Earlier this year, two Israeli leaders prepared themselves for very important meetings with Jose Angel Gurria, chairman of the Organization for Economic Cooperation and Development (OECD), the association of the world’s 30 most developed countries. Gurria was visiting the country to discuss Israel’s potential membership in the prestigious club.

In the week before the chairman’s arrival, Israeli President Shimon Peres took a busload of Israeli chief executives to the Arab city of Nazareth to show them the beginning of high-tech developments in Arab-Israeli society, and to encourage them to employ Arabs. And before his own meeting, Dr. Ahmed Tibi, a leading and vocal Arab member of the Knesset, Israel’s parliament, simply armed himself with statistics of Arab poverty.

Gurria arrived in January, OECD report in hand. Its contents were explosive, not because it revealed something new, but because both the information and the report were coming from an international organization that Israel very much wanted to be a member of.

After praising the country’s rapid growth and development, the report went on to show Israel as like a Third World country with a variety of problems holding it back. The report focused on the enormous social and economic gaps between the general Jewish population and those of the Arab and ultra-Orthodox sectors.

The statistics were appaling: “Israel’s deep socio-economic cleavages must be given due priority … Poverty is concentrated among the 20 percent of the population who are Arab-Israelis whose poverty rate is around 50 percent and the (estimated) 8 percent who are ultra- Orthodox Jews whose poverty rate is around 60 percent,” wrote the OECD.

In other words, 50 percent of Arab families live below the poverty line, a rate three times higher than that among Jewish Israelis.

The OECD understood that, although the ultra-Orthodox Jews’ poor lifestyle was one of choice because they prefer to study religious books than work, that was not the case for the Arabs. “The OECD’s review of Israel’s labor market and social policies documents econometric evidence comparing wages and employment rates that points to discrimination against Arab-Israelis,” wrote the OECD, putting the blame squarely on the shoulders of the state.

The report shook the country, making headlines in all the media. Yaron London, an Israeli commentator from the Israeli daily Yediot Aharonot, called it a “sad report” and said it presented no new facts. “Were it possible, we could have fixed this long ago,” wrote London, lamenting that Israeli society itself prevents the change from occurring. “The obstacles: the ultra Orthodox refuse to prepare themselves for a life of work and productivity, while the Arabs suffer institutionalized and uninstitutionalized discrimination.”

Yael Gviretz, another Yediot columnist, thanked the OECD. “Israel needed the humiliating report of the OECD, that ranks it as a Third World country in terms of social gaps, in order to act to fix the policies of neglect and discrimination towards the Arab sector.”

It is unclear whether the 30 OECD members will unanimously accept Israel into their fold. If they do, Israel will be the prestigious group’s poorest member with the widest social gaps. But what excites Arabs in Israel and those who desire equality is that the OECD made it a criteria to membership that Israel close the social and economic gaps between Arabs and Jews. “This is the first time that an international organization is intervening and basically demanding from the government to close the gaps and to secure the rights of the Palestinian minority within Israel,” says Ali Haider, co-executive director of Sikkuy, a leading joint Jewish-Arab organization that works for civic equality.

Haider and others hope that this external pressure will have some impact because, in the 60-odd years since the founding of the state, little else has. Indeed, senior Israeli government officials have been aware of the need for reform. But no government has yet had the political will to implement the deep systemic changes needed to end discrimination against Arabs in Israel. “Experience shows us that the different governments of Israel have ignored the recommendations of a formal commissions on the situation of Arabs, and also the decisions and laws passed by the government itself,” Haider says.

Now, however, Israel has a very strong outside incentive to end discrimination against Arabs in Israel. “It is important for us to join the OECD, the most prestigious organization from an economic point of view, but also because of our international status,” said Minister of Finance Yuval Steinitz. Membership in the OECD brings numerous economic benefits and also serves as a statement confirming the state’s levels of economic prosperity and democracy.

In the case of Israel, OECD membership would raise Israel’s credit rating, which would in turn reduce interest rates for loans from international banks and encourage foreign investment.

The OECD was established on the foundations of the Marshall Plan, which was an American initiative to rehabilitate Europe after World War II. Israel was invited to open negotiations to join the OECD in March 2007, along with Russia, Chile, Estonia, and Slovenia.

When Gurria met with Peres on Jan. 19, he told the president that social and economic gaps must be bridged before Israel can join the OECD. Peres was prepared for the meeting. He told Gurria about his efforts to improve the social and economic situation, such as the CEO bus tour he led to Nazareth the week before.

When Tibi met with Gurria he simply asked the chairman not to accept Israel into the OECD until the state ends the discrimination against Arabs in budget allocations and reduces the high Arab poverty rate. “I explained that Arabs in Israel are 20 percent of the population, but we signify only 6.5 percent of the civil service employees,” Tibi said. “The state electricity company has 12,000 employees but we represent only 1 percent of them. Sixty percent of the Arab children are under the line of poverty.”

Gurria showed understanding, said Tibi. “He handed me the report and said, ‘That’s exactly what we wrote.’”

Despite the damning report, the Israeli finance minister was upbeat that Israel would be accepted when OECD votes in May. “The visit by the secretary general symbolizes the fact that 2010 is a decisive year for our integration. Our chances appear to be good,” Steinitz said.

Indeed, there is no precedent of the organization rejecting a country once it has been invited to such talks, which means that Israel’s eventual acceptance as a member state is practically guaranteed. But it could take years. Already OECD deliberations have delayed Israel’s membership. Moreover, besides the social and economic gaps in Israeli society and other matters raised in the report, there are wider issues that could prevent a unanimous vote in May.

Acceptance requires the vote of every single OECD member, but a recent diplomatic fall out with Turkey, one of those members, may very well work against Israel. The identity theft scandal linked to the assassination of a Hamas official in Dubai could also harm its chances.

Ultimately it is in everyone’s interests – the Arab population of Israel included – that the state becomes a member. But only when it deserves to become one.