The criminal Zionist aggression against the Gaza Strip has turned back on the aggressors by triggering a strong internal economic crisis that will surely deepen after the Zionist aggression against Lebanon and the Iranian missile attack. What will be the political impact of this crisis?
By Alejandro Iturbe
According to the Israeli Central Bureau of Statistics, GDP fell 19.4% year-on-year in the fourth quarter of 2023 and ‘the results were much worse than expected’[1]. This negative dynamic of the Israeli economy has continued this year. In July 2024, ‘The Bank of Israel lowered its growth forecast for the national economy for 2024 to 1.5% [ndr. in 2022 it had grown 6%]... due to the “high level” of geopolitical uncertainty and an increased likelihood of a regional war on several fronts’[2].
In reality, this forecast is ‘made-up’ and distorted. The fall in the production of goods and services has been very large (especially in the very strong private sector). A report from months ago argues: “Private consumption contracted 26.9%, while business investment plummeted 67.8%. Exports fell 18.3% and imports 42%. Meanwhile, public spending made up for part of the losses, with an increase of 88.1%, mainly in war spending”[3].
In this context, the Bank of Israel has acknowledged that ‘There are several risks of a possible acceleration of inflation: geopolitical developments and their effects on economic activity… and a depreciation of the shekel’. It is interesting to recall that, in 1985, the State of Israel experienced hyperinflation of 500% per year, which it controlled through classic capitalist measures: fiscal adjustment, reduction of public spending, and privatisation of state enterprises[4]. This is a policy that is impossible to repeat under current conditions.
Hiding the problem
In analysing the causes and looking for ways out of this crisis, there have been various responses from within the Zionist state. Some media have claimed that the decline in activity is partly due to the ‘lack of workers’. This is absolutely true for agriculture: ‘Crops are rotting near Gaza and Lebanon. The authorities are rushing in workers from India, Malawi and Sri Lanka to make up for the departure of Thais, the vetoing of Palestinians and the conscription of Israelis”[5]. However, in industrial production, technology and private services, where there has been a sharp drop in activity, there is hardly a ‘shortage of workers’.
At the beginning of February, the well-known and influential international agency Moddy’s downgraded Israel’s credit rating because of ‘political and fiscal risks’. In response, Israeli Prime Minister Benjamin Netanyahu said that ‘his country’s economy is strong’. He added: “We are at war. The rating will go up again as soon as we win the war, and we will win it.
Netanyahu avoided referring to the impact of ‘the war’ on the economy (at the time the bloody invasion of the Gaza Strip), something the Bank of Israel itself acknowledges. At the same time, faced with great difficulties in Gaza, it ‘upped the ante’ and regionalised the war: it attacked Lebanon and Hezbollah, and thus forced a response from the Iranian regime (the recent missile attack on Tel Aviv). In other words, he transformed it into a ‘multi-front’ war.
In other words, he met a domestic economic crisis stemming from the impact of ‘the war’ with ‘more war’. The truth is that far from ‘strengthening’ the Israeli economy, this policy and its consequences have deepened the crisis.
Netanyahu relies on the fact that imperialism, especially U.S. imperialism, maintains its unconditional support for his enclave through military and technological aid (such as the reinforcement of the anti-missile shield in the face of Iran’s attack).
An exodus of companies
One of the signs of this is the departure from the country (for now on a temporary basis) of numerous foreign companies operating there, either through their own subsidiaries or in partnership with Israeli companies. Others are considering doing the same.
International media have reproduced a Reuters report with an extensive list that includes international airlines that have suspended flights to Tel Aviv, banks, technology companies and also retail chains. Among them, ‘dozens of Spanish brand shops such as Zara, Mango, Pull&Bear and Tous have joined the measure to protect themselves from the conflict’.
The case of the U.S. company Nvidia, an international leader in the manufacture of chips for Artificial Intelligence, which last year made significant investments in Israel, is very significant. In the face of the situation in Gaza, Nvidia cancelled the AI summit that was to be held in Tel Aviv (which was to be attended by its representatives and senior executives from Microsoft, Amazon Web Services, Snowflake and Lenovo[6].
Most significantly, this process is also occurring among Israeli private sector companies that are affected in their exports by the results of the BDS campaign and also in their search for international investors. A recent report notes that ‘many Israeli-led companies […] are already based in the United States and maintain a subsidiary in Israel’[7].
An ‘exodus of citizens’.
What is happening with Israeli companies is an expression of a much deeper process, which has been going on for several years. We are referring to the growing number of Israeli citizens, many of them from the intellectual and professional elite, who are ‘silently’ leaving the country, seeking an ‘individual solution’ in terms of work and career, and emigrating to the U.S. or Europe (without renouncing their Israeli citizenship).
On this reality, a Spanish media outlet has reported: ‘Doctors and the elite are leaving Israel, as they ’feel they don’t belong there’. In the case of doctors, departures have increased tenfold, which the Hebrew media consider ‘alarming’ ‘[8].
This exodus of thousands of Israeli citizens of European origin (the Ashkenazis) has been covered by the massive immigration of Jews of Russian origin who have become the settlers occupying the newly occupied lands in East Jerusalem and Cisjordnia, with great privileges from the state. Therefore, they are the most aggressive in the ‘defence of Israel’ against the Palestinians, with fascist methods.
Changes and contradictions in Israeli society
At this point, it is worth referring to the profound economic and social changes that the state of Israel has undergone in recent decades and how these changes have generated deep political contradictions in Israeli society. We have devoted numerous articles to this topic on this page[9].
The Zionist state was created as a military enclave of imperialism in the Middle East. Therefore, it must maintain a state of ‘permanent war’ against the Palestinians and the Arab and Muslim peoples. For several decades, the economy of this imperialist enclave was developed, driven and controlled directly from the state, financed by ‘foreign aid’ sent by U.S. imperialism for military purposes and collected by the international Zionist movement.
In this context, an arms industry developed, which first supplied the Israeli army and then began to export. Over time, it became increasingly specialised in the development of technology for military purposes, software and security and surveillance systems.
From the late 1980s onwards, this state economy began to be privatised. Some of these enterprises were transformed into joint ventures and others were sold off outright. On that basis, new private companies started to develop, especially in the security technology and software and systems sector in general. To a lesser extent, in other areas such as pharmaceuticals and food and beverages. In 2022, Israeli exports reached 165 billion dollars, 30 per cent of the country’s GDP[10].
10] A new ‘classic’ private bourgeoisie thus emerged, which established links with international markets through exports, foreign investments and also through investments by Israeli bourgeois abroad. A new sector of specialised and professional workers also emerged, whose personal and economic development is linked to this new economy.
Both sectors have frictions and contradictions with Netanyahu and his policy of ‘permanent war’, as it harms their businesses and careers. They aspire to live in a ‘modern, developed and democratic Israel’ in the style of some European imperialist countries. They would like some kind of ‘peace’ in order to quietly develop their businesses and professions.
This has led them to make big mobilisations against the Netanyahu government. This was the case of those who opposed the ‘judicial reform’ promoted by the prime minister. Months after the beginning of the invasion of the Gaza Strip, this sector supported and joined the demonstrations organised by the families of the Israeli hostages in Gaza, who demanded that the government sign a ‘ceasefire’ agreement that would include their release and return[11].
Every time the Netanyahu government and the ‘right wing’ face these situations, they respond with a new advance of the ‘permanent war’ and call for the ‘unity’ of Israeli society in the face of the ‘enemy’. This is what he did with the invasion of Gaza and now with the attack on Lebanon and the situation with Iran.
Netanyahu has achieved part of his goal with these methods. In the upcoming parliamentary elections, the invasion of Lebanon has increased voter support of the ruling coalition parties and outstripped their main opponent Yair Lapid. However, the predictions do not give him a majority in the Knesset (Parliament) and he has therefore added another opposition leader (Gideon Saar) to his cabinet, which increases his chances of forming a new government[12].
Beyond the election result, the recent experience with the Gaza invasion shows that Netanyahu initially achieved the effect of ‘closing ranks’ and gaining support, but then the contradictions of Israeli society manifested themselves again in mobilisations ‘against the war’. Reality will show whether this situation will repeat itself.
The insurmountable limits of contradictions
In the face of these strong contradictions and mobilisations, several organisations of the world left have reinforced their proposal that the main way to defeat the Zionist state is the formation of an alliance between the Palestinian people and the Israeli working class against the ‘common enemy’ (the Zionist state and bourgeoisie). This is a wrong proposal because such an alliance is objectively impossible to realise.
These contradictions have an insurmountable limit: the state of Israel is not a ‘normal’ oppressor/imperialist country but a political-military enclave of imperialism. It was created by the imperialist powers on the basis of the theft and usurpation of Palestinian territory, the violent expulsion of the Palestinian people from their land and the artificial installation of a Jewish population from abroad. Zionism was the tool used by imperialism to create this enclave.
In this territory stolen from the Palestinians, a foreign population (mainly Jews of European origin, later also from other countries) settled and continues to settle, building their lives on the basis we have described. The houses in which Israeli workers live, the schools where their children study, the factories and fields in which they work were built on the land that was stolen from the Palestinian people and from which they were expelled. The whole Israeli society (including the vast majority of its working class) is aware of this and is not willing to give back these lands.
In other words, they also defend Israel’s enclave character (‘what was stolen from the Palestinians is already ours’) and, in their overwhelming majority, they will never abandon this position, even if they have occasional contradictions with Netanyahu and mobilise against him.
That is why ‘national unity’ in defence of the enclave always prevails over internal class contradictions. For the Israeli working class, the Israeli bourgeoisie is not a ‘common enemy’ with the Palestinian people, but its ally in the defence of the ‘Jewish homeland of Israel’ against the ‘Palestinian enemy’.
The Zionist state has an overwhelming military superiority over the Palestinian people. Even more so, with the technological and logistical help of U.S. imperialism. In spite of this, under these harsh conditions, it has already shown that it is maintaining and intensifying its heroic resistance. In order to achieve the victory that will enable it to regain its historic national territory, this resistance must be a ‘spark’ that ignites the joint revolutionary and military struggle of the Arab and Muslim peoples against the state of Israel.
[1] https://www.bbc.com/mundo/articles/c3gkel91581o
[2] https://www.swissinfo.ch/spa/banco-de-israel-rebaja-previsiones-de-crecimiento-de-2024-y-2025-por-riesgo-de-m%C3%A1s-guerras/83140225#:~:text=%2D%20El%20Banco%20de%20Israel%20rebaj%C3%B3,guerra%20regional%20en%20varios%20frentes.
[3] https://es.euronews.com/business/2024/02/20/la-guerra-entre-israel-y-hamas-pasa-factura-a-la-economia-israeli#:~:text=La%20producci%C3%B3n%20econ%C3%B3mica%20de%20Israel,7%20de%20octubre%20de%202023
[4] https://bolsamza.com.ar/como-salio-israel-de-la-hiperinflacion-y-como-argentina-fracaso-en-sus-intentos/#:~:text=Baj%C3%B3%20el%20gasto%20p%C3%BAblico%20%2Dbajando,algunos%20productos%20de%20consumo%20masivo.
[5] https://elpais.com/internacional/2024-04-02/la-guerra-sume-a-la-agricultura-israeli-en-la-mayor-crisis-de-su-historia.html
[6] https://www.bolsamania.com/noticias/empresas/nvidia-cancela-evento-ia-tel-aviv-tras-ataque-hamas-israel-14909980.html
[7] https://harris-sliwoski.com/blog/
[8] https://www.hispantv.com/noticias/economia/599729/iinflacion-subida-precios-exodo-israel
[9] A growing political crisis of the State of Israel and Zionism – International Workers League (litci.org)
[10] Israel’s Exports Could Reach $165 Billion (israelnoticias.com)
[11] https://litci.org/es/el-movimiento-israeli-contra-la-guerra-crece-a-pesar-de-su-falta-de-vision/?utm_source=copylink&utm_medium=browser
[12] https://www.bbc.com/mundo/articles/c3wp575x55do
