The elections scheduled for March 28, 2006 will conclude what has got to be one of the more bizarre campaigns in Israel’s history. The series of totally unexpected events began with Amir Peretz’s surprise victory over Deputy Prime Minister Shimon Peres in the race for the Labor Party leadership. Peretz immediately withdrew Labor from the coalition government, forcing Prime Minister Ariel Sharon to call early elections.

The prime minister’s next move was to split his own Likud Party, the political machine he had put together in 1973 and then ridden to triumph in 2001 and 2003, to form a new electoral list that he called Kadima (in Hebrew, Forward). This Sharon did because he knew that while his victory over Binyamin Netanyahu in the Likud primary was all but guaranteed, he would not be able to govern with the fanatically right-wing Likud faction that would enter the seventeenth Knesset on his coattails. It was a well-calculated risk. Kadima immediately established itself as the leading party in pre-election polls, routinely drawing around 40 of 120 seats in the parliament-to-be. Curiously, the party’s standing in the polls has not been hurt by Sharon’s incapacitation by two consecutive strokes or by the victory of Hamas in the January 25 Palestinian legislative elections. On March 28, Kadima will almost certainly win a plurality equal to its standing in the polls, allowing it the best chance of leading the next coalition government. Evidently, the new party answers some deeply felt needs of a major portion of the Israeli electorate.

Sharon’s Ascent to Power

To identify these deeply felt needs, we must first look at the circumstances that brought the father of Kadima to power in 2001 and then at the policies he pursued in the five years he was in office as head of Likud. Ariel Sharon’s ascent to power was a direct result of the outbreak of the second intifada, which he himself had set off by his heavily publicized visit to the Temple Mount/Haram al-Sharif at the head of a contingent of about 1,000 policemen. The intifada had more profound causes, of course—the Palestinians’ frustration with the Oslo “peace process” and the collapse of that process at Camp David in July 2000—but Sharon’s provocation was the spark that ignited the flames. The day after Sharon’s visit, September 29, 2000, Palestinian worshippers demonstrated on the Temple Mount/Haram al-Sharif, and seven of them were killed by Israeli police. A storm of protest engulfed the West Bank and Gaza, resulting in more Palestinian dead and wounded. When Israel’s Palestinian citizens joined the protests, 13 of them were killed by police over a ten-day period in early October. These shootings sealed the fate of then Prime Minister Ehud Barak, because Palestinian citizens responded by boycotting the special elections for prime minister held in February 2001, and without their support no Labor candidate could win. Sharon was elected in a landslide—but the boycott was not the only reason.

In a deeper sense, Sharon’s victory resulted from the social stalemate that had come to plague Israeli society by the end of 1990s. In 1985, the national unity government headed by Peres and Likud leader Yitzhak Shamir launched Israel on a course of economic liberalization that has completely transformed the country. Liberalization brought unprecedented economic prosperity, nearly tripling Israel’s per capita gross domestic product from $5,600 in 1980 to $15,100 in 1998, as well as attracting nearly $2 billion per year in foreign investment by the mid-1990s. But the prosperity for some was coupled with widening gaps in wage distribution, with 30 percent of economic income (a more comprehensive measure than cash income) accruing to the top ten percent of the population by 2002. Inequality, along with the slow attrition of the welfare state, resulted in intensified class conflict. With the Histadrut labor organization gravely weakened by privatization of its assets and by the delinking of health benefits from Histadrut membership, the main defender of the welfare state became Shas, an ultra-Orthodox Mizrahi (non-European Jewish) party that draws its support primarily from the Jewish working class. The animosity between Shas and two political parties representing the Ashkenazi (European Jewish) middle class—Meretz and Shinui—was the hallmark of Israeli politics in the 1990s. One casualty of this struggle was Shas’ founder and charismatic political leader, Aryeh Deri, who was hounded from office through judicial persecution. This was to have a grave effect on the fate of the Oslo process in 2000.

When Israel signed the Oslo accord with the PLO in 1993, a nationalist dimension was added to the class conflict, resulting in the formation of two political fronts: a liberal front of peace and profits, headed by Labor, and an ethno-nationalist front of war and welfare, headed by Likud. Word of the Oslo agreement reached Israel just before Rosh Hashanah, and business leaders seized the occasion to buy an advertisement in the liberal daily Haaretz urging Prime Minister Yitzhak Rabin to “bring peace for the sake of good years.” It was the same group of people, who used to meet in Rabin’s private apartment in Tel Aviv every Saturday afternoon, who persuaded him to call off the newly imposed capital gains tax right before it went into effect in 1995.

By the end of the 1990s, these two political fronts succeeded in checking each other. Economically, despite the attrition of the welfare state, the basic safety net of essential welfare payments remained in place due to the vigilance of Shas. Politically, the Oslo process faltered and then ended at Camp David, because it lost the support of a significant segment of the Jewish working class, who correctly identified it with economic liberalization. Deprived of Deri’s skillful leadership, Shas, with 17 Members of Knesset, succumbed to pressure from its working-class voters and barged out of Barak’s coalition government right before he left for Camp David in July 2000. This often neglected fact played an important role in restricting Barak’s freedom of maneuver at the summit and contributed greatly to its failure.

The social stalemate gave the state, personified since February 2001 by Sharon, an opportunity to reshape Israel’s “control system,” encompassing both Israeli and Palestinian societies. Sharon proceeded to do that by launching a dual war: a military war on the Palestinians and an economic war on all but the wealthiest Israelis. Oddly, these simultaneous wars did not hinder each other, but helped each other along.

Sharon’s Strategy

Sharon had been known as a brilliant tactician and lousy strategist, but when he finally took office as prime minister he had a clear strategic vision that he pursued doggedly and successfully. That strategic vision consisted of two elements, both having to do with dismantling the legacy of Labor: reversing the results of the Oslo process and reasserting Israel’s control over the occupied Palestinian territories, and reshaping the Israeli economy according to an extreme neo-liberal model. In class terms, each of these two elements corresponded to the wishes of one of the two main social classes and contradicted the interests of the other. The Jewish bourgeoisie, which had supported the Oslo process throughout, sought the elimination of even the elementary social safety net that had survived 15 years of welfare state attrition; the Jewish working class, disillusioned by economic liberalization, transferred its anger and frustration onto the Palestinians and the Oslo process.

What has united these two classes since September 2000 is fear of the Palestinians and belief in the myth that “there is no partner” for peace, a myth that was spun after Camp David by the quartet of Barak, his Minister of Foreign Affairs and Public Security Shlomo Ben-Ami, President Bill Clinton and his Middle East envoy Dennis Ross. The persuasive power of the “no partner” argument was reinforced by the outbreak of the intifada and especially by the suicide bombings. With these developments, and with the main economic benefit of Oslo — the lifting of the Arab boycott—firmly in hand, the Israeli bourgeoisie changed its preference from achieving security through peace to achieving security at all costs. Sharon’s promise to defeat the Palestinians’ campaign of suicide bombings (which started in March 2001, after he had taken office) sounded credible because of his past record as an outstanding military field commander. In late March 2002, after a particularly deadly terror attack in a hotel during a Passover seder, Sharon launched a military operation to reoccupy areas of the West Bank Israel had evacuated during the Oslo years and to destroy the Palestinian Authority (PA) as a political entity capable of independent action. Yasser Arafat’s confinement to his offices in Ramallah, from then until his death from a mysterious illness two and a half years later, was the symbolic manifestation of the impotence of the PA (which, nonetheless, Israel and the US kept insisting must “dismantle the terror infrastructure”).


In economic terms, the Jewish upper class was paid off handsomely for its support of Sharon’s dual war. The share of the top ten percent of earners in economic income rose from 30 percent in 1998 to almost 35 percent in 2004-2005. But, in 2001 and 2002, the Israeli economy experienced negative growth due to the intifada and the global high-tech crisis, and, as a result, in the general elections of 2003 Israeli big capital rallied behind Labor’s peace-oriented candidate, Amram Mitzna. Though Mitzna lost, the lesson of how he built support among the bourgeoisie was not wasted on Sharon, who realized that he must placate that class politically, as well as economically. He therefore adopted as his own two political-military measures that, before, he had fiercely opposed: Mitzna’s election promise of a unilateral withdrawal from Gaza and Labor’s plan to build a separation wall in the West Bank. (Whether or not Labor would have built the wall as deeply inside the West Bank as Sharon did is an open question.) These two steps charted the outlines of the policy Sharon would pursue vis-à-vis the Palestinians were he awake to contest the 2006 elections: unilateral removal of the small settlements and permanent military bases from roughly the half of the West Bank that lies between the wall on the west and the Jordan valley, liberally defined, on the east. In this area, Sharon planned to keep only major “settlement blocs” that he intended to enclose behind the wall, one way or another.

The unilateral withdrawal from Gaza earned Sharon the reputation of a peacemaker and brought his international standing (at least among politicians) to a point that had been inconceivable only a few years earlier. Needless to say, this reputation was totally misplaced, as Sharon’s policy was not intended to make peace or even resume negotiations with the Palestinians. It was intended simply to make Israel’s occupation of Palestinian lands more economical, in terms of Jewish blood and money, so that taxes could be cut even further and liberalization of the economy could proceed to even greater heights. The capstone of this policy was to be Hamas’ victory in the Palestinian elections, for that would lock in the notion, both in Israel and internationally, that Israel has no partner for peace. Thus, the oppression, expropriation and ghettoization of the Palestinians could continue with even greater impunity. In order to achieve this end, Sharon ignored and humiliated what remained of the Palestinian Authority and its president Mahmoud Abbas, refusing consistently to even meet with Abbas or let him take any credit for the Gaza withdrawal.

The other side of Sharon’s legacy is the unprecedented levels of poverty and inequality created by his economic policy (mistakenly attributed to Netanyahu, the finance minister in his second cabinet), and especially his dismantling of the social safety net. Thus the Gini coefficient, measuring the inequality of income distribution, rose, for disposable income, by 4.3 percent between 2002 and 2004-2005 and by 6.8 percent between 1999 and 2004-2005. In order to achieve these results, Sharon was compelled to fire the Shas ministers from his first cabinet (they came back three days later, completely subdued), and then exclude Shas altogether from his second government, formed in 2003. Even as poverty increased and unemployment benefits were slashed, the Jewish working class represented by Shas had become the strongest backers of the prime minister’s determination to impose Israel’s will in Gaza and the West Bank. A survey taken in 2002 found that 89 percent of self-described Shas voters (as opposed to 60 percent of all Jewish Israelis polled) opposed a peace agreement along the lines proposed by Clinton in 2000. More than 60 percent (as opposed to 46 percent of the overall sample) supported the idea of “transfer” (expulsion) of Palestinians into neighboring Arab countries. With its constituency thus enthralled by Sharon’s treatment of the Palestinians, there was little Shas could do to fight his ruinous economic policies.

After five years in office, Sharon had realized virtually all of his strategic aims: the second intifada was defeated, personal security for Israelis was restored, economic prosperity for the upper layers of society was shored up and his own popularity was at a level never before enjoyed by an Israeli prime minister. The price for these accomplishments is being paid by the Palestinians, whose economic misery, according to World Bank reports, has reached an all-time low and whose national aspirations appear stymied. The price has also been paid by those Israelis whose livelihood depended on the state, whether through public sector employment or through welfare services. These are the two time bombs that Sharon has bequeathed to his probable successor, Ehud Olmert.

Olmert and His Rivals

Olmert’s reputation is that of a shabby politician who enriched himself through his association with the rich and powerful. His ten-year tenure as mayor of Jerusalem left the city, and especially its Palestinian residents, in an even more dismal situation than under his predecessor, Teddy Kollek. In 2003, Olmert barely made it into the Knesset; he was number 33 out of the 38 Likud candidates who were elected. On the eve of Sharon’s departure from the political scene, Olmert’s popularity among the general public stood at 13 percent (today it stands at 34 percent), and his main political asset was his slavish loyalty to Sharon, who had defeated him in the Likud primaries in 1999. So far, however, it seems that Sharon’s mantle has descended quite naturally on Olmert’s shoulders, and the ex-mayor of Jerusalem seems to be headed for an impressive election victory at the helm of Kadima.

Olmert’s expected success has a lot to do with the inherent weaknesses of his two rivals, Peretz and Netanyahu. Before entering the electoral fray, Peretz was head of the Histadrut labor organization, once a powerful political and economic broker but now eviscerated by Israel’s post-1985 neo-liberal makeover. His victory over Peres, the perennial loser of Israeli politics, was in reality a hostile takeover. He enrolled tens of thousands of Histadrut employees and supporters of his own small party—Am Ehad (One People)—in the Labor Party prior to the primary, and though many of these new recruits were disqualified through judicial review, enough of them remained to give him the edge. Old-time Laborites, led by Peres, reacted by deserting Labor in droves and moving to Kadima. Pollsters estimate that Labor lost some 40 percent of its voters to Sharon’s party, not only because of Peretz’s tactics but also because of his identity and his politics. Peretz was born in Morocco, and he is the first Mizrahi ever to head a major political party in a general election and run for prime minister. He is also the first Labor leader in a very long time to hold progressive views on both the economy and the Israeli-Palestinian conflict. Since Labor voters come mostly from the Ashkenazi middle and upper-middle classes, and since the party swallowed Barak’s line that “there is no partner” for peace, Peretz’s views are out of touch with those of many of his would-be constituents. Given these handicaps, the fact that Labor’s standing in the polls has been roughly equal to its strength in the present Knesset—around 20 seats—is quite an achievement.

If Peretz’s problem is that he is too radical for his potential voters, Netanyahu’s problem is that he is not radical enough. Netanyahu was Sharon’s finance minister throughout the period of the national debate over the Gaza disengagement, and he voted for disengagement in cabinet meetings and Knesset debates on many occasions, against the wishes of the Likud faithful, who rejected the proposed withdrawal in a May 2004 internal party referendum. He finally resigned from the cabinet five days before the operation began, much too late for many Likud purists. Thus, while Kadima is estimated to have snatched about half of the 40 seats Likud has in the present Knesset, about five more seats are estimated to have been lost to parties to the right of Likud. Netanyahu is also burdened with responsibility for Sharon’s economic policies, though these were launched by Sharon’s first cabinet, in which Netanyahu did not hold an economic portfolio.

The interesting question now is whether Olmert will be able to carry out further disengagements in the West Bank and fulfill Sharon’s plan. In the West Bank settlement of Ariel on March 13, Olmert announced that by 2010 he intends to inscribe on the map “permanent borders, whereby we will be completely separate from the majority of the Palestinian population and preserve a large and stable Jewish majority in Israel.” He went on to say that these borders would include Ariel, which he called “an integral part of the state of Israel,” as well as the settlement blocs of Gush Etzion and Maale Adumim. If the polls are any indication, in the next Knesset the right-wing bloc will have around 50 seats, Kadima will have around 40, and the left wing (relatively speaking) will have 30. However, of the left-wing members only 25 will belong to Jewish parties, and therefore be eligible for inclusion in the governing coalition (the others being from Arab parties, which are never included). This means that the only pro-disengagement coalition Olmert will be able to assemble will have about 65 MKs in it, and such a grouping will be inherently unstable. If he includes any of the right-wing parties in the coalition, no further disengagements will be possible.

Moreover, Olmert, obviously, does not have Sharon’s personal stature and ability to dictate his preferences to the various security services. Before the Gaza disengagement, Sharon had to replace the heads of all three services, the Israel Defense Forces, Mossad and the General Security Service (Shabak), in order to make them cooperate with his plans. These institutions have a vested interest in the occupation and have consistently opposed any withdrawal, beginning with Menachem Begin’s pullout from the Sinai in the early 1980s. The head of Shabak, Yuval Diskin, has already voiced his opposition to further withdrawals, in a semi-public meeting with young Jewish settlers in the West Bank.


Hamas’ victory in the Palestinian elections complicates Olmert’s situation even further. Sharon must have believed that he could handle Hamas and still carry out his further disengagement plans. He may have been wrong about that, and Olmert is certainly no Sharon. While the main rationale for unilateral disengagement, namely, that “there is no partner,” is strengthened with Hamas at the helm, further withdrawals will be seen as rewarding Hamas and will be politically very difficult to sell. Without further disengagements, however, friction between Jews and Palestinians inside the West Bank will increase, especially in view of Israel’s decision to punish the Palestinians economically for democratically electing Hamas. That decision will face another difficulty: Israeli exports to the occupied Palestinian territories amount to about $425 million a year (or 14 percent of total exports), and imports from the occupied territories amount to about $100 million a year (or 2.5 percent of total imports). These are small sums in relation to Israel’s gross domestic product of $100 billion a year, but they are significant for the Israeli businesses involved, and economic measures that further erode Palestinians’ purchasing power or cut off imports will encounter opposition from the owners of these businesses.

Viewed from the other side of the wall, the main card that Hamas holds against Israel’s punitive measures, and any measures the West may impose, is its ability to declare the PA null and void for reasons of financial bankruptcy. Such a declaration will put Israel in a position of again being directly responsible for the lives of the Palestinians in occupied territory, as it was before the Oslo accords. Since April 2002, the PA has been a sham anyway, functioning as Israel’s subcontractor for running basic services for the Palestinians, such as they are, and enabling the “international community” to pretend that the Israeli-Palestinian conflict is a conflict between two autonomous political entities. If the PA ceases to exist, the true nature of the relations between Israel and the Palestinians as occupier and occupied will reemerge, and Israel will no longer enjoy the privilege of having all the power over the Palestinians without any responsibility for their wellbeing. The downside for the Palestinians, of course, will be the loss of international economic assistance that makes up much of their national income and translates into salaries that sustain a great portion of the Palestinian population. But the Palestinians pay a heavy political price for this money, and if Hamas is indeed as incorruptible as it claims, it may decide that the advantages of putting an end to the charade called the PA outweigh the costs. Given the Palestinians’ economic and military weakness, upsetting the applecart in this manner may be the only way forward open to them as the dual war initiated by Ariel Sharon marches on even in his absence.

How to cite this article:

Yoav Peled "Dual War: The Legacy of Ariel Sharon," Middle East Report Online, March 22, 2006.

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