Israel Needs an Election on the Economy

Article Summary
Nadav Haetzni argues that Israel’s economy is in crisis and that  Israel needs a re-focus on free market principles.

A year and a half ago we Israelis were promised that the upcoming election campaign would focus on economic and social issues and bring down the present government. And although the leaders of the Tel Aviv Rothschild Boulevard social justice protesters may have been driven by ulterior motives, the "cottage cheese revolution" — as the consumer boycott of the big dairy cartels, announced in the summer of 2011 in protest of recurrent price hikes was dubbed — led to the social justice protest of that summer and raised to the top of the agenda a critical problem that threatened the very survival of the government. Alas, at the moment , just a month prior to the parliamentary election, the socio-economic issue is no longer seen as a crucial issue capable of making or breaking anything and contrary to the expectations of summer 2011, it is not really putting at risk the next tenure of Israeli Prime Minister Benjamin Netanyahu.

Paradoxically, it’s a pity that this is the state of affairs, since if anything may be improved here, it is only in the socio-economic sphere and by putting an end once and for all to the anomaly of the ultra-Orthodox Jewish community in Israel.

As to all other spheres, nothing has changed and nothing is likely to change. And while Tzipi Livni, the former Kadima leader, who is currently running on the ticket of her newly established Hatnuah party, is trying to breathe new life into the corpse of the disaster named “the peace process,” the camp of folly of her adherents, who still believe in her ideas, has diminished to a negligible size.

The failure of the socio-economic issue to attract public and governmental attention is regrettable in itself. It directly stems from the general disappointment with the leaders of the social justice protest movement and the distorted national discourse on economic and social issues.

On the one side, Prime Minister Netanyahu is advocating — or so it would seem — the doctrine of free economy, while on the other side, Labor party leader Shelly Yachimovich is calling for the institution of an equitable economy. Unfortunately, both fail to stand behind their economic slogans. True, Netanyahu does believe in free economy and has scored some impressive achievements in this sphere, but he failed to pursue his policy all the way through. He did not succeed in solving the fundamental structural problems of the economic system in Israel — the legacy of the socialist era of Mapai, the left-wing party dominant in Israeli politics until its merger into the Labor party in 1968 — and since the summer of 2011, he has made some significant steps backwards. Succumbing under the pressure of the social protest demonstrations that swept the country, Netanyahu has seriously undermined free competition in the market and what’s more, immediately following the election, he will have to take a series of other]negative steps, such as tax raises.

As to Shelly Yachimovich, she deserves every praise for the norms of integrity and idealism that she has introduced into the Labor party. However, there is no virtue, not to say wisdom, in the socio-economic program she is promoting. After all, how can one talk of an equitable economy and, in the same breath, bow to the biggest racketeers in the market — the major labor unions; how can one talk of equality when a small group of privileged employees and advantaged, well-heeled professionals are allowed to suck our blood?

What the Scottish philosopher and economist Adam Smith wrote already in 1776 in his book The Wealth of Nations is still true today. Smith deciphered the dynamics that controls human society, naming it “an invisible hand.” According to Smith, implausible as it may seem, it is freedom of action that promotes a more equitable social order. It is actually the laissez faire mechanism that enables every individual to pursue his own self-interest and that enables the market and society to reach an equilibrium — an equilibrium of supply of all the services needed by society and an equilibrium of fair prices that people are ready to pay. Yet, for the “invisible hand” that guides market participants to prevail, the market has to be competitive. When there is true competition, those charging exorbitant prices are bound to go bankrupt. On the other hand, in the absence of competition, the strong and mighty would triumph over all others.

Unfortunately, this is precisely the recipe suggested by Shelly Yachimovich – the policy that is liable to abandon us all to the mercy of the powerful labor unions of the Israel Electric Corporation and the seaports and their colleagues.

As a matter of fact, the formula of tax raises and corporate strangulation has been recently tried by France under the leadership of another advocate of the socialist ideas propounded by Yachimovich — French President François Hollande. However, since the election of Hollande to the presidency, France has already made at least a partial about-face when realizing that a large number of its entrepreneurs and moneyed citizens simply moved their businesses elsewhere, to more hospitable countries. At the same time, that same socialist philosophy at the base of the Israeli Labor party platform, which is still pursued by France, is pushing it ever deeper down the slippery slope into economic ruin.

Thus, against the backdrop of our drowsy election campaign here in Israel, which seems to have lost its passion all of a sudden, it is perhaps about time we start a revolution à la Adam Smith, which would free us from the yoke of the market sharks looking for prey, lower taxes and prices, allow the truly productive, hard-working citizens of the state freedom of action and assure them of an equitable economy.

Found in: yachimovich, social justice, netanyahu, liberal economy, israel, economic, capitalism, benjamin netanyahu, adam smith

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