The Israel Center
for Social & Economic Progress
an independent pro-market
public policy think tank since 1984
Winner of the 2005 Award for Institutional Excellence and the 2006 Templeton Award for Student Outreach
Log in or Register
The Jerusalem Post17 Feb ’12
The choice is between an efficient, growth-inducing market economy or a welfare state, meaning a huge government that actually harms the poor and inhibits prosperity.
fundamentals • public policy • limiting government
At the recent Herzliya Conference, the question was raised whether the Israeli economy should be “managed” according to the principles of social justice or of the market economy.
As a “vision,” Social Justice – a codeword for the welfare state—undoubtedly trumps capitalism.
Social Justice is indefinable so it can mean anything: from free tuition to subsidized housing. In contrast capitalism seems niggardly.
For Capitalism – the dirty word Karl Marx, a brilliant propagandist, attached to the market economy – can make no unlimited ideological promises. The market economy is merely a process of production and distribution of goods and services, the best we know in a world of imperfect people.
Yet capitalism created “values” when it freed humanity from crushing poverty, from the need to labor hard just to keep body and soul together, when it immensely improved human life in any parameter imaginable from longevity and health to the status of women and children.
Many are unmoved by the astounding freedoms that capitalism created, the ability to pursue happiness and self-realization, because they do not guarantee absolute equality (an impossible task, really, since people so differ in their abilities, circumstances and even needs). But they get excited over Socialism’s enticing vision: “from every person according to his abilities and to each according to his needs.”
They do not realize that it is difficult to balance our capacity to produce with our needs, which will always exceed our abilities. Even more intractable are the questions about who will determine what our “abilities” are, and what are our “needs.” Politicians? Experts? Or perhaps the kibbutz’s general assembly or Daphni Leef, Stav Shaffir and their wise councilors?
The question of whether the principles of social justice or of the market economy are best for “managing” our economy is really meaningless. Economies cannot be managed from above. Furthermore, while the achievements of a market economy can be measured, it is impossible to assess “Social Justice.” How do you compare a very complex reality with a nebulous “vision”? So instead of debating vague abstractions, why not examine certain concrete problems facing the Israeli economy and decide what offers a better solution.
Let us first tackle the problem of excess political and economic concentration in Israel. It is increasingly acknowledged as the underlying reason for the failure of the Israeli economy to realize its immense potential, to provide economic security to all its citizens, and become one of the richest countries in the world.
That only a few family-owned conglomerates control most assets in Israel, and use most of its credit, makes the Israeli economy highly uncompetitive and consequently very inefficient. The capable Israeli worker produces only two thirds of what an American worker does, and his salary, therefore, is miserably low. Lack of competition is also the reason Israeli consumers pay prices on everything often inflated by 100 percent to 300% over world prices, and why about half their salaries are literally plundered by our oligarchs who can charge such prices with impunity.
For over 30 years, people have spoken up about how the weaker strata are most harmed by our system.
But the self-proclaimed social lobby and champions of the poor had nary a word to say about how the poor are exploited by our distributive political system that enriches the politically powerful at the expense of the weak, by self-seeking politicians, public sector bureaucrats, rapacious captains of industry and commerce and their conglomerates and monopolies, by the Histadrut labor federation and by the banks.
For decades they just demanded more and more money to fund failing state systems, including the government’s educational monopoly that managed to make Jews nearly illiterate and a judicial system that cannot deliver justice.
Until Itzhak Elrov and his colleagues launched “the cottage cheese rebellion” last summer most Israelis, especially our elites, lived in denial of the fact that hundreds of thousands of Israeli families can hardly make ends meet while there are many who live in great luxury by exploiting all the rest; those who Guy Rolnik called “the connected,” and I named our “Hevrocracy” (the “Hevre” being the “in” group).
In the 2006 Herzliya Conference, our think tank, ICSEP, presented a plan to radically reduce poverty in Israel.
First, competition must be encouraged by breaking up monopolies and cartels and fully opening Israeli markets to imports. Much lowered prices would enhance purchasing power, especially of the low income strata that devotes much of its income to consumption.
Low prices will generally boost demand, employment, productivity and wages, as was the case when telephony was made competitive.
Second, we suggested a gradual lowering of housing costs, the biggest expense of Israeli families.
Housing costs are highly inflated by the government’s land monopoly (owning over 93% of all land) by exorbitant taxes, by cumbersome regulation and by private (such as cement) and labor monopolies. Reducing housing costs can ease the lifelong yoke of high mortgages, and free resources for productive investment.
Last, but not least, the inflated Israeli public sector (employing every third person) must be cut and made efficient, leading to many billions in savings and possible reduction in punitive taxes.
Powerful vested interests that exploit poverty made sure the plan was not implemented.
So there is our choice: an efficient, growth-inducing market economy or a welfare state meaning a huge government that actually harms the poor and generally inhibits prosperity.
The Jerusalem Post30 Jun ’15
Israel’s last elections proved how right David Ben-Gurion was when he said that, in Israel, whoever does not believe in miracles is not a realist.
PJ Media20 Jun ’15
The security challenges facing Israel obscure other deep concerns about the viability of Israel’s economic system.
The Jerusalem Post7 Jun ’14
Unless the laggard Israeli economy is reformed soon, its problems—including its morally debilitating corruption—may threaten its future.
Israel Hayom15 May ’14
What does it say about Israeli society and the system of government when a prime minister is convicted of taking bribes?
Israel Hayom23 Feb ’14
What kind of education should it offer and at what cost?
The Jerusalem Post9 Jan ’14
The productivity of Israeli workers is only two-thirds that of Americans, and their salaries are much lower.
The Jerusalem Post11 Jul ’13
As he completes an exceptionally difficult 8-year tour of duty during a worldwide financial crisis, Stanley Fischer has achieved a unique status.
The Weekly Standard7 Jun ’13
When Israel finally discovered a bonanza of natural gas about five years ago everyone was happy. But then fierce arguments broke out—and rightly so.
The Weekly Standard22 Apr ’13
The economic future of Israel now rests in the hands Netanyahu, Lapid and Bennet. Will they succeed in fulfilling the most difficult and complex mission of liberating Israel’s economy?
Israel Hayom2 Jan ’13
The Israeli government could eradicate poverty by breaking the monopolies and spurring competition.
The Jerusalem Post7 Dec ’12
Our socialist and statist heritage bred our inefficient system. But foreign aid and remittances were serious enablers. The struggle against political and economic concentration could finally permit Israelis to overcome this destructive heritage.
Israel Hayom8 Nov ’12
The time to prepare the reforms is now, so that after the Israeli elections, the prime minister can immediately devote his time to moving them forward.
The Financial Times21 Jun ’12
Israel Hayom6 Jun ’12
To grapple with the impending crisis, Israel’s government must improve the nation’s competitiveness.
The Jerusalem Post7 May ’12
The Wall Street Journal3 May ’12
Reform-minded Prime Minister Benjamin Netanyahu is stymied by bureaucrats and monopoly tycoons.
Middle East Quarterly30 Mar ’12
As the high hopes for a brave new Middle East fade rapidly, Western policymakers must recognize that promoting market economics and its inevitable cultural changes are far more critical to the region’s well-being than encouraging free elections or resolving the Arab-Israeli conflict.
The Jerusalem Post25 Oct ’11
Aversion toward the rich has had strong roots in Zionism since its early leaders embraced Marxist practices.
Is capitalism in crisis? Of course.
The Jerusalem Post10 Aug ’11
The tent-dwellers’ revolt calls for the enforcement of ‘the will of the people’ (like all autocrats). It refuses to rely on Democracy.
The Jerusalem Post9 Aug ’11
David Lewis, the exceptional entrepreneur and philanthropist, and head of the Isrotel Group dies at 87
The Jerusalem Post20 Jul ’11
Although MKs appear concerned over rising costs, it was they who allowed this injustice to occur in the first place.
The Jerusalem Post28 Jun ’11
Who is to blame for the shameful situation in which millions of Israeli workers – who earn about half what American workers earn – have to pay double for goods?
The New Republic19 May ’11
A Middle East peace strategy that could actually work.
The Jerusalem Post15 Mar ’11
Israel needs to slash its state budget by as much as possible if it wants a chance at fighting waste and corruption.
The Jerusalem Post9 Mar ’11
Too little attention has been paid to how Egypt’s socialist past and welfare-state present shaped the current rebellion.
The Jerusalem Post7 Feb ’11
The Herzliya Conference has become an important international event, but one central issue is absent: Israel’s debilitating economic concentration.
The Jerusalem Post22 Jan ’11
It’s highly unlikely that government can ever learn to make long-term plans and execute them efficiently.
The Jerusalem Post23 Dec ’10
How can one dare compare narrow-minded religion with the all-embracing faith of universality and equality that is socialism?
The Jerusalem Post1 Dec ’10
Many of the social and economic troubles we are experiencing are due to the public’s lack of understanding of the need for economic literacy.
The Jerusalem Post17 Oct ’10
The PM’s courageous decision to tackle economic concentration was misrepresented by several of our media publications—owned of course by tycoons.
The Wall Street Journal8 Oct ’10
Economic concentration hurts the country’s viability and the chances for peace.
The Jerusalem Post4 Oct ’10
A damaging ethos of ‘welfarism’ and distributive politics has come to dominate not only academia but our cultural, military and even our business elites.
The Jerusalem Post19 Aug ’10
The reformers must know the importance of the reform’s success both for Israel and for their careers, and what damage they will incur if it fails.
The Jerusalem Post13 Jul ’10
Kagan’s admiration for Justice Aharon Barak’s philosophy may have revealed her own predilection for radical judicial activism.
The Jerusalem Post30 May ’10
We must dismantle the oligarch-owned monopolies that impoverish the Israeli consumer and choke our economy.
The Wall Street Journal18 May ’10
The OECD’s invitation to Israel is a “seal of approval” but the country still needs more reforms.
The Jerusalem Post10 Feb ’10
The world’s astonishment at Israel’s response to the Haiti disaster is insulting. What we saw there was Israel’s true face.
The Jerusalem Post10 Jan ’10
Individual initiative and freedom are essential for creativity—in hi-tech as in all other spheres.
The Jerusalem Post14 Oct ’09
As far as Rose Friedman was concerned, public kudos did not matter that much. She persisted in being a rose, no matter what.
The Jerusalem Post22 Sep ’09
Lasting peace must grow from the bottom up, from an “economic peace process” that proves what advantages peace has to offer on a daily basis. It cannot come from signing peace agreements with radical and corrupt entities propped up by corrupting Western handouts.
Recognized by the IRS as a charitable organization pursuant to Section 501(c)(3) of the Internal Revenue Code.
Tax ID # 13-3129249
Copyright © 2001-2023
The Israel Center for Social & Economic Progress
“Where there is
there is no Torah.”
Pirkei Avot (Ethics of the Fathers)
Contributions made out to Friends of ICSEP can be mailed to:
Fox Associates, 100 Front St., West Conshohocken, PA 19428, USA