At the end of December 1997, Israel's national trade union, the Histadrut, brought the economy to a halt for four days with a general strike just as the government was debating its yearly budget. The key issue was the reluctance of Netanyahu's Minister of Finance, Ya'akov Ne'eman, to honor the previous government's agreement on pension benefits for workers in major Israel companies. At first glance the strike – and the government's attempt to crush it through court orders – seemed to open a new, more militant era in labor relations. A close look, however, reveals the limited scope of the strike and of the populations it was intended to benefit. The Histadrut did not originate as a classic trade union. Established in 1920, it organized Jewish workers in order to take control of key labor sectors, excluding the Arabs. It got control of the main health fund. It also played a major role in building the huge cooperatives of Tenuva, Solel Boneh, Bank Hapoalim, Kur and others that formed the core of the Israeli economy. Thus, under one roof, side by side, lived Capital and Labor, or if you will, a strange alliance between Jekyll and Hyde.

The Histadrut had a "trade union" section, but it was weak and toothless. Its main function was to organize voters for Mapai, the ruling party that then controlled the state apparatus. In contrast, the private sector was affiliated with the right-wing Likud. The Histadrut held elections in 1994, and the result was a major overhaul. Laborites Haim Ramon and Amir Peretz (the union's current leader) split with their party and established an electoral list called New Life. They proposed selling off the Histadrut companies to the private sector and ceding control of the health fund to the state. The trade union section, they pledged, would remain independent. They won by a landslide. What motivated Ramon was not a sudden conversion to trade unionism, but rather (aside from his personal ambitions) a Thatcherist drive to sell off the Histadrut companies and free the economy from bondage to the workers and the poor. Within four years the "New Life" – which joined Labor again and re-named itself as "the new Histadrut" – sold companies in banking, insurance and agriculture to the highest bidders in the private sector.

The Histadrut's recent militancy is explained by the loss of its historic control over the main health fund. This near monopoly had enabled it to combine the trade union fee with health insurance, thus guaranteeing its income. Now that the health fee is separated, the Histadrut must go to the workers and convince them to join the trade union section. As a result, it has lost some fifty percent of its members and is now down to 700,000. In order to maintain its dominant position and meet its payroll (of almost 2,000 employees), the union must recruit more workers. But which workers is it seeking? The December strike showed that the new Histadrut is not fighting for the poor or the Arabs. Actually, the main issue of the strike – the size of the pension funds – covers merely the interests of the "aristocrats" in Israel's working class, the only ones with large pension funds. This stratum of several hundred thousand controls such crucial segments of the economy as the banks, ports, trains, electricity, telephone, and military industries. Their salaries range from a monthly $4,000 to $7,000. Except for the public services in their villages, Arab citizens in Israel are barred from most of these industries.

A secret memo from the electric company has recently come to light, exposing the discrimination. Known as Order No. 411, it forbids the employment of Arabs. In most high-tech industries, workers have to pass a security check. Arabs are defined as a "potential" threat. They have been so deeply indoctrinated with their unacceptability that they no longer apply for jobs in these sectors. In order to assess the importance of the general strike, one must ask whether the rescue of the pensions agreement will benefit the less privileged parts of the working class. It is hard to see how. Meanwhile, the workers have been suffering major setbacks, because of Israel's march to privatization and globalization. The weaker echelons, especially Arab workers, are entering a deep recession, and no leadership has appeared to fight the Israeli economic establishment. There is, in all this, a thin silver lining: many of the organizational barriers against a more radical and democratic workers' movement have now been removed. The road that progressive workers must take to organize and defend themselves lies clearly before them.