Israel's New Man in Washington

Is Ron Dermer too right wing to win friends and influence "allies" in the White House?

There's a new big macher in town. On Tuesday, July 9, Israeli Prime Minister Benjamin Netanyahu officially named Ron Dermer to be his next ambassador to Washington, formally bringing current ambassador Michael Oren's four-year tenure to an end in the fall. In replacing Oren with Dermer (full disclosure: Oren was my professor in graduate school at Harvard University, and we have maintained a good relationship), Netanyahu is replacing one American-turned-Israeli with another, but that is where the similarities end. Dermer will have big shoes to fill, as Oren has done an admirable job as Israel's ambassador to the United States during a time that has been fraught with potential peril for the special relationship between the two countries. Although Dermer will have some advantages that Oren did not, he also has a history of his own that must be overcome.

While Israeli envoys have traditionally reported to the Foreign Ministry, Oren has been in the unique position of bypassing traditional channels and reporting directly to Netanyahu. This is because Oren didn't come from within the ranks of the Foreign Ministry and so wasn't in any way beholden to former Foreign Minister Avigdor Lieberman. But it's also an indication of how far the Foreign Ministry has fallen out of favor under Netanyahu's purview. Netanyahu has sidelined the Foreign Ministry and has run Israeli foreign policy directly out of his office, using personal aides for important diplomatic tasks. While some analysts, such as Aaron David Miller, claim that Oren is outside Netanyahu's inner circle and thus has had a diminished role, there is no doubt that the outgoing ambassador has played a crucial role in serving as a critical communicator between U.S. President Barack Obama and Netanyahu.

One need only look at the results of the past four years to see how well Oren has comported himself in his position. During Obama's and Netanyahu's respective first terms, all manner of analysts were predicting an Israeli strike on Iran and a policy of unfettered settlement building, both of which were going to lead to terrible clashes between Washington and Jerusalem. Indeed, when U.S. Vice President Joe Biden was embarrassed during a trip to Israel by a surprise announcement of new building in East Jerusalem, the immediate fallout was swift. Yet the fears over Iran and exploding settlement growth were never realized, and the actual working relationship between the United States and Israel is as strong as it has ever been in terms of security cooperation and coordination. One has to assume that Oren has played a key role in all this by communicating to the Israeli government the mood in Washington and the dangers inherent in moving unilaterally against Iran or sabotaging the peace process.

One of the Israeli ambassador's primary tasks is making sure that the relationship between Washington and Jerusalem is as smooth as possible, and not only is the institutional relationship humming along, but the personal relationship between Obama and Netanyahu has immeasurably improved over time. During Obama's first term, low points included Netanyahu publicly lecturing the U.S. president while the cameras were rolling during Netanyahu's visit to the White House in May 2011, and Obama later returning the favor by denigrating Netanyahu over an open microphone while talking privately to then French President Nicolas Sarkozy. In contrast, during Obama's trip to Israel this past March, the two men joked with each other, smiled, and seemed far more comfortable than they ever had before. Although the credit for this cannot be laid entirely at Oren's feet, one should not overlook his part in it either after four years of his public insistence that Obama and Netanyahu have a solid working relationship.

The other major task that an Israeli ambassador has is serving as a representative to the American Jewish community, and in this Oren has been peerless. Aside from speaking perfect, American-accented English (as befitting someone who was born and raised in New Jersey and has degrees from Columbia and Princeton universities), Oren is uncommonly eloquent and erudite, with a gift for public speaking. On college campuses and in synagogues of all denominations, Oren is an extremely popular figure, and he has pushed the Israeli government on issues important to American Jews, such as resolving the controversy over the Women of the Wall prayer group seeking to hold female egalitarian prayer services at the Western Wall. He is also a talented communicator in the mass media to the wider American public on subjects concerning Israel's security and interests, and he has done yeoman's work in explaining and defending Israeli government positions. Given Oren's street cred as a popular, respected historian and someone whose publicly stated views before his appointment as ambassador tended to be more dovish than Netanyahu's, Dermer is going to be fighting an uphill battle to match Oren's esteemed reputation and effectiveness as an advocate for his country.

Like Oren, Dermer is no stranger to the United States, having grown up in Florida in a locally prominent political family (his father and brother both served as mayor of Miami Beach). Dermer went to the University of Pennsylvania's Wharton School and became involved in Republican politics before moving to Israel in 1996 and going to work for politician Natan Sharansky and then Netanyahu. But unlike Oren, Dermer has a history with the Obama administration that must be overcome. Whether the charge is true or not, there is a widespread perception that Dermer was behind a covert campaign on Netanyahu's part to support Republican candidate Mitt Romney in the 2012 U.S. presidential election. This means that despite having the complete confidence of Netanyahu -- which is the prime motivating factor behind his appointment -- Dermer walks into a situation of immediate distrust and suspicion when it comes to the administration and Democrats in Washington. His history of working for political consultant Frank Luntz and the Republican Party won't help. In addition, where Oren is generally viewed as smoothly diplomatic, Dermer has a reputation for abrasiveness. His December 2011 letter to the New York Times explaining Netanyahu's refusal to write an op-ed for the newspaper's prestigious opinion section, while red meat to Israel's more hawkish supporters, is not the type of communication that will win him friends in the White House or make it easier for him to work with administration officials.

The flip side is that, in some ways, Dermer is set up to succeed in a way that Oren never was. Aside from his deep connections all over Washington from his time working under Luntz and his stint in the mid-2000s as the man in charge of economic affairs at the Israeli Embassy in Washington, Dermer also has lots of firsthand experience with the upper echelons of the Obama administration, having served as Netanyahu's top aide and right-hand man for the last four years and heavily participating in diplomatic discussions between the two countries. Dermer also benefits from an extraordinarily close relationship with Netanyahu, which allows him to speak with an authority that is unusual: There is no daylight between him and the prime minister. Any need there may have been in the past for back channels -- a role that previously would have been filled by Dermer himself -- will be entirely eliminated with Dermer at the helm.

Perhaps most of all, Dermer will benefit from a new environment on the peace process front. Netanyahu has demonstrated a willingness to be more pragmatic on the two-state solution since his re-election in January, and it is possible that he has reached a tipping point on wanting to negotiate in earnest with the Palestinians. It will make Dermer's job a lot easier if the next year or two sees Israel cooperating with U.S. Secretary of State John Kerry's fervent efforts to bring both parties back to the bargaining table with a renewed push for an Israeli-Palestinian peace agreement. Rather than having to deflect and mollify the White House's anger at Netanyahu's intransigence, Dermer might find himself on the receiving end of a much sunnier reception from the Obama administration. Paradoxically, it'll be easier for Dermer to play the bad cop on occasion when it comes to peace process specifics if his government has built up a reservoir of goodwill by making concessions requested by Washington. Even if Dermer has been viewed in the past as an obstacle to a two-state solution by arguing against it at every turn, events may be overtaking that reputation by making it irrelevant.

Dermer may not have the same diplomatic tact or communications deftness as Oren, but his strong relationship with Netanyahu and events beyond his control might be all that he needs to be successful. If he can transition from his current mode of looking out first and foremost for his boss's interests to looking out for Israel's interests as a whole -- and there is no reason to think that he can't -- he will be primed for a successful stint as Netanyahu's man in Washington. While Israel is about to lose its most talented English-language spokesman, the blow will feel less acute if Dermer is able to use his advantages to Israel's favor.

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Where Apartheid Lives On

Mandela helped South Africans find their way to political freedom. But they still haven’t managed to overcome the economic legacy of the old regime.

There was a time when news from South Africa regularly painted a refreshing picture of hope for the future. The 1994 fall of the racially segregated system of apartheid, combined with the establishment of democratic institutions anchored in one of the most progressive constitutions worldwide, gave hope that it was possible to move from a system of exclusion and inequality to one of inclusive participation and equality. And for a while, the country's mineral-based economy provided respectable economic growth that -- even if not spectacular by East Asian Tiger standards of 8-10 percent per year -- was still able to support rising standards of living for broad segments of the population.

Now the bloom is off. The past year has seen a troubling rise in fighting and strike-related activities reminiscent of the violent clashes between miners and police during the apartheid era. In August 2012, labor unrest at the Marikana platinum mine left 34 protesters dead at the hands of police forces. For some, this incident represented a telling erosion of the 1994 "grand bargain" between the (predominantly white) Nationalist party and the (predominantly black) liberation movements. For others, the subsequent labor strife has brought to light serious weaknesses in the economy that the African National Congress (ANC)-led government seems powerless to confront.

Since then, labor unrest has spread from the platinum mines to gold, iron-ore, chrome, and coal producers. Farm workers and truck drivers have joined the protests. Mining strikes alone caused more than 1 billion dollars in lost output, and by the first quarter of 2013 the economy had slowed to a 0.9 percent rate of growth (sharply down from the 2.6-3.1 percent rates achieved during 2010-2012). With the country's currency, the rand, falling to its lowest value since the early days of the global financial crisis, the economy appears to be spiraling downward and out of control. By mid-May, South Africa's president, finance minister, and top central banker had each acknowledged the nation's darkening economic prospects and urged workers and employers to end the vicious circle of unauthorized strikes and excessive pay-raise demands.

How has it come to this? While the country has made remarkable progress in dismantling the political and social remnants of apartheid, many of that system's economic institutions, practices, and mindsets remain largely intact. As Anne Applebaum has observed, apartheid was, among other things, an elaborate system of job protection for poorer whites, guaranteeing them high wages and benefits. Some aspects of that system now live on -- but with black interest groups privileged where white ones were before. It exists in powerful trade unions (now black rather than white) aligned closely with the dominant political party (ANC rather than the Nationalist Party), and crony capitalism assuring vast fortunes to political insiders. The all-important mining sector is still controlled by a small group of investors, including a new black elite empowered by the country's controversial affirmative action program, that are more interested in profits than working conditions. This isn't to say that whites don't retain considerable economic power in some sectors, though. The largely white-dominated commercial agricultural system remains largely unchanged, preventing it from absorbing many of the unemployed who are ordinarily found on smaller farms and plots of land.

Under white rule, apartheid's economic institutions produced an initial period of high investment and economic growth in the 1960s and into the 1970s. However, its economic institutions prevented the channeling of resources into their most productive uses, and the economy stagnated as a result. (Sanctions helped, of course). Ironically, a similar process is playing out today in South Africa.

The signs are apparent everywhere. By one standard measure of inequality, the Gini coefficient, South Africa stands as one of the most unequal countries in the world. The top 10 percent of the population accounts for 58 percent of the country's income, while the bottom 10 percent accounts for 0.5 percent. The bottom half of South Africans own less than 8 percent.

Also contributing to the country's glaring income disparities is the economy's seeming inability to create sufficient jobs. The unemployment rate has exceeded 20 percent for more than 15 years, and is currently around 25 percent. Young people (aged 15-34, mostly black Africans, and mixed-race persons) dominate the unemployed, accounting for around 70 percent of the total. Youth unemployment is around 51 percent.

Chronic unemployment has made it almost impossible to reduce the country's rate of poverty. While overall income poverty has fallen slightly, it persists at acute levels for the black and non-white racial groups. Poverty in urban areas actually increased in the 10 years following the fall of apartheid.

The harsh reality is that South Africa operates as a dual economy: In some ways it is strongly positioned globally with its world class companies competing in finance, engineering, construction and synthetic fuels. Yet the country's educational system is not providing workers with the skills and expertise to compete with workers in China and India in many labor intensive areas.

No doubt some of the skill shortage can be attributed to the deliberate exclusion of black people from the educational system and from skilled occupations under apartheid. During apartheid, education was strictly segregated; spending on white students was ten times higher than for black students. Today, though all groups theoretically have equal access to education, the families of poorer black families cannot afford the tuition charged by the better schools. Furthermore, the quality of education freely available to the poorer segments of South African society is regularly ranked as one of the worst in the world by organizations such as the World Economic Forum. The result is increased polarization with rising incomes for the educated, formal sector workers. The undereducated, burdened by stagnant wages and low productivity, are forced to take refuge in the informal economy.

But there's another equally persuasive explanation for the country's dual economy, one that has become increasingly topical since the onset of labor strife. That is South Africa's industrial relations structure, another (albeit indirect) remnant of the apartheid era. While many developing countries have a nascent union movement, South Africa's unions under apartheid developed along more advanced industrial country lines. Their strong adherence to minimum wage laws in the post-1994 era has stifled the development of many low-cost, labor-intensive industries that would normally employ large numbers of semiskilled and unskilled workers. 

Union power, together with the government's attempts to respond to the demands of its "working poor" constituencies, have resulted in a pattern of wage increases that are above the rate of inflation and unrelated to productivity. With labor costs rising faster than productivity, many smaller labor-intensive firms that are facing competition from low-cost imports have found themselves compelled to go out of business or risk the chance of prosecution for non-compliance. Many have been shut down by the authorities.

With productivity's role diminished in the determination of wages, factors such as labor market imperfections (price and wage rigidities, entry restrictions, employment protection legislation) have combined with the collective bargaining framework to reduce labor mobility and thus job creation.

But rather than focus on labor-market reforms to better link wages with productivity and reduce job entry impediments, the government has approached the problem through broad sweeping plans that are strong on vision but weak on details and means of implementation. In 2010 the New Growth Path (NGP) was introduced with the 2020 target of reducing the unemployment rate from 25 percent to 15 percent, via the creation of 5 million new "decent" jobs.

Though most of the jobs will be in the private sector, the private sector has been highly skeptical of the plan, claiming that it lacks credibility. Specifically, to create five million jobs by 2020, South Africa would have needed a growth rate of at least 5 percent per year just to make a dent in current levels of unemployment, and considerably more to meet the plan job creation targets. The likelihood of that being achieved is pretty low; according to the International Monetary Fund, South Africa's GDP is projected to stay well under 4 percent until 2018.

One hears little today of the NGP. Instead the government has moved on to a new plan, the National Deployment Plan (NDP), with similar grandiose promises of full employment -- this time by 2030. This effort would require the creation of 11 million extra jobs, again a hardly feasible goal.

Why the diversion of attention from proven labor market reforms to questionable massive state intervention to solve the country's economic problems? One possible explanation harks back to mindsets formed during the apartheid days. South Africa under apartheid fancied itself as a developmental state, one that aspired to use government planning and focused public policy to accelerate economic growth along the lines successfully implemented at the time in many of the successful East Asian countries. 

Many of apartheid's key development state agencies are still in place, including the Industrial Development Corporation, the Land Bank, and the Southern African Development Bank. Many in the government think that they can use these agencies to power a new developmental state -- now embedded in a democratic, non-racial framework -- that can succeed where the apartheid variant failed.

There is little reason to believe they're right -- even though conditions are indeed different this time around. The apartheid developmental state was unsustainable because it was premised on excluding the black majority, leaving the apartheid state virtually bankrupt by the late 1980s. The developmental states of East Asia achieved their rapid industrialization during the post-war pre-oil crisis era of the Bretton Woods international economic order which for a generation delivered unprecedented sustained non-inflationary growth in the world economy, accompanied by a tolerance of tariff and non-tariff barriers. The contemporary world economy of highly competitive export markets, one marked by lower overall world economic growth, calls for open liberalized markets. By moving in the opposite direction, the developmental state is not a suitable or feasible path for South Africa to take at this time.

Will the post-apartheid dream of freedom, equity, tolerance, multi-racial harmony, and a more prosperous South African existence come to an end, undermined by a failed economy unable to eliminate the vestiges of apartheid? Or will the government muster up the courage to effectively confront the many problems it faces. One hopes it will, but to date the authorities are providing little cause for optimism. As one wise observer put it in the spirit of Nelson Mandela:

As a country, what we are called upon to do is to think and act collectively... and most important of all, change our national political behavior in ways that are properly aligned to our national strategic goals.

How wonderful it would be if the country could return to Mandela's dream.