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 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.
financial markets • fundamentals • public policy • limiting government
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. In spite of a media almost totally dedicated to making him a “has been,” despite the consuming hatred of our political, media, academic and even business “elites” (Udi Fridan, one of Israel’s top PR men and campaign managers, called Netanyahu “a Satan”), despite the unanimous pollsters’ predictions of a resounding defeat for the prime minister, Netanyahu, the man Israel’s movers and shakers love to hate, won a landslide victory.
Our ruling elites so oppose Netanyahu because they believe he is perhaps the only politician willing to take on the corrupt political and economic system that they constructed, and they fear that he may break it up. They fear that economic reforms, those Netanyahu has already managed to implement and even more so the ones he plans to implement, may finally break the enormous power they wield economically and politically, with their almost total control of the media and their direct and indirect contributions to the primaries of Knesset members. Isaac Herzog, the head of our putative loyal opposition, devoted a big chunk of his maiden speech to an appeal to Finance Minister Moshe Kahlon to jump the coalition boat and have the reforms he leads, that are so vital for Israel’s survival, sink. Such is the animosity for Netanyahu that even the less radical Herzog is willing to cause great harm to Israel just to prevent Netanyahu from succeeding in a task that is vital for Israel’s survival.
The surprising election results may beget additional miracles if the prime minister’s political skills enable him to navigate his narrow, hard-to-govern coalition. It will be another miracle if at long last, after years of neglect, such an unstable coalition is able to put its many divisions and conflicting interests aside and focus on vital economic reforms that will rid Israel of its dysfunctional and corrupt economic system, or at least restrain it.
Our highly concentrated “system” has impoverished a nation with excellent human capital and corrupted its economy and politics.
Unless we get rid of it, it may endanger Israel’s survival.
There are two political leaders who may be able, if they are lucky and if they manage to put aside partisan considerations, to overcome the immense obstacles that any significant reform meets in Israel from powerful vested interests that protect the corrupt system from which they benefit. They are Prime Minister Netanyahu and Finance Minister Kahlon.
The prime minister is the only top politician in Israel who is interested in economics and understands its crucial significance for the survival of Israel. He led some key economic reforms in the past, notably the reform that broke the Poalim-Leumi duopoly. However imperfect, this reform helped generate five years of five percent annual growth, after decades of no growth and several recessions. It also saw the average income of Israelis double from $20,000 annually to $40,000, while their savings grew from the pre-reform NIS 1.2 trillion to NIS 2.7 trillion today.
Because of strong political resistance from the tycoons and the MKs that support them, the Bachar reform left important parts of the monopolistic financial sector untouched, at immense cost to the economy. Now is the opportunity to tackle them.
Kahlon, as a Likud communications minister, led the very important and successful reform in the cell phone sector, breaking its cartel- like structure and opening it up to competition with great benefits to consumers.
Running independently as head of the Kulanu Party Kahlon promised to first tackle three major issues: the high cost of living, the forbidding costs of housing and the remaining anti-competitive practices in Israel’s financial markets. All are very important and deserve urgent attention. But as Kahlon may soon find out, all three are extremely complicated. Because markets and prices are so distorted in Israel, attempts to modify them by fiscal means may not work as expected. It may not be easy to devise straightforward, implementable solutions for these problems, especially since reforms will meet stiff resistance from many quarters, including politicians, tycoons and their army of enablers, lawyers, accountants, public figures, academicians, media and PR people, and even some “social activists.” No reform will have an easy ride.
It may be politically more opportune then if while work proceeds on the major, more difficult reforms Kahlon also launches smaller, politically more feasible growth-inducing reforms such as the long awaited reform to remove the many obstacles to the formation and growth of small businesses in Israel: excessive regulation, high and complicated taxes and lack of access to credit. There will be hopefully less resistance to a reform that does not directly threaten vested interests and that can bring about a great spurt of growth in a reasonable timeframe, increase employment and cut prices by creating competition.
Other reforms could be launched that will train women and enable them to become more productive at what they do, thus improving their employment prospects and their wages. Women usually occupy the lower rungs of the labor market and are scandalously paid much lower wages than men even when they work in hi-tech. Training them to improve their skills as secretaries, teachers, nurses and saleswomen will increase their productivity and pay. It will grow our economy.
Instead of only mending what is broken in the Israeli economy, in real estate markets, in financial markets and in consumer trade markets, all dominated by monopolies and damaged by government, namely political intervention – all for sure vital and urgent tasks – the simultaneous undertaking of growth-inducing reforms like those mentioned above may create a better political climate and facilitate the implementation of other more difficult reforms by stimulating growth, that like the tide lifts all boats.
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 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.
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 © 2001-2015
The Israel Center for Social & Economic Progress
“Where there is no bread,
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