There have been mass protests and strikes in Israel recently.  There's even an attempt to replicate the Tahrir effect, with protest camps being set up in Jerusalem.  Some on the Left are naturally very pessimistic about these events.  After all, the Israeli left has very rarely shown any sign of wanting to seriously overcome the colonial/racial injustice at the heart of the Zionist project.  The current protests show no sign of developing an anti-occupation stance, much less an anti-apartheid stance - far from it.  For all sorts of reasons, the colonial issue is not even mentioned, even though it reaches right into the problems galvanising their protest.  The greatest likelihood is that the Israeli state will try to resolve the social antagonism by displacing it onto the colonial plane - more settlements, more raw material robbery, possibly another war of expansion.  And given the chauvinism and racism of the great majority of Israelis, surely, you might think, they would go along with that?  The only way to properly analyse this is to base it on an understanding of Israel's class antagonisms and their relationship to the colonial project.  For my money, the best analysis of the latter was supplied by Moshe Machover and Akiva Orr.  The core of their argument is that, unlike in many other imperialist societies, the colonial dynamic predominates over domestic class antagonisms.

Certainly, every level of Israeli society, from trade unions to the education systems, the armed forces and the dominant political parties, are implicated in the apartheid system.  That was true from the very inception, in the very germinal forms of the Israeli state built up in the British Mandate period.  Israeli is a society of settlers, and this has enormous ramifications for the development of class consciousness.  As long as it thrives on building colonial outposts, as long as people identify their interests with the expansion of settler-colonialism, then there is little prospect of the working class developing an independent revolutionary agency.  Not only is it a settler-colonial society, it is also one supported with the material resources of US imperialism.  It has enjoyed considerable advantages over all regional rivals in this respect, and has thus typically enjoyed a greater capacity to contain social antagonisms.  Indeed, a certain kind of colonial welfarism was built into the foundations of Zionism.  Even Jabotinsky, the saint of the Israeli Right, held that every settler should have a house, food, education, clothing and medicine - this was essential for as long as much of the society was made up of very recent immigrants.  In the neoliberal era, this has been eroded and undermined, with some important consequences that I'll return to.  Still, Israel is unique among the countries of the Middle East and North Africa (MENA) in that it is a non-oil-exporting economy with a high per capita income. With one of the highest population densities in the region, it has the ability to satisfy the needs of every citizen, even if it chooses not to do so.  In a region notorious for looming food insecurity and growing water shortages, Israel maintains a high-technology economy with a big financial sector and, for no small number of its citizens, a properous lifestyle.  It also has a large share of the world's billionaires.  Much of this wealth derives directly from the expropriation of the Palestinians, whether it's water or real estate.  In such circumstances, with colonialism such a pervasive feature of Israeli society, so central to its legitimation, and not challenged by any major political party or media outlet, it is delusional to expect the Israeli working class to be the leading agency in overcoming the racialised capitalist system they are integrated into.

Important strategic consequences follow from Machover and Orr's analysis.  If the class antagonism is dominant, then the Left should focus its activism first on organising the Israeli working class as the key to breaking the colonial project.  The self-organisation of that working class would be central to the downfall of that colonial system.  If the colonial dynamic predominates, then Machover and Orr are right to conclude that "as long as Zionism is politically and ideologically dominant within that society, and forms the accepted framework of politics, there is no chance whatsoever of the Israeli working class becoming a revolutionary class".  In which case the only solution is a regional revolutionary upsurge. 

Well, the miraculous beginnings of such a regional revolt have been evident since January this year.  There's no question that these have weakened Israel's regional position.  Internationally, it also led to the very pro-Israel Obama calling for a return to pre-1967 borders, in an attempt to save American dominance in the Middle East.  This shouldn't be exaggerated.  At the moment, it's quite germinal, and unless the revolution deepens and spreads further still, it's unlikely that the US will undertake serious material steps to curb its local watchdog.  Nonetheless, the weakening of Israel's regional position is real.  And this certainly raises the stakes of any escalation of regional aggression that it choosed to undertake.  It's also important that the Arab revolt has set the precedent for the Israeli protests, and has been produced by some of the same circumstances in terms of global recession.  But, of course, while the Arab revolution has so far had a powerful anti-imperialist dynamic (not uniformly, but broadly), any possible anti-imperialist or even 'peace' dynamic in the Israeli protests is at best latent.  Still, there are aspects of Israel's colonial economy that are linked to the sharpening of social divisions within the society.  Generally speaking, it is the Palestinians who are made to bear the costs of the occupation.  However, there are some potential antagonisms that are of relevance here.

First of all, the Israeli state invests a lot in the development of settlements, which requires an unusual degree of investment in the repressive apparatus.  That necessarily diverts resources from 'internal' development, even if the long-term payback for such colonization is expected to outweigh the costs.  Investment in the military vs investment in welfare is one of the issues that has arisen in recent Israeli debates.  Secondly, the concentrations of class power that develop in Israel are bound up with its colonial power.  For example, the specific problem at the centre of recent protests is housing.  Israel's public housing system was developed on a colonial basis - literally built on Palestinian land and property.  The current system allows developers and contractors who have grown very rich from the whole colonial project (look up the Israeli real estate firm named 'Colony') are deliberately refusing to carry out approved building schemes in order to inflate prices.   Netanyahu's decision to grant preferred development status to colonial settlements in the West Bank also helped diverted house-building activity into the frontiers.

Netanyahu's solution is a 'free market' one - reforming the housing sector in a more privatized direction.  The protesters have refused to accept his proposals, and as such the protests will probably continue.  This points to the way in which, under neoliberalism, Israel's class antagonisms have been sharpened somewhat.  Welfare has been run down and the rate of exploitation of Israel's working class has increased quite dramatically.  A recent study within Israel found that "the average Israeli works 12 years before his or her cumulative pay equals the monthly salary of the CEO of a large firm".  Unemployment is high in Israel, with the 'unproductive' the fastest growing sector of workers.  Now, before these recent protests, the predominant response of Israeli workers to this situation was to become more right-wing, and more pro-Zionist.  It was to kick the Palestinians hard.  The far right grew in power, fuelled significantly by the support of Russian immigrants, while the overwhelming majority of Israeli workers could be counted on to support bestial acts of aggression such as Operation Cast Lead.  The state became more obscenely authoritarian and racist, often without much sign of protest.  There's nothing to say things won't continue in that fashion.  As we have seen, the Right has means of racialising the transition to a more savage apartheid capitalism - consider this extraordinarily racist diatribe, published in the LA Times without irony or criticism, by a leading Israeli economist.  The argument is that Arabs and ultra-Orthodox Jews are lazy, out-breeding the rest of the population, and acting as a drag on the economy.  Welfare is allowing them to be lazy, he says - and one can well imagine policy being made on the basis of such arguments.  

But these protests constitute a form of class struggle that has the potential to weaken the far Right and, if pushed to a certain extent, bring the polity to a crisis that weakens its grip over the Palestinians.  The Israeli state will certainly try to resolve this by transferring the antagonism to the colonial plane, and may even launch another aggressive war.  But such solutions may run up against quite serious limits, especially if the Arab revolt deepens and spreads (what's happening in Hama and Tahrir now is very important in this respect).  Certainly, an Israeli attack on Iran could be suicidally stupid.  So, the options are limited.  

Moreover, another effect of neoliberalism has been the development of an autonomous 'business community', a more or less cohesive elite that owed little to the traditional institutions of Israeli society, looked increasingly outward for its revenues, and pushed the state to move toward direct negotiations with the PLO with the aim of reaching a settlement protecting Israeli supremacy.  (The model of Palestinian 'governance' that emerged from Oslo thus constituted a neoliberal restructuring of Israeli colonialism.)  Historically, the state took on the role of creating a Jewish bourgeoisie, since there was no such thing in Palestine prior to Israel's creation.  For several decades, the state managed a corporatist settlement with the racist trade union federation Histradut incorporated into its development plans, and Labour enjoying electoral dominance.  Substantial sectors of capital were developed on the 'Labour Zionist' model.  The emerging crisis of this model was partly solved by the 1967 colonization project, which gave Israeli capital access to resources, cheap labour, and a larger domestic market.  It further allayed domestic class conflicts by making occupied Palestinians the bottom rung of Israeli society.  Still, Israel was not spared the globalised crisis of Fordism, and undertook a similar series of responses - privatizing state-owned industries, deregulating business, opening up import markets, pursuing export markets, and encouraging finance.  The shift from state-led development to privatised, financialised accumulation was accompanied by a shift to Likud dominance, and consolidated in the 1985 Economic Stabilization plan.  (See Adam Hanieh on this background).  

This has allowed a private sector, business-oriented capitalist class to emerge, and  has thus opened some potential fissures between different sectors of the Israeli ruling class.  The IDF remains the supreme, dominant institution in Israeli society, and it continues to provide a great many profitable opportunities for Israeli capital.  But its interests are increasingly at odds with those of the wider Israeli capitalist class.  The second Palestinian intifada, for example - provoked by IDF incursions and the failure of the Palestinians to get a whiff of justice from the Oslo process - cost Israeli capital a huge amount of potential growth.  Now, the IDF's reputation for military supremacy has meant that it could always promise to extirpate any problem.  In reality, the limits of military power were illustrated quite starkly in Lebanon in 2006.

Because in Israel the colonial dynamic still predominates, and because the vast majority of Israeli workers have not begun to break with Zionism, and indeed many could reasonably claim to get some benefit from it, how these social antagonisms and elite fissures work out depends primarily on the regional context.  If the Arab Spring continues and radicalises, the weakening of Israel's position, its usefulness to Washington, and its ability to sustain military policies that sections of its ruling class already find burdensome, then the prospects of major social struggles in Israel are increased.  If not, then I suspect the Israeli ruling class can resolve its difficulties at the expense of the Palestinians and take a further lurch down the road to some sort of fascism.