FYI, Netanyahu: Trickle-Down Economy has Failed

Article Summary
While all developed countries have enjoyed accelerated economic growth, social inequality has grown at an even faster pace. However, facts and figures apparently cannot impress the Israeli PM's ideology, says Calcalist publisher Yoel Esteron.

Whenever I happen to take part in some discussion or another, the first thing I want to know is what the facts and figures are. If you were to tell me that the management fees you are paying your bank or your pension fund are "too high,” I would say, well, you may be right, but precisely how high are they, in terms of percentages, and how much are you actually paying, in shekels? If you were trying to convince me that the plan proposed by Construction and Housing Minister Ariel Attias is a victory for Attias over the Trajtenberg (Commission, appointed to review Israel’s run-down welfare system), I would say: I don't know, let me see the costs first, preferably clearly charted, before I can decide who the winner is. If you were arguing about the Delek Nadlan "haircut," I would say, give me the precise figures — how much and when — before I make up my mind whether it were a "fair" arrangement or a "swinish" deal. Politicians and commentators, tycoons and talkbackists alike — they are all trying to outdo each other when it comes to putting across their feelings, looking for the best choice of words, searching for just the right cliché. However, what about the real meaning of it all?

It is no wonder then that I have developed a penchant — you may call it a freaky taste — for reports based on credible databases, preferably those known to be consistently reliable and extensively supported, reports that are really fun to read through. No offense meant, but I guess you have not delved too deeply into the Oxfam report on the dramatically widening gap between rich and poor in almost all major economies in the world in the past 20 years. It may have skipped your notice — you might have been preoccupied with the Natan Eshel corruption affair — but we published in Calcalist last week a full-size article discussing the report at length, complete with enlightening infographics.

The report by the international humanitarian confederation of organizations working together to find lasting solutions to poverty and injustice, submitted to the Presidency of the G-20 — the group of 20 major economies that collectively account for about 90 percent of the global GNP and for roughly 80 percent of world trade — tells us nothing new. Indeed, it corroborates what we have long known by intuition. According to the report, the impressive economic growth in the developed countries has not contributed to narrowing the gaps between rich and poor, but rather further deepened the chasm. The obvious conclusion is that the trickle-down theory simply does not work. When the state grants the rich tax breaks or other benefits with the view of ultimately benefiting the poor through the wealth the rich are expected to produce to the advantage of the public at large, it benefits first and foremost the rich themselves. So let's have a look at the figures.

In the years 1990–2010, socioeconomic gaps deepened in almost all G-20 countries, even though their economies prospered. Inequality increased by 23 percent in Russia, by 13 percent in China, by 8 percent in Japan, by 4 percent in Germany and by 3.5 percent in the UK. Surprisingly enough, of all countries, it is some of the poverty-stricken African countries, which can only dream of the GNP enjoyed by the G-20 countries, that have managed to narrow the gaps in recent decades. Poverty dispersal is flabbergasting: 1.3 billion people are earning less than a dollar and a quarter a day. More than half of them live in the developed G-20 countries.

Israel has not yet made it to the G-20 club — its economy is not big enough. However, the figures for Israel are quite similar. Calcalist reporter Shaul Amsterdamski found far down in the State Revenue Administration's annual report, on page 113 (Calcalist, November 9, 2011), that in Israel, too, socioeconomic gaps have widened, at an even higher rate than economic growth. In the last decade, the top tenth's income (net) has increased by 62 percent, while the lowest tenth's income (net) has increased by mere 15 percent. At the end of 2010, the top tenth's income — averaging NIS 25,703 a month — was 29 times higher than that of the lowest tenth, averaging NIS 889 a month. Clearly, the interested parties would have no interest in such troubling facts and figures. It would be naive, indeed, to expect those who have mastered the art of spreading empty slogans to bear all this in mind when discussing tax breaks and other benefits for the moneyed class. However, next time somebody tries to promote the trickle-down theory, we will politely suggest that he study the relevant report first.

The most stalwart advocate of the trickle-down theory in Israel is naturally the Prime Minister himself. It is none other than Mr. Netanyahu who, blindly putting his faith in this questionable theory, promoted the taxation policy that has widened the gap far beyond the rate of economic growth. Facts and figures are for the losers — certainly not for Mr. Netanyahu. The Oxfam report, like others published in the past year, apparently cannot make a dent in his ideology. Having thrown the Trachtenberg report to the wind, the Oxfam report apparently couldn't interest him less.

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