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The following article summarizes Netanyahu’s long history of privatizations made in the
Israeli economy, including his most recent reforms.

Netanyahu's economy: 'The third phase'
By Daniel Gutwein, Haaretz, July 5, 2009
Do the economic policies of Benjamin Netanyahu 2009 contradict those of Netanyahu 2003, as some
economic commentators maintain? The answer is affirmative only if the question is asked with reference to
the means used to implement such policy. However, if the analysis is broadened to include his policy goals
as well, then the answer will be negative. Constant change is the only constant in Netanyahu's economic
policy - namely, changing the means he uses to attain his policy goals. Seemingly, the policy followed by
his present government is diametrically opposed to that spearheaded by Netanyahu when he served as
finance minister under Ariel Sharon, which in turn appeared to contradict the policy of Netanyahu's first
government, of 1996-99. Yet, what all the changes together suggest is that Netanyahu is a consistent
adherent to the principles of neo-liberal economy, adapting them to the different stages of Israel's policy of
ongoing privatization. However, these stages have been ignored by the commentators.
The initial stage of Israel's privatization revolution, after 1977, was marked by sectorialization, which
helped the right cope with two obstacles faced by the policy of privatizing welfare services: A shortage of
private capital, and the fear of hurting the lower classes that comprised a large portion of right-wing voters.
The different sectors - such as Shas, the ultra-Orthodox, the settlers, Russian immigrants and others -
consisted of combinations of political groupings and service providers that allowed the right wing to
liquidate the welfare state while offering its supporters partial substitutes in a manner that increased their
affinity for the right. The first Netanyahu government was based on a "coalition of sectors," which also
served as the basis for its economic policy. Following budgetary cuts, to weaken governmental services as a
condition for privatizing them, Netanyahu further degraded the welfare services by substituting them with
services applied sector by sector, Shas being the notable example. Thus, although the sectorial services
retained the appearance of being public, and seemed to run counter to neo-liberalism, they in fact served it.
The second stage in the Israeli privatization regime, which began in the late 90s, was that of the oligarchs.
The oligarchical dismantling of the Israeli state economy brought about the normalization of the Israeli
privatization project. Sectorialization became a redundancy, as capital strove to enhance its control over the
government, resulting in a conflict with the sectorial establishments. Indeed, the maturation of the
oligarchic stage, during Sharon's tenure, was reflected in a decline in sectorial power - as evinced by the
fading away of the Russian parties and the eviction of Shas from Sharon's first government as well as the
fact that it was not co-opted into the second. As finance minister, Netanyahu aligned his economic policy to
the oligarchic stage of privatization. His criticism of state involvement in the economy was actually the
right's criticism of sectorial economy. Accordingly, Netanyahu strengthened the power of capital,
deepening privatization and undermining sectorial power by slashing civil service budgets and allowances.
Thus, during his stint as finance minister, Netanyahu brought together the means and the goals of his policy
with neo-liberal principles, only to go back and separate them during his second government.

The lesson Netanyahu drew from his failure in the 2006 elections was that the privatization regime's
oligarchic nature generates alienation among supporters, and thus weakens his political stability. In
addressing this problem, in 2009, Netanyahu is taking the privatization regime to its third stage, that of the
"illusionary plunder." This latest strategy, which was also followed by Margaret Thatcher when she was
British prime minister, is designed to recruit broad public support for privatization in return for temporary
morsels of privatized property. Such is the logic behind the idea, advocated by Netanyahu and his
associates, of privatizing Bank Leumi by distributing its shares to the public. The same goal stands behind