequences of some groups’ tendency to adhere to radically different messages? If there is such a plan, then it’s being kept secret and it certainly does not appear as if anyone is putting it into action.