Capitalism With a Human Face - Pt. II

With real transparency, the trust of the people would be restored - trust that the tax man is applying the rules fairly and equally to all, trust that there's no 'cheating' on the part of the authorities. Bring back trust and it will lead to a flourishing of new enterprise start-ups.

Ariel Natan Pasko,

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One of the areas of reform is Unemployment Benefits. The reformers seek to reduce the period for benefits are received and tighten the rules on Low Income Supplementation Benefits: "Let's catch those welfare cheats!"

Well, how about ?workfare?? It's done well in the United States. Right now, when unemployed, there is little incentive to find a job or create your own in Israel. The rules actually discourage you from taking a low-paying job. Combined with the Tax Authorities 'assumption you're cheating' until proven otherwise, the regulations downright force you not to try and start your own business. But why throw people off the dole, into destitution? Let them start working part-time, or at a low-paying job, or trying to get a business off the ground, while still collecting something to live on. If they get past their difficulties, then everyone will be better off.

Why do you think there is so much tax fraud in Israel? Maybe, because of the excessively high tax rate and the assumption of cheating by the tax authorities, which leads one to 'protect' himself by skimming. Just in case he's called in for an audit, the Israeli has some money put away for the immorally high fines charged on such skimpy evidence. What if income tax were simplified and reduced to only two tiers, 10% and 20% across the board, with major deductions for socially positive charitable contributions, really stiff penalties for cheating and transparency in the rules and procedures of the Income Tax Authority? With real transparency, the trust of the people would be restored - trust that the tax man is applying the rules fairly and equally to all, trust that there's no 'cheating' on the part of the authorities. Bring back trust and it will lead to a flourishing of new enterprise start-ups.

Which leads to the last issue, cutting the size of public sector employment - a very worthy goal. Finance Minister Benyamin Netanyahu has enlightened us with his analogy of the 45 kilogram man trying to carry the 55 kilogram man. He has told us that the public sector accounts for 55% of GNP. Everyone knows that such a situation can't continue. Layoffs and early retirements are on the board. But, again, we have a massive unemployment problem already. What is the government doing to encourage entrepreneurship and employment opportunities?

Cutting jobs in general is fine, but one area in which that needs to be done very carefully is Education. I have personal experience in this area due to my children muddling through the Israeli educational system and my wife teaching in it. Across the board cuts, or just plain early retirement won't do. They're into education over there in the Education Ministry, right? So let them develop testing methods and evaluating systems to weed out the dead wood. There are a lot of poor quality teachers - notice I didn't call them educators - in Israeli schools. Bust the Histadrut - the Labor Union - and get teachers fired for incompetency.

K?viyut -the Israeli version of tenure - should only come after working five years, and only after you've proven that you're a competent teacher, who cares about educating the next generation. After five years, the Education Ministry should be able to tell if someone is going to succeed as a teacher. If not, get them out of there.

An educational free-market should be encouraged to develop. Regulations on opening schools should be loosened. Competition in Education should prevail. Getting a good education is the best guarantee that the weaker sectors will be able to raise themselves up. Education is the key to Israel's success in the 21st Century global economy.

More generally, developing a system of retraining for the newly and long-term unemployed is crucial. With many labor intensive jobs having left or leaving the country, the hi-tech downturn, and now planned public sector cuts, some combination of government sponsored programs through the Labor Ministry (they're supposed to be working, right?), vouchers - for use in private retraining - from the National Insurance Institute, and serious encouragement of a private sector retraining industry, on a massive scale, is mandatory. And that retraining should emphasize entrepreneurship as well as new skills. Israelis should no longer expect 'Big Brother government' to take care of their futures.

A safety net - yes; a free ride - no.

Jews have always done well economically throughout their history; there is no reason that in the Jewish State it should be any different. If we don't help provide the tools to people to pull themselves up, they might just pull us down. Maybe we should even give them a hand up. If some half-baked 'Thatcherite' program is implemented without serious thought - as is currently planned - then the masses of growing poor, will probably still feel that, "Capitalism has a bad name in Israel." It might even lead to a neo-socialist backlash that would set back the cause of economic liberalization in Israel a generation or more. That would only put us on the highway toward third-world status. We as a society cannot suffer pockets of great wealth and pockets of great poverty - labeled Capitalism - or the 'Neo-Socialist Workers Paradise' of total equality and no growth.

However, a well thought out and balanced program of tax cuts, budget reductions, capital market reforms, deregulation, monopoly busting, increased labor mobility, retraining for the 21st century economy, and encouragement of the non-profit social welfare sector to take over where government leaves off - true economic freedom, that is - could transform the Israeli economy into a dynamic, robust, vibrant one.

The Israeli economy and society would pull Aliyah - immigration - like a magnet, not only from the lands of despair and danger, but also from the lands of prosperity such as Europe, South Africa, Australia and America. Imagine what a million well-educated - and free-market oriented - American Jews could do for Israel?

Policies like these, in harmony with our long-held Jewish traditions of tzedakah - righteousness, charity - and concern for the poor and weak, combined with the equally long-held Jewish tradition of entrepreneurial spirit, could lead Israel toward her goals of prosperity and fulfillment. It would be an israeli capitalism with a human face.

Disclaimer: All the figures used in the article are only rough estimates. Due to the lack of transparency, the author is not privy to true analytical data, nor does he know if the government is either.

[Part 2 of 2]
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Ariel Natan Pasko, an independent analyst and consultant, has a Master's Degree in International Relations & Policy Analysis. His articles appear regularly on numerous news/views and think-tank websites, in newspapers, and can be read at www.geocities.com/ariel_natan_pasko.
(c)2003/5763 Pasko
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