Suicidal bombers aside, the economy is not collapsing. So told us PM Sharon last week at the 10th annual Israel Democracy Institute Caesarea Economic Conference. Sharon criticized media and business leaders for painting a negative image of Israel?s economy. He said the economy was basically sound. For two days, ?chicken littles? were running around predicting the imminent fall of the sky. Economics has a strange relationship to psychology, what are dire predictions today, can become self-fulfilling prophecy tomorrow. So if we want growth and prosperity, we better start thinking positive. PM Sharon told us, ?The economy, however, can start on a new path if we all work together.? The question is, do we want to work together, for the good of the nation?
Two different views came out of the Caesarea Conference: 1. That there can?t be any economic growth without movement forward in the ?peace process?, and 2. That even during a military conflict, the right policies can help maximize growth. Well, what do you want growth and development, or stagnation and decline? With so many people connecting the state of the economy to the state of the ?peace process?, I have my doubts about their intentions.
When the economy began to pick up in the early 1990?s, many on the Left, including Rabin and Peres, gave credit to the ?Oslo Accords?. See, they said, with peace we will have prosperity as well. I never bought it then and I still don?t. I never saw our economic development dependent on ?peace? with our neighbors. I know that the reforms of the late 1980?s, including bringing inflation down to manageable proportions, preceded the ?peace process?. So did the wave of aliya from the former Soviet Union. First came hardships, housing shortages, and crises, but as the massive population growth was absorbed, doctors, engineers, and others were integrated into the workforce, and ?absorption funds? were infused into the economy, it grew.
Another important ?coincidence? occurred in the early 1990?s, the serious growth of the post-industrial or information economy. Computers, technology and creativity began to drive the global economy. Many people, I among them, had been talking about the ?human capital potential? of Israel?s educated workforce since the mid-1980?s, finally, the global economy ?caught-up? with Israel. The ?boom years? for Israel coincided with the ?boom years? of America and a large part of the global economy. Israel just ?cashed in? on its comparative advantage.
Another point against the ?doom sayers? is that we haven?t had ?peace? with the Arab world since 1948, and the economy overall has grown quite nice, thank you.
Which leads back to, whom are these people linking economic growth to the ?peace process?? In its review of the first day of the conference, Ha?aretz (July 4th) quoted former finance minister Avraham Schochat saying that the economy is in a terrible crisis and only a political solution would help. He pointed out that economic indicators were positive before the ?intifada? broke out in 2000. First of all, this is the man who left the economy in a shambles (relatively speaking), despite a growth spurt from 1992-1996 as finance minister. He left huge over-spending caused deficits for Netanyahu to clean up. Did Schochat forget that the Internet bubble burst, world stock markets led by the Dow & NASDAQ tumbled, and the US and world economies started softening about this time? And lastly, he?s been a supporter of the ?peace process? from the start.
Next, Ha?aretz quotes former agriculture minister Haim Oron, Meretz MK, former Mapamnik, and ?peace process? supporter. He told the conference, 3-5 more years of conflict with the Palestinians, combined with unemployment, and we will be on the verge of economic-national collapse. Should we just give up now? We?ve been fighting the ?Palestinians? for 100 years already. We haven?t collapsed yet!
Then there?s Ben Gurion University President Avishay Braverman. I actually admire what he?s been trying to do with the University, hi-tech, and its relations with Be?er Sheva. But when he tells us that the economy is in ?deep crisis? and without a diplomatic solution, it won?t get back on track, all I hear is his long time support for the ?peace process?.
The same day, the Jerusalem Post quoted Teva Pharmaceuticals Chairman Eli Hurvitz and former managing director of Bank Hapoalim, Amiram Sivan, who spoke at the conference. Hurvitz blamed the crisis on the political situation, changes in private consumption, and a halt to foreign investment. Sivan said the economic problems are not temporary and will only pass when a political solution is found to the Israeli-Palestinian conflict. Both support the security fence to separate Israel from the ?Palestinian territories?.
I didn?t know either of their political views before researching this article. In doing so, I found an interesting piece of information in Globes, June 30th. Eli Hurvitz and Amiram Sivan are activists for the ?Movement for Separation?, which has taken a number of business leaders on a tour of the ?seam line?. They also have held a conference for business leaders a month before the Caesarea Conference, with the intent to deepen the connection between the ?Movement? and the business community. The Left has been lobbying business leaders, convincing them that only ?separation? and the ?peace process? can bring back their prosperity. Even after the ?false messianism? of everlasting peace has collapsed, the Left continues to tie prosperity to ?peace?. Now we won?t have anymore growth without ?political solutions?. Lets just ignore 100 years of Zionist development from the sand dunes of Tel-Aviv to the silicon wadis of today.
Now, don?t get me wrong, I?m not saying there aren?t any problems (i.e. opportunities) with the economy; there is a need for restructuring the social welfare net, lowering taxes, retraining the unemployed, and opening up entrepreneurial opportunities. But things have to be put into context. Merrill Lynch called this economic period, ?The worst corporate recession in 60 years.? Let?s remember that Israel?s economy is part of a larger whole, the global economy. Its true foreign investment is down, but investment in hi-tech is down around the world. The good news is that the US (a main trading partner) is just coming out of recession. This actually bids well for Israel. Bye the way, hi-tech and the information economy are still main growth areas for the 21st century, and Israel is still well positioned to take advantage of that growth. Why give half our country away for a bowl of lentils?
We need to remember all this and be intellectually honest, and not just blame ?the political situation?. Bank of Israel Governor David Klein was, when he spoke at the conference saying, ?Unless we win the economic battle, it is doubtful we will win the war on security.? He called on the Treasury and policy makers not to blame Israel?s economic failures and structural problems entirely on the security crisis.
Although former PM Ehud Barak echoed the ?peace mantra? that the only way out of the economic crisis is political dialogue with the ?Palestinians?. Former PM Binyamin Netanyahu rightly stated that policy makers should not view the security crisis as the most urgent economic issue. He called for tax cuts (including income tax), not increases; a comprehensive economic plan; more privatization of state owned firms; and placing leading economic figures on the National Security Council. Netanyahu said, ?The nation is waiting for clear economic leadership.?
Unfortunately, I have yet to see that leadership. Although PM Sharon has resisted the temptation to link the economy to the ?peace process?, he hasn?t yet begun the ?battle? for economic growth. The Left turned our security over to the ?good will? of Arafat and the PA, now they want to put our economic well-being at their mercy too. But just as PM Sharon hasn?t bought into the ?loser? mentality on security issues, and has no intentions of ?giving up? to suicidal bombers, he needs to dig deep down inside and exhibit the leadership he?s known for. Lets all think positive and work towards the day when the Israeli economy will start ?booming? again!
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Ariel Natan Pasko is an independent analyst and consultant.
Two different views came out of the Caesarea Conference: 1. That there can?t be any economic growth without movement forward in the ?peace process?, and 2. That even during a military conflict, the right policies can help maximize growth. Well, what do you want growth and development, or stagnation and decline? With so many people connecting the state of the economy to the state of the ?peace process?, I have my doubts about their intentions.
When the economy began to pick up in the early 1990?s, many on the Left, including Rabin and Peres, gave credit to the ?Oslo Accords?. See, they said, with peace we will have prosperity as well. I never bought it then and I still don?t. I never saw our economic development dependent on ?peace? with our neighbors. I know that the reforms of the late 1980?s, including bringing inflation down to manageable proportions, preceded the ?peace process?. So did the wave of aliya from the former Soviet Union. First came hardships, housing shortages, and crises, but as the massive population growth was absorbed, doctors, engineers, and others were integrated into the workforce, and ?absorption funds? were infused into the economy, it grew.
Another important ?coincidence? occurred in the early 1990?s, the serious growth of the post-industrial or information economy. Computers, technology and creativity began to drive the global economy. Many people, I among them, had been talking about the ?human capital potential? of Israel?s educated workforce since the mid-1980?s, finally, the global economy ?caught-up? with Israel. The ?boom years? for Israel coincided with the ?boom years? of America and a large part of the global economy. Israel just ?cashed in? on its comparative advantage.
Another point against the ?doom sayers? is that we haven?t had ?peace? with the Arab world since 1948, and the economy overall has grown quite nice, thank you.
Which leads back to, whom are these people linking economic growth to the ?peace process?? In its review of the first day of the conference, Ha?aretz (July 4th) quoted former finance minister Avraham Schochat saying that the economy is in a terrible crisis and only a political solution would help. He pointed out that economic indicators were positive before the ?intifada? broke out in 2000. First of all, this is the man who left the economy in a shambles (relatively speaking), despite a growth spurt from 1992-1996 as finance minister. He left huge over-spending caused deficits for Netanyahu to clean up. Did Schochat forget that the Internet bubble burst, world stock markets led by the Dow & NASDAQ tumbled, and the US and world economies started softening about this time? And lastly, he?s been a supporter of the ?peace process? from the start.
Next, Ha?aretz quotes former agriculture minister Haim Oron, Meretz MK, former Mapamnik, and ?peace process? supporter. He told the conference, 3-5 more years of conflict with the Palestinians, combined with unemployment, and we will be on the verge of economic-national collapse. Should we just give up now? We?ve been fighting the ?Palestinians? for 100 years already. We haven?t collapsed yet!
Then there?s Ben Gurion University President Avishay Braverman. I actually admire what he?s been trying to do with the University, hi-tech, and its relations with Be?er Sheva. But when he tells us that the economy is in ?deep crisis? and without a diplomatic solution, it won?t get back on track, all I hear is his long time support for the ?peace process?.
The same day, the Jerusalem Post quoted Teva Pharmaceuticals Chairman Eli Hurvitz and former managing director of Bank Hapoalim, Amiram Sivan, who spoke at the conference. Hurvitz blamed the crisis on the political situation, changes in private consumption, and a halt to foreign investment. Sivan said the economic problems are not temporary and will only pass when a political solution is found to the Israeli-Palestinian conflict. Both support the security fence to separate Israel from the ?Palestinian territories?.
I didn?t know either of their political views before researching this article. In doing so, I found an interesting piece of information in Globes, June 30th. Eli Hurvitz and Amiram Sivan are activists for the ?Movement for Separation?, which has taken a number of business leaders on a tour of the ?seam line?. They also have held a conference for business leaders a month before the Caesarea Conference, with the intent to deepen the connection between the ?Movement? and the business community. The Left has been lobbying business leaders, convincing them that only ?separation? and the ?peace process? can bring back their prosperity. Even after the ?false messianism? of everlasting peace has collapsed, the Left continues to tie prosperity to ?peace?. Now we won?t have anymore growth without ?political solutions?. Lets just ignore 100 years of Zionist development from the sand dunes of Tel-Aviv to the silicon wadis of today.
Now, don?t get me wrong, I?m not saying there aren?t any problems (i.e. opportunities) with the economy; there is a need for restructuring the social welfare net, lowering taxes, retraining the unemployed, and opening up entrepreneurial opportunities. But things have to be put into context. Merrill Lynch called this economic period, ?The worst corporate recession in 60 years.? Let?s remember that Israel?s economy is part of a larger whole, the global economy. Its true foreign investment is down, but investment in hi-tech is down around the world. The good news is that the US (a main trading partner) is just coming out of recession. This actually bids well for Israel. Bye the way, hi-tech and the information economy are still main growth areas for the 21st century, and Israel is still well positioned to take advantage of that growth. Why give half our country away for a bowl of lentils?
We need to remember all this and be intellectually honest, and not just blame ?the political situation?. Bank of Israel Governor David Klein was, when he spoke at the conference saying, ?Unless we win the economic battle, it is doubtful we will win the war on security.? He called on the Treasury and policy makers not to blame Israel?s economic failures and structural problems entirely on the security crisis.
Although former PM Ehud Barak echoed the ?peace mantra? that the only way out of the economic crisis is political dialogue with the ?Palestinians?. Former PM Binyamin Netanyahu rightly stated that policy makers should not view the security crisis as the most urgent economic issue. He called for tax cuts (including income tax), not increases; a comprehensive economic plan; more privatization of state owned firms; and placing leading economic figures on the National Security Council. Netanyahu said, ?The nation is waiting for clear economic leadership.?
Unfortunately, I have yet to see that leadership. Although PM Sharon has resisted the temptation to link the economy to the ?peace process?, he hasn?t yet begun the ?battle? for economic growth. The Left turned our security over to the ?good will? of Arafat and the PA, now they want to put our economic well-being at their mercy too. But just as PM Sharon hasn?t bought into the ?loser? mentality on security issues, and has no intentions of ?giving up? to suicidal bombers, he needs to dig deep down inside and exhibit the leadership he?s known for. Lets all think positive and work towards the day when the Israeli economy will start ?booming? again!
----------------------------------
Ariel Natan Pasko is an independent analyst and consultant.