The rise of racism and xenophobia in Israel has been the favorite topic of most pundits in the last weeks, and for good reasons, because the phenomenon is worrying. The causes have been well-analyzed: the fragmentation of Israeli society, the lack of a common culture and ethos, and of course Israel's growing international isolation. This is the type of situation in which right-wing movements flourish: they take the confusion engendered by complex factors, and they resolve the problem by creating a conspiracy theory that explains everything. When faced with an intractable problem, right wing politicians single out an easily identifiable group that is accused for the problems. This is the essence of what psychoanalyst Wilfred Bion called paranoid leadership.This has been true for all societies, and we Jews should know this well. Hatred of Jews rose steeply in the thirteenth century because of the plague epidemics that wiped out large parts of Europe's population. At the time, people didn't understand the real reason: it was a rise in urbanization. So they developed conspiracy theories, for example that Jews had poisoned water wells. Similarly, in the 1920s Germans felt humiliated by the Versailles treaty, and their, already weak, economy could not withstand the onslaught of the great depression. As a result, the theory that a Jewish conspiracy had brought down Germany became ever more popular. In Israel there are currently two main variations on the theme of conspiracy. Netanyahu's main story-line is that Israel is being delegitimized and that its very existence is called into question. He keeps repeating that the global criticism of Israel has nothing to do with the settlements, nor with the stalled peace process. Since the world doesn't accept Israel's existence, it doesn't matter what Israel does: it will be isolated and under criticism. Foreign Minister Avigdor Lieberman and Interior Minister Eli Yishai are focusing on Arabs as a fifth column. Each in his own way keeps arguing that Israel is under threat from the inside and from the outside. Since the outside threat cannot be addressed directly, they focus on Israel's Arabs, arguing that they are really a fifth column that is threatening Israel's existence.For our purposes it is irrelevant whether Netanyahu, Lieberman and Yishai believe their own stories, and what their precise interests are in propagating them. We are interested in the effect of right-wing tactics. The mechanism of explaining everything through conspiracy has one immediate psychological effect: it channels a vague anxiety into hatred focused on a real or imagined enemy. Temporarily it creates the semblance of more unity through its mythology: our society is in danger, there is an external enemy, and we now need to stick together and fight that enemy.In the long run, this type of myth exacerbates the real problems: Netanyahu's line that the Palestinians and Iranians are the obstacles to peace convinces very few outside Israel. It also doesn't help that Netanyahu keeps a foreign minister, whom most commentators and diplomats (of course never officially) see as an Israeli Milosevic. The result is that the international community no longer sees Israel as a partner for peace talks, whereas it does see the Palestinians as constructive; hence the notion that Israel needs to be forced into a peace agreement by pressure is gathering momentum. This, in turn, is used in Netanyahu's story line that the world is delegitimizing Israel's existence. Internally the situation is exacerbated as well. Israel's Arabs feel more and more alienated by the hatred propagated by seculars like Lieberman and the anti-Arab Rabbis. This closes the paranoid vicious circle: anxiety is translated into hatred and suspicion, which disrupts communication with the outside world and internal groups designated as enemies. This leads to further isolation, which in turn raises anxiety even further. The right of course has no incentive to stop this vicious circle. The higher the anxiety, the more votes it will reap. Where this will vicious circle end? At this point it is very difficult to see what forces inside Israel could change the paranoid, isolationist state of mind. Politicians are pressured into conforming to right-wing demand to close the ranks in the face of impending doom, and are desperately afraid to be seen as traitors if they point out that there might be more cooperative modes of action. Historically, right-wing escalation leads to implosion before sanity is regained. This has been true for Italy and Germany as it has been for Serbia. In these cases, the wakeup call to sanity was triggered by a lost war. In the case of South Africa the international community generated ever higher pressure, until the regime understood that it was no longer tenable. Not long ago it seemed that a solution to the Israel-Palestine conflict imposed from the outside would be a catastrophe. Given the alternative, it is sadly ironical that international pressure towards change is now the lesser of two evils.