Is the Welfare State Alive? Is Elvis?
Is the Welfare State Alive? Is Elvis?


August 16th marks the anniversary of Elvis Presley’s death. Yet some of the King’s fans claim he never died and just went into hiding. The average person rightly scoffs at this science-fiction theory.
But how can you ridicule those who believe that Elvis is still alive and, at the same time, continue to believe in socialism or in the Middle East peace process? Those Israeli academics and journalists who claim that both socialism and the Oslo accords can be salvaged may consider themselves to be the paramount of sophistication and rationality. In truth, however, they are no less irrational than Elvis Presley’s most wacky fans.

With Israel’s social protest movement in its fourth week, the Government has appointed a team of experts (the “Trachtenberg Commission”) to suggest ways of making life more affordable for the middle-class.
Opposing this, high-ranking academics have volunteered to help the protesters formulate their demands. Among those self-appointed consultants is Yossi Yonah, a philosophy professor at Ben-Gurion University. How exactly is Yonah qualified to argue about macroeconomics with the Trachtenberg Commission?
True, the same question can be asked about Yuval Steinitz, himself a philosophy professor turned Minister of Finance. But the question is not whether philosophers can understand economics (Karl Marx had a Ph.D. in philosophy, in case you were wondering what the answer is). The question is what the presence of Yossi Yonah tells us about the true agenda of some of the movement’s leaders.

Yossi Yonah publishes mostly on “multiculturalism” and he summarized his views in an interview published in Ha’aretz in 2005 (“Brave New Multicultural World,” Ha’aretz, 14 October 2005).
What is Yonah’s vision for the future of Israel? "Well” he says, “besides the naturalization of the migrant workers, it will include the annulment of the Law of Return; theHow can you ridicule those who believe Elvis is still alive and, at the same time, believe in socialism or in the Middle East peace process?
cancellation of the arrangement of automatic naturalization for Jewish immigrants; and provision of a worthy solution for the Palestinian refugee problem, based on the Geneva Convention."
So, you see, it’s not only about economics.

There are economic experts on that team, though, such as Prof. Avia Spivak from Ben-Gurion University. He recommends raising taxes, especially corporate taxes, which would supposedly fill public coffers –as if Israeli companies couldn’t pick-up and leave, and as if both economic theory and practice hadn’t showed that governments’ revenues decrease when taxes are too high.

Then there is Shas’ brilliant idea on how to lower the price of real-estate. Rent control, of course: the Government should tell landlords what to charge. Such policies have been tried in the past, and they’ve always had the effect of increasing the price of real estate.
The reason is simple: when real-estate investors cannot charge the rent that would make their investment profitable, they stop investing in real-estate. When investments in real-estate decline, so does housing supply. And when supply goes down, prices go up.

The official narrative in Israel’s media these days is that the high cost of living and the hardships of the middle-class are the result of “ultra-liberalism” and that Israel must become a “welfare state.” The very opposite is true.
Israel is not a liberal economy: it is dominated by oligopolies that strangle consumers, and by monopolies (such as the National Land Authority) that control supply. If the Israeli economy is strong and productive, it is partly thanks to the economic liberalization undertaken by Shimon Peres in 1985 and by Benjamin Netanyahu in 2003. What Israel’s economy needs is more, not less, freedom and competition.

As for adopting the welfare state model, it is ironic that our know-it-all pundits are suggesting the idea precisely when the welfare state is causing European economies to crumble. If Greece, Spain and Italy are broke, it is partly because their welfare state model was built at a time when the population was young and the economy was hardly exposed to foreign competition.
With an aging population and the constraints of a globalized economy, the European welfare system has become unaffordable. Hence the piling debts of European governments, and hence the nervousness of financial markets.

Israel’s everyone's-an-expert public discourse does not end there.
The violence in Britain, we are told, is to be blamed on Thatcherism. The fact that Labor was in power between 1997 and 2010 is irrelevant (and anyway, a journalist told me while interviewing me live on the “Reshet Bet” radio last week, Tony Blair allied himself to George Bush, so he doesn’t count (!)).
The truth, of course, is that Margaret Thatcher saved the British economy and that if it weren’t for her reforms, Britain’s fate today would be similar to Greece’s.

If the current social protest movement in Israel finally provides the opportunity to lower the cost of living by breaking-up monopolies and cartels and by lowering taxes, it will be remembered as one of the best things that ever happened to the country.
But if the movement is hijacked by armchair ideologues to implement policies that have been proven to be counter-productive, then Israel is in trouble.

Those who believe that socialism might actually work at the end and that Israel is just the right place to check the theory again are about as rational as Elvis Presley’s fans who “know” he’s alive.
The Israeli hard Left can be given a chance to implement its economic theories –but only after it finds out where Elvis is hiding.