The Decline of the Labor Party
Even before the October 1973 War, the Labor Party was hampered by internal dissension, persistent allegations of corruption, ambiguities and contradictions in its political platform, and by the disaffection of Oriental Jews (see Oriental Jews. Labor's failure to prepare the country for the war further alienated a large segment of the electorate.
Despite Labor's commitment to exchange occupied territories for peace, successive Labor governments beginning soon after the June 1967 War established settlements in the territories and refrained from dismantling illegal settlements, such as those established in 1968 at Qiryat Arba in Hebron by Rabbi Moshe Levinger and others set up by the extremist settler movement Gush Emunim. By 1976 more than thirty settlements had been established on the West Bank.
Another contradiction in Labor's political platform concerned Jerusalem. All Labor governments have proclaimed that Jerusalem will always remain the undivided capital of Israel. In effect, this stance precludes the peace for territories formula contained in Resolution 242 because neither Jordan nor the Palestinians would be likely to accept any agreement by which Jerusalem remained in Israeli hands.
The post-1973 Labor Party estrangement from the Israeli public intensified throughout 1976 as the party was hit with a barrage of corruption charges that struck at the highest echelons. Rabin's minister of housing, who was under investigation for alleged abuses during his time as director general of the Histadrut Housing Authority, committed suicide in January 1977. At the same time, the governor of the Bank of Israel, who had been nominated by Rabin, was sentenced to jail for taking bribes and evading taxes, and the director general of the Ministry of Housing was apprehended in various extortion schemes. Finally, and most egregious, Rabin himself was caught lying about money illegally kept in a bank account in the United States.
Israel's growing defense budget (about 35 to 40 percent of GNP), along with rising world oil prices, also created chaos in the Israeli economy. Inflation was running at 40 to 50 percent annually, wages were falling, and citizen accumulation of so-called black money (unreported income) was rampant. The worsening economic situation led to greater income disparities between the Ashkenazim, who dominated the higher echelons of government, the military, and business, and the majority Oriental population, which was primarily employed in low paying blue-collar jobs.
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