Israeli Prime Minister Ehud Barak postponed this week's cabinet meeting from Sunday to Tuesday in an effort to resolve the crisis prompted by the Shas Party's announcement that it is leaving his government. Shas (Sephardi Torah Guardians), with 17 seats in the Knesset, is Israel's third largest party and the second largest in the current government after Barak's Labor/One Israel. It is an ultra-orthodox religious party whose supporters are mainly poor and working class Jews whose families came to Israel from Middle Eastern countries (Mizrahim).

The cabinet crisis was prompted by the refusal of Minister of Education Yossi Sarid to allocate the funds Shas demanded to operate its independent network of schools. Sarid is the leader of the Meretz Party, whose supporters are primarily upper middle-class, secular, Euro-American Jews (Ashkenazim). Sarid has dug in his heels and refused to attend a meeting to defuse the crisis and keep Shas in the government.

International media attention last week focused on diplomatic activities: the Palestinian-Israeli negotiations outside Washington; the meeting between Presidents Clinton and Arafat; and the announcement that Secretary of State Madeleine Albright will travel to the Middle East to explore the possibility of arranging a Barak-Arafat-Clinton summit to secure a final status agreement between Israel and the Palestinians before Clinton leaves office. Ultimately the cabinet crisis may have more influence on Israel's capacity to reach any agreements with its Arab neighbors. Barak must keep Shas's loyalty if he is to retain a "Jewish majority" in the Knesset for any agreements he reaches with the Palestinians or Syria. More importantly, the lukewarm attitude of Shas supporters towards the "peace process" is an expression of the deep divisions among Israeli Jews.

Sources of Shas's Discontent

Shas is unenthusiastic about the "peace process" because it deeply distrusts the elite Ashkenazim of the Labor and Meretz parties. Former Prime Minister Shimon Peres and his associates, especially members of the business elite, promote the peace process as a regional diplomatic extension of Israel's integration into the global economy. They hope peace will consolidate Israel's military superiority, give Israel access to the markets, resources and cheap labor of the Arab world, and normalize a European-style secular culture. Shas supporters are not enthusiastic about these goals.

Mizrahim now comprise about 45 percent of Israel's population. Many detest the Labor Party and Meretz. When Mizrahim arrived in Israel in the 1950s and 1960s they were typically sent by bureaucrats of Mapai, Labor's predecessor, to reside in cooperative farms, "development towns" located in areas formerly populated by Palestinian Arabs far from the centers of Jewish population, Jewish culture and economic opportunity, or other undesirable locations. Mizrahim have always had lower levels of education, healthcare and income than Ashkenazim in Israel. Their culture was disparaged by the country's historic leaders. Israel's first Prime Minister, David Ben-Gurion, referred to them as "human dust." Golda Meir said they were not "real Jews" because they don't speak Yiddish. Some Mizrahim developed harsh anti-Arab attitudes in order to "prove" to Ashkenazim that they were not Arabs.

Ashkenazi moralists like Yossi Sarid complain loudly that Shas is corrupt, pointing to the conviction of former Shas leader Arye Deri on charges of mishandling government funds. Shas is indeed corrupt. But no one has demonstrated that its corruption is substantially greater than that of other Israeli parties. Shas supporters argue that harping on this question is simply another expression of Ashkenazi racism.

The historic grievances of Mizrahim have led most of them to vote for the Likud since the 1970s. Since its establishment in 1984, Shas has won the support of ever larger parts of this constituency. Nonetheless, Shas spiritual leader Rabbi Ovadia Yosef, has forthrightly declared that it is permissible to trade land for peace in both the West Bank and the Golan Heights because peace will save lives. Saving human life is the supreme value of Jewish law and supercedes other commandments such as settling the land of Israel. Although Shas voters are intensely loyal to Rabbi Yosef, many are not attracted by the Lithuanian-style (anti-Hasidic) ultra-orthodoxy he has adopted, which is alien to their religious and cultural heritage. They tolerate, but are not enthusiastic about, his positions on the peace process. They support Shas as an expression of ethnic pride and power and because Shas provides a network of social services--schools, day care centers, clinics--that they badly need.

Mizrahim in Israel's Neo-Liberal Economy

These services have become increasingly important. The social gap between Shas's core supporters living in development towns and urban slums and middle-class Ashkenazim has widened since Israel adopted neo-liberal economic policies in 1985. These policies led to sharp cuts in government expenditures on health, education and welfare and restructuring of the economy. Historically, many Mizrahim were employed in textile mills, food processing plants and other "old economy" manufacturing enterprises that have closed down or downsized as a result of Israel's integration into the global economy and the shift toward high-tech industries. While the national unemployment rate is about nine percent, unemployment in the development towns is 50 to 100 percent higher.

As a result of the peace agreements with Egypt, Jordan and the Palestinians, Israeli firms, especially apparel manufacturers, that previously operated in development towns have moved their operations to Jordan and Egypt or subcontracted work to Palestinians in the West Bank and the Gaza Strip. In 1998 and 1999 alone, Israeli firms established 30 factories in Jordan employing 6,000 workers and four in Egypt employing 3,000 workers. The largest Israeli employer in Jordan and Egypt is the Delta Galil textile firm, which employs 2,000 workers in two plants in Egypt and 1,600 workers in one plant in Jordan. The Barak government has been anxious to facilitate employment of Jordanians and Egyptians in Israel to consolidate the peace. In March a protocol was signed to permit employment of 200 Jordanians in Eilat. This is part of a broader project to integrate Eilat with the neighboring Jordanian city of Aqaba.

Shas and the "Peace Process"

Here lies the link between Shas's budget demands and the peace process. The Shas constituency is suspicious of the peace process because they have not benefited economically from it and they do not identify with the European-style secular culture of those who are promoting it. Shas leaders insist that their schools be fully funded because this is the source of their power and their constituents need protection from the economic consequences of peace between Israel and its Arab neighbors. If Shas receives sufficient government funds to support its social service network, it is prepared to support a land-for-peace deal with the Palestinians and the Syrians. If not, it has no problem seeking to join a Likud-led government that will deliver the goods.