When Ariel Sharon and his 1,000-strong military escort marched to the Temple Mount/Noble Sanctuary in Jerusalem on 28 September 2000 (or 28 Elul 5760), triggering the second intifada, the former general was almost universally considered a political has-been.footnote1 Well into his seventies, he was then the acting chairman of a crisis-ridden, medium-sized political party (albeit the country’s second largest), wherein he was overshadowed by the younger and more popular Benjamin Netanyahu. Only a few months later, Sharon won a landslide in the prime ministerial elections, and in 2003 led his party to a stunning victory that doubled its Knesset representation. How should we understand this transformation?

In The Eighteenth Brumaire of Louis Bonaparte, Marx demonstrates how, as he put it in the preface to the second edition, ‘the class struggle in France created circumstances and relationships that made it possible for a grotesque mediocrity to play a hero’s part’. Sharon is certainly not a grotesque mediocrity. He is a shrewd and cunning politician, and was one of Israel’s most distinguished military field commanders. He has a clear strategic vision for his country, which he has pursued with skill and determination. Since his election in February 2001, he has proved himself a very effective leader, capable of transforming both Israeli and Palestinian societies in ways that were considered impossible only a short time before. Nevertheless, the circumstances of Sharon’s rise to power and the policies pursued by his government may be usefully illuminated by analogy with those of Louis Bonaparte in Marx’s analysis. As I understand it, Marx’s key argument is that the class struggle in France had been stalemated in the late 1840s and early 1850s, forcing the state, in the person of Louis Bonaparte, not only to govern France but to rule it as well.footnote2 The state then used its power to promote the economic programme of the French bourgeoisie while denying their liberal political and cultural aspirations. (It also engaged in an aggressive foreign policy that led to a disastrous defeat by Germany in 1870.) This phenomenon—a state which serves the economic interests of the business class, while trampling on its declared political and cultural agenda—is precisely what has been taking place in Israel since February 2001.

The most puzzling thing about Sharon’s policies since he took office is not the fact that his government is engaged in a war of ‘politicide’ against the Palestinians.footnote3 It is rather that it is simultaneously engaged in an economic onslaught against all but the very wealthiest Israelis. For most of its history Israel has pursued an aggressive policy towards the Palestinians and the surrounding Arab states—but, partly in order to mobilize effectively behind that policy, it also promoted a corporatist political-economic system, in which the profit motive was tempered by national considerations.footnote4 Forged in the context of settler struggle with the Palestinians, the Israeli state—highly intrusive but formally democratic—was intensively engaged in the control and deployment of societal resources, both directly and through the umbrella labour organization, Histadrut. A pillar of pre-statehood Zionist colonization, the Histadrut also possessed an economic empire encompassing, at its height, agricultural, manufacturing, construction, marketing, transportation and financial concerns, as well as a whole network of social-service organizations. Until the 1990s this conglomerate controlled about 25 per cent of the economy and employed around a quarter of the labour force. A roughly equal share of the economy, plus virtually all land, was owned directly by the state. During the four-and-a-half decades of Labour rule (1933–77), this construct played a crucial role in maintaining the privileged position, and political and cultural hegemony, of a large segment of the veteran Labour Zionist ashkenazi community.

Ironically, it was this privileged sector that first began pressuring the state to liberalize the economy. By the mid 60s, the initial phase of Israel’s post-1948 economic development—rapid growth, fuelled by massive immigration and gift capital, in the form of German reparations and donations from world Jewry—had been exhausted. A ‘crisis of full employment’ had developed, threatening to undermine state and Histadrut control over the labour market. The state responded with a two-pronged move: it sharply reduced its own expenditures, primarily in the construction of public housing; and, for the first time, opened the ‘Jewish’ labour market to Palestinian citizens. The spending cuts plunged the Israeli economy into the worst recession in its history—still known in Israel as ‘The Recession’—but a swift recovery took place following the territorial conquests of the 1967 war.footnote5

The 1967 war and occupation of the Palestinian territories inaugurated the second phase of Israel’s economic development. Not only were the domestic market and labour pool expanded significantly, with the addition of one million Palestinians, but the French arms embargo, imposed on the eve of the war, gave rise to Israel’s military-industrial complex. The mostly state- or Histadrut-owned arms industries became the engine pulling the Israeli economy behind them, employing 25 per cent of the manufacturing labour force in the peak year of 1982–83. Though they benefited greatly from the increase in the global arms trade in the 70s and 80s, they were primarily sustained by Israeli defence expenditures, which skyrocketed after the 1973 war with the onset of significant us military aid.footnote6