I am in Israel today, where — strange to say — the economy is doing well.  Given the crises and slowdowns everywhere else you look, this is remarkable.  Part of the reason for success is Israel’s diversified economy — agriculture, engineering advances, and high tech/information technology, all of which have helped reduce Israel’s demand for scarce water and energy while bringing in foreign exchange.  So is all well?  Unfortunately, not.

First, like everyplace else in the world, inequality is growing, as those profiting from globalization leave everyone else behind.  Last summer, there were huge demonstrations in Israel by ordinary Jewish citizens protesting that rents had grown unaffordable.  The government blinked and promised new construction adn rent regulation.  But at the end of the day, the question for all industrialized economies is how much they will either redistribute the gains of their big economic winners to everyone else, or let the majority of their workers suffer from stagnant wages and try to justify the increasing inequality.

Another approach is to distract people from economics with nationalist and religious rhetoric.  Yesterday was Jersualem Day in Israel, and larger than ever crowds dominated by conservative religious and nationalist groups marched through the city.  This year, for the first time, they gained the right to march right through the Muslim sections of the Old City to the holy sites area.  This is a bit like the Orange Unionists (Protestants) marching through Catholic areas in Northern Ireland.  I’m told this demonstrates the increasing power of the religious and nationalist right (pro-settlements, anti-negotiation with Palestine).

Prime Minister Binyamin Netanyahu has strengthened his position by entering a broad unity government with the Kadima party.  Yet he also retains the Shas and other far right parties in his coalition, giving him an overwhelming majority.  No politician in Israel can challenge “Bibi” as he is called here — Time Magazine has crowned him “King Bibi” (an Israeli magazine used the more amusing “BiBi King”, but you get the idea).

Unfortunately, as far as I can tell, Netanyahu has no intention of slowing his plans to dismember Palestine by expanding settlements and render a viable Palestinian state an impossibility.  The talk here is that the Arab Spring has created so much uncertainty that this is no time to try to make a peace deal.  I think a case can be made that a peace deal would position Israel better to cope with the rising populism and Islamism of the region; but the Israeli view is that withdrawal from southern Lebanon only strengthened Hezbollah, and withdrawal from Gaza only entrenched a hostile Hamas, so withdrawing from the West Bank would be madness.

The result may be that Israel feels more secure, but it is getting to be a much less pleasant place.  Anti-Arab racism is increasing (I got an earful of that from my taxi driver at the airport), and I’m told that it’s not safe to venture outside of Hebrew University’s Mt. Scopus campus where I am staying, surrounded as it is by east Jerusalem’s Arab settlements.  Security to enter the campus is much like airport security — full body scans at dedicated gate houses await any vistor without a University ID.  Keeping Israel a democracy and Jewish without a two-state solution will require the endless disenfranchising of millions of Palestinians, and endless occupation and security measures against a hostile Arab population.  Seems to me a high price to pay.

Jerusalem is beautiful though — and just as rich with Christian monuments as places holy to Jews or Muslims.  Indeed, you see lots of evidence of the Crusaders in the monuments, wall, citadel and churches. The two Churches I visited yesterday – the Franciscan Church of St. John the Baptist and the Church of the Visitation — were truly ecumenical world monuments, with plaques in 80 or so different languages lining the main walls.

It would be a wonderful world if Jerusalem, with its concentration of Jewish, Muslim, and Christian holy sites, could be an example of inter-faith peace, tolerance, and cooperation.  It should be an international “Peace City” as well as harboring the Israeli and Palestinian capitals.  But that is not what we see; instead it is becoming a living monument to racism, intolerance, and interfaith conflict.   So sad….