Military Conflict and Neo-Liberalization in Israel (2001–2006): A Neo-Gramscian Approach

Introduction

The most salient analyses of Israeli society and politics—notwithstanding the differences between them—tend to understand it as polarized into a neo-liberal, more secular, elite that supported the peace process, and more religious, conservative social groups that supported ethno-republican models, and opposed the peace process (Ben-Porat, 2005; Ram, 2008; Shafir and Peled, 2002). The turn to ethno-republicanism following the outbreak of the Second Intifada in October 2000, and two neo-liberal economic programs in 2002 and 2003, exposed the limitations of those approaches. This article argues that a neo-Gramscian approach (NGA) provides a better theoretical framework for explaining the developments in Israel’s politics, society, and economy during the early years of the twenty-first century. Our main argument is that what explains these developments is the emergence of a national-neo-liberal hegemonic project during the years 2001–2006. This project succeeded in combining neo-liberal and ethno-republican elements and was based on a relatively stable historical bloc—a socio-political alignment of social groups.

The theoretical approach that grounds the more salient macro-level analyses of Israeli society and politics (even when discussing with it) is the citizenship discourse approach (CDA). CDA argues that in Israel coexist three citizenship discourses: liberal, republican, and ethno-national (Shafir and Peled, 2002: 11). Discourses are used by socio-political actors as means to legitimate differences in resource allocations (political power, symbolic status, and access to material resources) among social groups in a particular incorporation regime. Until the mid-1980s, the liberal discourse legitimized the allocation of basic rights and status to all citizens; the ethno-national discourse distinguished Jews and awarded them a preferred status; and the republican discourse legitimized a superior status for the Ashkenazi group (Jews of European origin, see below), since it viewed Ashkenazim as having fulfilled at the highest degree their duties as citizens, in the building of the national project. According to Shafir and Peled (2002), in the mid-1980s, the republican discourse was weakened as the dominant Ashkenazim opted for a liberal discourse that fitted the neo-liberal turn of the economy. Concomitantly, the decline of republicanism invigorated the ethno-national discourse among Mizrachim (Jews originating from Arab countries) and national-religious Jews (NRJ) (Peled, 2008; Ram, 2008). This approach has difficulties in explaining the above-mentioned combination of deepening neo-liberalism and ethno-republicanism. In order to adapt to the post-2000 reality, proponents of CDA had to abandon a key element of this approach, namely, the distinctiveness of the three citizenship discourses (see Peled, 2008), since the combination of nationalism, neo-liberalism, and war includes elements of liberalism, republicanism, and ethno-nationalism. Moreover, the pairing of neo-liberal reforms and military conflict challenges CDA’s assumption that group positions are determined solely by the material dimension. If Mizrachim opposed neo-liberalization, why in 2003 some of them deserted a party who partially opposed it (Shas) and voted one which played a leading role in the neo-liberalization of the economy (Likud)? If liberalization was so beneficial to Ashkenazim, why did they support a hard-line response to the Palestinian uprising that could jeopardize the neo-liberal economy? (see Shalev and Levy, 2005).

This apparent contradiction was not resolved by later works which were influenced in different degrees by CDA. Ben-Porat (2005), while criticizing Peled and Shafir’s conclusions by emphasizing the Ashkenazi elite’s failure in pursuing the peace process, accepted their theoretical assumption of a clear and fixed division concerning the political and symbolical positions of the main social groups. Grinberg (2007) addressed the demise of the Oslo peace process and the closure of the political way it represented, but his emphasis is on the interaction between Israel and Palestine and the opening or closure of a political space, and he addressed only marginally the consolidation of a neo-liberal model. Ram (2008) contributed a seminal examination of neo-liberalization processes and refined the analysis of the social groups’ ideologies, but he also considered the Ashkenazi secular elites as supporting neo-liberalism and liberal post-Zionism, the religious groups as supporting neo-Zionism (ultra-nationalism) and a significant sector of Mizrachim as supporters of anti-liberalism. Levy (2007a, 2007b) analyzed the relationship between changes among social groups in Israeli society, changing socio-economic models, and Israel’s management of the conflict, but his excellent analysis is focused mainly on the relationship between social processes and the military. Similarly, Cohen (2000, 2006) analyzes changes in Israel’s approach to the conflict, by focusing on the ways in which changes in the Israeli society had decreased the military’s autonomy.

We argue that an NGA offers a better explanation of post-2000 socio-political processes. NGA is able to explain the combination of neo-liberalism, ethno-nationalism, and war since it considers the material dimension as necessary rather than determinant, and since it classifies social group positions by categories whose content is not determined a priori (e.g. citizenship discourses), but results from a political process. Hence, the category contents are unique to each hegemonic project.

An Neo-Gramscian Approach

The central concept of NGA is hegemony, defined by Filc (2006: 47) as “a state or process in which a political subject—the historical bloc—tries to stabilize the social structure around a project which responds to the core interests of the dominant group in the bloc.” Thus, a hegemonic project is constituted by a historical bloc which is a political alignment of groups. The bloc itself is formed during attempts to promote “its” hegemonic project in the context of social conflict. Hence, the project and the bloc are mutually constitutive. The bloc bears two central characterizations. First, it attends to interests of all the social groups comprising it. Yet, the material interests of the dominant group are awarded precedence over those of other groups in the bloc which are served only partly (Gramsci, 1971: 182). Second, it promotes a certain perception of the world which the dominant group believes in and which allied groups share. This worldview acts to homogenize the bloc (Mouffe, 1981: 229). Hence, NGA suggests a three-dimensional analytical framework—political, material and perceptional—where neither holds a priori precedence over the others and all are indispensable to explain socio-political outcomes.

The material dimension consists of the distribution of monetary, physical and other assets and resources. Direct distribution is a product of the relations of production or more specifically the labor process (Gramsci, 1971: 161). Indirect distribution, or re-distribution, results from state function (which affects direct distribution as regulator of the labor market, employer, and owner of material assets). Material distribution and re-distribution of assets and resources play a necessary, but not sufficient, role in the constitution of social groups. There are two important implications for understanding the material dimension this way. First, social groups may initially form on a material or non-material basis, but their cohesiveness rests at least partly on some homogeneity in material resources and rewards. Diverging material rewards through time will reduce group cohesion and may result in its split or disintegration. Second, material issues do not determine the formation of worldviews among groups or their political actions, in a unidirectional way. There are no necessary relations of causation between the three dimensions but a more complex interrelationship.

Following Bourdieu (1985), we consider that social groups tend to form according to their relative position in the social space, where proximity is defined by the quantity and quality of capital owned by agents. In Bourdieu’s (1985) terms:

[t]he social field can be described as a multi-dimensional space of positions such that … agents are distributed within it, in the first dimension, according to the overall volume of the capital they possess, and, in the second dimension, according to the composition of their capital (Bourdieu, 1985: 724).

Capital can be objectified (material) and subjectified (cultural). Social groups are sets of agents that occupy similar positions in the social space and thus have “every likelihood of having similar dispositions and interests and therefore of producing similar practices and adopting similar stances” (Bourdieu, 1985: 725). However, that does not mean that these sets of agents will necessarily act as a group politically, it merely establishes that they will present fewer hindrances to common mobilization (Bourdieu, 1985). Those sets of agents do not exist as “objective” groups, since alliance between those closest in the social space is never necessary or inevitable. ¹ Proximity in the social space, however, explains the probability that individuals would constitute themselves as social–political groups, and that those groups will persist through time.

The perceptional and political dimensions are thus related to, but not determined by, the material one. The perceptional dimension consists of ideas, beliefs, worldviews, and other forms of conception of the social environment (Gramsci, 1971: 9). By conception we mean awarding meaning or symbolic value to processes, objects, and events. This includes, for example, interpreting a sequence of occurrences in a particular way and lumping together or differentiating between individuals and groups through the attribution of symbolic statuses.

The political dimension consists of social groups each vying to promote its hegemonic project by aligning other groups in a supporting historical bloc. Most of these efforts fail, but when they succeed, the historical bloc can relatively stabilize the social structure (Filc, 2006). The groups left out then become opposition groups, sometimes putting forward alternative hegemonic projects. As we show below, it may be beneficial to sub-divide allied groups into associated and assistant groups. This distinction is based on the understanding that hegemonic projects may go through changes following efforts made by the dominant group to attend to its interests as surrounding conditions change. These efforts may affect the internal composition of the historical bloc. ² Some allied groups may be negatively affected by these changes either materially or perceptionally, while others may be unaffected or positively so. The former are termed assistant, while the latter are termed associated. Despite being negatively affected, assistant groups do not cross the line to become opposition groups because the hegemonic project still rewards them somewhat materially and symbolically and retains at its core some principles that they perceive as just and ethical. Thus, we can identify four types of groups: dominant, associated, assistant, and opposition.

The understanding of social group positions in this way shares with CDA the assumption that group positions should be measured relative to other groups. Yet, it departs from CDA in the method of categorizing these positions. CDA uses a “closed” categorization that includes fixed categories for group position and a fixed content for each category. NGA, on the other hand, uses a more “open” categorization in which categories are also fixed, but their content is not predetermined. Thus, the exact meaning of a dominant group, an opposition group, and so on is determined by the characteristics of a particular hegemonic process.

Social Groups in Israel

We identify six social groups in Israel according to the timing and mode of their insertion into Israeli society. By timing we mean the period in which they acquired significant presence in Israel’s society. By mode we mean the class location in which they were inserted to. The interaction of timing and mode gave rise to socially prevalent labels for these groups formulated in cultural–national terms. Therefore, the six groups are labeled: Ashkenazim, Mizrachim, immigrants from the former Soviet Union (IFSU), NRJ, ultra-orthodox Jews (Haredim), and Palestinian citizens (PC). ³

The Ashkenazim are Jews of (mainly, East-) European origins who were the first group to begin the construction of the Zionist proto-state and later remained well placed in Israeli politics, economics, and culture. They occupy middle, upper-middle, and upper class positions. The Mizrachim are Jews originating from Arab countries who mostly immigrated to Israel during the first two decades of statehood. In class terms, they populate mostly the middle, lower-middle, working, and poor classes. The NRJ are mostly of European origin who have departed from non-Zionist orthodox Jewry and aligned themselves with Zionism before and after the state was established. They are located mainly in the middle and upper-middle classes, and many of them have relied on the state as job provider since the 1967 war. The group spearheaded Jewish settlements in the territories occupied during that war, supported by the state. The IFSU arrived in Israel as of the late 1980s and through the 1990s. Because of their late arrival to the Israeli society, their class positions are generally lower than would be expected in a capitalist economy for a group with relatively high education levels. The Haredim are ultra-orthodox Jews of European origin some of which were present in Palestine (Land of Israel) before the state was established. A pact with the state led to the creation of a “scholar society” (Friedman, 1991) in which most men study in religious institutions rather than work, with basic funding granted by the state. Therefore, they mostly do not play a role in the labor process and occupy the lowest income brackets. The PC are an indigenous minority whose members received Israeli citizenship because they resided within the 1949 borders of Israel. They mostly pertain to the working class and can generally be seen as a peripheral group.

The National-Neo-Liberal Historical Bloc

Material Dimension

The neo-liberalization of Israeli society began in the mid-1980s, with the implementation of the Stabilization Program following the hyperinflation of the early 1980s. This neo-liberalization process included privatizations, retrenchment of the welfare state, liberalization of the financial sector and trade, and the “flexibilization” of labor relations (Shalev, 2000). Neo-liberalization continued through the 2000 decade in which the Israeli economy underwent an economic crisis at least partly triggered by the Second Intifada. Gross domestic product (GDP) growth was hardly positive in 2001 and negative in 2002. Unemployment rose above 10% in 2002 and did not go below this line until 2005 (Bank of Israel, n.d.). The government’s approach to the crisis was clearly neo-liberal, as expressed in the two economic programs designed to deal with it: the Emergency Economic Program (2002) and Israel’s Economic Recovery Program (2003). The first Program froze minimum wage updates and hardened the conditions for receiving unemployment benefits. The second Program was broader and included cuts in unemployment benefits, further restrictions on receiving them, wage cuts, and layoffs of state employees and the nationalization of Histadrut pension funds (as a way to privatize them soon afterward).

The government continued to push neo-liberalization forward by introducing in late 2003 an active labor market program, based on the Wisconsin program (named Mehalev and later Orot LaTaasuka). Private firms were granted authority to train unemployed people to get jobs and could also impose sanctions on them. Moreover, the government deepened the privatization trend of the previous decade (GCA, 2005).

Parallel to these neo-liberal policies, other policies were oriented at investing in ethno-republican issues: allowances, security, and settlements. Friedman and Shalev (2010) find that during 2000–2007 allowances that were distributed based on “loyalty” to the state and its goals (e.g. absorption basket for Jewish immigrants) were cut less than “general” allowance schemes, or not at all. As Figure 1 shows, state expenditure on security issues—grants to discharged soldiers and total security and defense budget—increased throughout the period. Furthermore, despite decisions to freeze it—as approved in the annual Budget Laws during the crisis years and two across-the-board budget cuts (2002, 2004) ⁴ —the security budget continued its rise. This rise can be explained by the combination of developments in the conflict (military responses to the Second Intifada), the readiness of the Israeli public to accept the need to “invest in security” and the power of the “security network”—a network of prominent members of the defense establishment and central actors in the political and civic society (Barak and Sheffer, 2006, see further discussion below). Finally, public investment on housing in settlements in the Occupied Territories increased through 2004 in both absolute and relative terms (see Figure 2).

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Figure 1.

Security Budget and Grants for Discharged Soldiers as Share of State Budget.

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Figure 2.

Crude Public Investment in Housing, Israel, and Settlements.

Group Positions

In order to determine the position of groups relative to the Project, we look at each group from the material and perceptional dimensions. We introduce dynamism to the analysis by accounting for changes relative to the previous decade (1990–2000) and during the analyzed time frame (2001–2006). The analysis begins with groups whose location as associated groups was stable (Ashkenazim), moves to groups with a more complex relation with the Project (Mizrachim, IFSU, NRJ, and Haredim), and ends with those opposed to the Project (PC).

Better positioned in occupational and network terms and better educated than the other groups, the Ashkenazim enjoyed substantial windfalls from the deep neo-liberalization of the Israeli economy which in the first half of the 1990s was accompanied by rapid growth (Shafir and Peled, 2002; Shalev, 2000). The economic crisis of the Second Intifada affected negatively the group’s income but did not change its relatively favorable material position (e.g. Dahan, 2013).

In the perceptional dimension, during the 1990s, the group maintained its previously held leading symbolic position as it supported economic liberalization, the strengthening of civil rights, and the peace process with the Palestinians and the Arab World (Peled, 2008). The rise of the Project as of 2001 that put an end to this liberal “spirit” led to a change in the symbolic status of Ashkenazim. They were now seen as equal to other Jewish groups taking part in the national collective effort to fight an external enemy.

This change was not viewed in negative terms by Ashkenazim because the turn of the century marked a change of heart among this group. Support for civic and political liberalism was substituted by a hard line against the Palestinian uprising and a resurgent nationalism. Nonetheless, the belief in the justifiability of the neo-liberalization of the economy was not abandoned. The rise of the Shinui party in the 2003 elections is particularly indicative of this change-cum-continuation. Shinui’s representation in parliament grew from 6 to 15 seats following a nationalist, neo-liberal, and anti-religious campaign which attracted mainly Ashkenazim (Peled, 2004; Shalev and Levy, 2005). This was not a temporal or party-dependent phenomenon. Following the disintegration of Shinui, the bulk of its supporters turned to the newly formed Kadima party which expressed very similar views (Shamir, 2008).

For Mizrachim, the rise of the Project signified a positive occurrence relative to the 1990s. During that decade, the peace process and economic liberalization caused both economic and symbolic distresses that were responded with ethno-nationalist vigor (Peled, 2004). The rise of the Shas party serves as an indication for this response. In the Project, they found a central element that stood to benefit them both symbolically and materially and with which they could identify, namely, ethno-republicanism. ⁶ Material rewards were provided by expanding security budgets, part of which was directed to the soldiers themselves (see Figure 1). Increased salience of Mizrachim within army ranks that had begun prior to the Intifada translated into higher rewards by this group’s young. This salience was also important for symbolic reasons because it provided the Mizrachim with an unprecedented status of prominent participants in Israel’s security efforts (Levy, 2007a). Finally, the Project’s revival of the Jewish national collective corresponded to ethno-nationalist sentiments in the group.

The neo-liberal pillar of the Project was somewhat more problematic. Cuts in overall state budget, primarily in welfare, and change in welfare provision criteria negatively affected low-income Mizrachim. Yet, the 2002–2003 neo-liberal economic programs were enacted during a period of decreasing income and wage gaps between Mizrachim and Ashkenazim (Dahan, 2013) and the opening of new class mobility horizons. Although these processes did not result in the leveling of the playing field vis-à-vis Ashkenazim, they did give rise to a sub-group of middle class Mizrachim which could seemingly combine the neo-liberal consumerist culture with traditional Jewish values (Ben-Porat and Feniger, 2009; Cohen and Leon, 2008). The emerging rift between the more and less affluent members of the group presented itself in the 2003 elections when the more well-to-do voters of Shas opted to vote Likud, while the poorer segments remained loyal. ⁷ Coalition building (see below) would further underlie this difference. Thus, neo-liberal reforms in 2002–2003 generated the movement of the lower tier of the Mizrachim group to an assistant position within the historical bloc. ⁸ This tier did not become an opposition group because it still shared with the Project the centrality of Jewish identity.

The rise of the Project coincided with a change in orientation within the IFSU group from inward-looking concern with group conditions in the new country during the 1990s to outward-looking interest in national, particularly peace and security, issues (Shumsky, 2001). This change is captured by the decline of the inward-looking Israel BaAliyah party and the parallel rise of the nationalist Israel Beitenu party. Along with the following three perceptional issues, they form the foundations of the IFSU’s alliance with the project. First, the group’s nationalist position (Al-Haj, 2004; Goldstein and Gitelman, 2005; Shumsky, 2001) was compatible with the Project’s ethno-republican worldview. Second, the resentment of “leftist” economic ideologies as a consequence of the experience with communism made the group tolerant if not receptive to neo-liberalism. Third, the group was considered by other Jewish groups as part and parcel of the Jewish collective and its effort to fight against Palestinian terror, despite the religious establishment’s refusal to acknowledge some 30% of the group as Jews (Horowitz, 2003; Kimmerling, 2004).

On the material dimension, army service became an important route for upward social mobility and economic gains (see Levy, 2007a). Moreover, the considerable gap in wage levels between the group and other Jewish Israelis evident in the 1990s—that is, immediately following immigration—was narrowed in the 2000 decade. Many of the immigrants significantly improved their economic situation based on their high educational credentials and highly demanded professional skills and experience (Horowitz, 2003). The improvement was even more salient for the younger generation which had been socialized in Israel (Goldstein and Gitelman, 2005; Shalev, 2012). However, the older and the less skilled among the group did not benefit from these processes and similar to the lower-tier Mizrachim were negatively exposed to the neo-liberal welfare reforms (Horowitz, 2003). Therefore, while the majority of the IFSU were definitely positioned as an associated group, a certain segment retained an assistant position.

The NRJ had been an associated group in the national-neo-liberal historical bloc in its initial stages but later became an assistant group. The peace process’ collapse and the Intifada provided the NRJ with at least two reasons for allying with the emerging Project. First, a tangible threat to the project of settling Jews in the Occupied Palestinian Territories—a predominant concern of the group—was eliminated with the demise of the peace process, and the Project did not aim to restore it. Second, the conflict with the Palestinians provided the NRJ with growing symbolic status both as settlers holding the frontier and because of their rising presence in the military (Levy, 2007a).

Unlike the poorer Mizrachim, the group’s movement to an assistant position did not arise from neo-liberal reforms. State financial support to settlements did not decline (or modestly so) even during the largest cutbacks in state budget (Adva Center, 2014). The movement to assistant position was a product of the Disengagement Plan, promoted by the Project as of 2003, whose aim was a unilateral Israeli withdrawal from some settlements. Yet, similar to the poorer Mizrachim, this did not result in full-fledged opposition. The Project’s ethno-republican perception viewed the NRJ group as part of the Jewish collective (as evacuation of settlements began, they were seen as suffering brothers). The group itself, although mobilizing against the Disengagement Plan, did not resist it violently and furthermore showed clear preferences for ethno-republicanism (i.e. loyalty to the Jewish state and its institutions) rather than ethno-nationalism (i.e. loyalty to the entire Land of Israel) (Herman et al., 2014: 47; Levy, 2007a). In fact, NRJ see themselves (and are so perceived by many Israeli Jews) as the new bearers of republican virtue, mainly by their growing presence among middle and middle-high ranking officers (Kimmerling, 2004; Levy, 2007a).

Similar to the NRJ and Mizrachim groups, the eruption of the Intifada had a positive effect on the relative position of Haredim. The expansion of the “scholar society” during the 1980s and 1990s translated into growing reliance of the group on the ability of its political representatives and religious leaders to exert political power over the government in order to ensure that adequate funding continues, while group autonomy is preserved. This was also the trigger for a rising tide of discontent among secular sectors whose vocal demands toward Haredim to go out to work and take on army service became a prominent feature of Israel’s public arena in the late 1990s. During that time, Haredim that did not serve in the army represented 7%–8% of every cohort (Barda, 2007). These demands culminated in government decision to establish the Tal committee for the regulation of army service/discharge of young Haredim. These external pressures on the group as well as internal ones contributed to an increase in the share of Haredim holding jobs and studying in training centers and academic institutions (Lupu, 2003).

As conflict with the Palestinians broke, the Haredim—although not enjoying the expanding security budgets and not having the symbolic status of soldiers—were still perceived by other Jewish groups as part of the battling Jewish collective. Further developments reinforced this trend. The Tal committee report published in 2000 and a subsequent law passed in 2002 allowed to exempt Haredim from military service, while allowing those who chose so to enroll and broadening the possibility to join the labor market, thus lifting the potential threat of a massive army draft of Haredim. ⁹ This, together with the prominence of the ultra-orthodox Zaka organization in sites of bombing attacks by Palestinians, presented Haredim as participants in the war effort in their own terms (Lee, 2007). Welfare cutbacks, especially child allowances, under the neo-liberal 2002 Emergency Economic Program were detrimental for the income of Haredim, but it was the ousting of the Haredim’s party, United Torah Judaism (UTJ), from the coalition following the 2003 elections which made it almost impossible for their leaders to take care of their material interests. Only the return of UTJ to the coalition in 2005 allowed some damage control from the perspective of Haredim.

The position of the PC was dramatically altered with the turn of the century. Their exclusion deepened, and they were clearly not members of the historical bloc. In the early 1990s, political and civil liberalization raised the symbolic status of the PC. Furthermore, during the Rabin–Peres government (1992–1996), state funds were invested in the PC sector in areas such as education and welfare, although they did not compensate for years of discrimination nor did they make state investment equal (Shafir and Peled, 2002). There was a continuing one-sided dependence of the Arab population on the dominant Jewish center, and the PC were over-concentrated in the low-income service sector and in the construction sector (Al-Haj, 2005).

As non-citizen Palestinians initiated the Intifada in the Occupied Territories, large-scale protest were conducted by the PC within Israel’s borders. This wave of protest and police violent repression in response had disastrous effects on the relations between the PC and Jewish citizens. For Jews, the (limited) legitimation for PC participation in Israeli social, political, and economic life was eroded. For the PC, trust in state institutions was seriously hurt (Peled, 2004, 2008). Clearly, this had material, perceptional, and political consequences. Materially, poverty rates increased and income gaps from Jewish groups reemerged (Shalev, 2012). In the perceptional dimension, the new bloc viewed the PC as part of the Palestinian demographic threat to the Jewish collective as discussed above. PC clashes with the police seem to turn concern into anxiety. Politically, a set of laws were passed resulting in the delegitimization of PC presence in state institutions and in the public sphere (Jamal, 2007). The PC, on their side, articulated a radically different counter-hegemonic project that centered on changing the Jewish character of the State and resisting its characterization as “Jewish and democratic” (Agbaria and Mustafa, 2012; Rouhana, 2006). The PC put forward demands that the state recognize them as an indigenous national minority entitled to collective rights, demands that encompassed the economic, political, and cultural spheres (Jamal, 2007).

Up to this point, we have been concerned with social group positions within or outside the national-neo-liberal historical bloc. Now, we turn to identifying the dominant group of the Project. As argued above, the dominant group has a profound effect on the basic characteristics of the hegemonic project that it leads. Thus, the dual nature of the Project is a product of the duality within the dominant group. We argue that this group comprised business and military elites. The business elite is made out of owners of large business groups and their top managers and managers of large hi-tech and financial firms. Late in the 1990s this group went through internal change as new owners used cheap credit for leveraged buyouts and contributed to the “family” structure of this elite (Aharoni, 2007; Kosenko, 2012). The military elite is made out of Israel’s “security network,” an informal network of actors in the realms of politics and civil society and in the “defense establishment” (Barak and Sheffer, 2006). That is, the group mainly comprised acting and retired security officials.

The Project has been mainly—but not entirely—concerned with looking after the material interests of both elites. The execution of the two economic programs and the resumption of growth under the neo-liberal model primarily benefitted employers whose share of the national income began to increase as of 2003 (see Figure 3). Concomitantly, the 10 largest business “families” increased their market share which by 2006 approached 30% (Kosenko, 2012). The security network was instrumental in preserving large security budgets and further increasing them after budgets were approved (Barak and Sheffer, 2006: 251; Figure 1). Furthermore, as the conflict with the Palestinians became costly for the military in terms of budget and human resources, the security network came up with the Disengagement Plan and eventually convinced Prime Minister Sharon to adopt it (Michael, 2008; Levy, 2007b).

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Figure 3.

Workers’ and Employers’ Share (%) of National Income.

Following the Neo-Gramscian logic, dominant interests were not the only interests taken into account. The construction and maintenance of the bloc required looking after the interests of allied groups as well, primarily the associated groups of Ashkenazim, the upper segment of Mizrachim, and IFSU—all of which pertain to the middle and upper-middle classes. The two economic programs and the resumption of growth were beneficial not only to the business elite but also to these groups (see Figure 4). Additionally, despite benefitting materially and symbolically from their participation in the military conflict against the Palestinians (see above), these groups bore the main burden of the death toll exerted by the military conflict (Levy, 2007b). The Disengagement Plan contributed to the reduction of casualties by reducing the military’s lines of contact with the Palestinian population.

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Figure 4.

Gross Income Change 2003–2006, Employee-Headed Households, by Deciles.

Relations among the two elites (business and security) would seem a priori far from stable but in practice achieved a stable equilibrium during the period under study. Business group leaders refrained from “trespassing” into the realm dominated by the security network, namely, issues of security and peace, thus parting from unsuccessful efforts made by chief executive officers (CEOs) of large firms to promote the peace process during the 1990s (Ben-Porat, 2005). Members of the security network whose interest fulfillment relies on state budget did not block neo-liberal restructuring, most evident in budget cuts, as long as they could safeguard the security budget.

Group coherence was achieved through “policy forums” (Maman, 1997) where encounters between business persons, top managers, and prominent members of the security network took place. Unlike Maman’s notion, these forums were informal in the sense that they did not have as their main target the shaping of policy and were not conducted under state auspices. They relied on the historical relations between the financial and the hi-tech sectors and the military and weapons industry (Nitzan and Bichler, 2002). Casual and planned meetings during these forums further reinforced personal ties and facilitated “exchange relationships” (Maman, 1997: 40). The weight of these forums was most evident by the decision made by Prime Minister Sharon to present the Disengagement Plan in the most prominent of these forums, the Herzliya Conference.

Historical Bloc Emergence and Development

The national-neo-liberal historical bloc went through two phases. The Project initially emphasized a strong ethno-republican identity while neo-liberalism held a subsidiary role. In this first phase, all Jewish groups were equally positioned in the historical bloc as associated groups. In the second phase, the neo-liberal pillar became more substantial but did not push aside ethno-republicanism. The historical bloc—while not changing in terms of the groups comprising it—went through internal reorganization where some groups remained positioned as associated, while others became assistant groups. Demonstrating these changes and bloc cohesiveness in the second phase adds a political dimension to the analysis provided so far which is vital for the understanding of the combination of neo-liberalism and ethno-republicanism in Israel.

In its first phase, following Sharon’s victory in the special elections for prime minister in February 2001, a broad coalition was constructed, including almost all Jewish parties (see Table 1). Parties representing the PC were cast into deep opposition after enjoying an improved political position during the 1990s (Ghanem, 1997). The coalition’s stability was derived from the sense of all parties that the main concern was the national struggle against the (non-citizen) Palestinians.

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Table 1.

Coalition Composition (Main Parties).

First phase (2001–2003)	Second phase (2003–2006)
	2003–2004	2005–2006
Likud	Likud	Likud
Labor (November 2002)	Shinui (December 2004)	Labor (November 2005)
Israel BaAliyah
Shas
NU-IB (March 2002)	NU-IB (June 2004)
NRP (joined April 2002)	NRP (December 2004)
UTJ		UTJ

NU-IB: National Unity-Israel Beitenu; NRP: National Religious Party; UTJ: United Torah Judaism.

Coalition exit dates in italics. Labor’s exits were due to upcoming elections.

The neo-liberal economic programs of 2002 and 2003, the results of the 2003 elections, and the introduction of the Disengagement Plan led to bloc reorganization. The Shas party, which represents mainly working and lower-middle class Mizrachim, opposed the 2002 economic program while still in government and did not enter the 2003 coalition. In the 2003 elections, Sharon’s Likud doubled its seats in parliament and became the largest party, winning twice as much seats as the second largest party, Labor. A significant part of this strength was derived from the more affluent sections of the Mizrachi group who deserted Shas and from IFSU who deserted the sectorial Israel BaAliyah (Al-Haj, 2004; Shalev and Levy, 2005). The latter party merged with Likud promptly after the elections. The new coalition was center right and middle class in nature. The Disengagement Plan, introduced in late 2003, was opposed by the parties representing the NRJ (National Religious Party and National Unity-Israel Beitenu). After a long period of opposition within the coalition, these parties left the government in 2004. Shinui also left the coalition later that year, for state-religion issues, but remained supportive of the government’s security and economic policies. Labor, which shares a similar constituency with Shinui (middle and upper-middle class Ashkenazim), replaced it in the coalition along with UTJ whose entrance was facilitated by the exit of the anti-religious Shinui. Thus, the coalition’s composition came to emphasize the role of Ashkenazim, middle class Mizrachim and IFSU, and Haredim as associated groups in the national-neo-liberal bloc, while poorer Mizrachim and IFSU and the NRJ were cast to an assistant position.

From a neo-Gramscian perspective, particular attention should be given to the party leading a hegemonic project. The party is at the same time the expression of the political will of its supporters and the creator of will through its organizational and ideological activities. Indeed, Gramsci not only designates this role primarily to the revolutionary communist party but also acknowledges the ability of the bourgeoisie to use other, non-communist parties to forward its hegemonic project (Gramsci, 1971: 155–156).

During most of the period, the Project was promoted by sections in various parties. The Likud did not become the party leading the Project, despite leading the government during the entire period. It was too weak in the first phase (less than a sixth of parliament seats until 2003) and became internally split in the second phase following the introduction of the Disengagement Plan. Yet, Sharon’s defeat in the Likud’s party congress vote over the Plan in May 2004 initiated a sequence of events which culminated in December 2005 in the establishment of a new party, Kadima, by Sharon and his followers from Likud and by some leaders of Labor who abandoned that party. Kadima’s worldview conveyed the foundational ideas of the Project: neo-liberal economics and Jewish nationalism which are based on security rather than territorial considerations and thus promote a policy based on separation from the non-citizen Palestinians (Kadima, 2006). Moreover, it was widely supported by voters. In the last election survey before Sharon’s departure from the political scene because of health problems, Kadima was predicted to obtain more than a third of parliament seats, more than doubling the Labor’s expected seats and tripling the Likud’s expected seats (Verter, 2006).

Conclusion

Following the Second Intifada and the demise of the Oslo process, Israel adopted a combination of increasing ethno-nationalism, deepening neo-liberalism and military conflict. Most of the main approaches that analyze Israeli society have difficulties in providing a comprehensive answer to this combination. These difficulties arise either because of the tendency to consider the relationship between the symbolic dimension and social groups as relatively fixed (Ben-Porat, 2005; Ram, 2008; Shafir and Peled, 2002), because of assuming that the material dimension has a determinant role (Peled, 2008; Shafir and Peled, 2002), or because they focus on specific aspects such as society-military relations or electoral behavior (Cohen, 2000, 2006; Levy, 2007a, 2007b; Shalev and Levy, 2005). By explaining the above-mentioned combination as the emergence of a hegemonic project sustained by the consolidation of a historical bloc led by business and military elites and connecting Ashkenazim with most other Jewish social groups, NGA provides a better framework for analyzing the intersection between politics, economics, and society during this period.

The national-neo-liberal hegemonic project we identified not only promoted neo-liberal reforms but also provided generous security budgets to the military as well as to soldiers. In the perceptional dimension, it revived republicanism as ethno-republicanism and maintained neo-liberal principles as guidelines for governing the economy. Following the introduction of the neo-liberal economic programs in 2002 and 2003 and the Disengagement Plan in 2003, the bloc went into internal changes that pushed some groups comprising the bloc into a position of assistant groups (lower class Mizrachim and IFSU, NRJ) while leaving others as associated groups (Ashkenazim, middle class Mizrachim and IFSU). Nonetheless, the overall composition did not change. This stability allowed waging an ethno-national war while promoting the neo-liberalization of the Israeli economy.

As we saw, NGA is able to explain the co-existence of these three because of its dynamic and open approach to the relationship between the material, the symbolic, and the political dimensions. For NGA, the material dimension is central, but it is not determinant. Moreover, the different roles of the social groups (as dominant, associated, assistant, or opposition) and their positions at the symbolic and political dimensions are not a priori established, not fixed; they are unique to the characteristics of the particular hegemonic project and the historical bloc.