Tel Aviv Tent City - Motti Kimchi - July 2011
Labor MK Isaac Herzog talks to protesters at Tel Aviv's 'tent city'. Photo by Motti Kimchi
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Newly elected Labor Party leader Isaac Herzog believes the business sector “needs to be restrained and not greedy,” he told TheMarker following his election Friday, “but [also] a partner and part of the growth of the economy.” (For more coverage of Herzog’s election, see pages 1 and 2.)

The leaders of the Labor Party, he said, including Israel’s first prime minister, David Ben-Gurion and one of his successors as Labor Party leader and prime minister, Levi Eshkol, knew how to create an economy that was a synthesis of elements involving the government, the Histadrut labor federation, the worker cooperatives and the private sector, to achieve a balance.

Herzog, 53, is a lawyer by profession. He has served as a member of the Knesset since 2003 and will now assume the position of official parliamentary opposition leader, following his defeat of Shelly Yacimovich in last week’s Labor primary.

Between 2007 and 2011, he was social affairs minister, a tenure in which he was widely considered a success for his efforts to increase social welfare spending. He also served as housing minister for 11 months in 2005 and was tourism minister for about a year. Following his initial election as a Knesset member in 2003, he was appointed to the Knesset Finance Committee.

He has been on close terms with social democratic party leaders around the world, many of whom called to congratulate him last week. On the domestic front, Labor sources say they expect Herzog and the party to support MK Eitan Cabel (Labor) in his bid for chairman of the Histadrut. The court is expected to decide on Sunday whether there will be an election for the top spot in the union organization, following the recent announcement by current Histadrut chairman Ofer Eini that he is stepping down.

Herzog, unlike his predecessor Yacimovich, apparently intends not only to champion social justice issues, as she did, but the diplomatic and security-related issues, which she did not emphasize but which he has previously prioritized.

“Yacimovich distanced the business sector from the Labor Party,” Herzog told TheMarker, “and those who grew up [in the party] also viewed her approach as a threat to the ability to function. The needs of the business sector must be understood. [The sector] needs to be told the truth – that it is a partner to the growth and the building of the country, but it won’t be able to run wild. It’s possible that we will be able to collect more taxes from [business] to increase public revenues and enable everyone to subsist. My line when it comes to the business world is more open and diverse.

“There has been an exaggerated focus on one narrow and important issue such as concentration of economic power and the [corporate] tycoons, while ignoring the general picture in fields such as small- and medium-sized business, opening up the job market, including integration of employment groups and the distribution of capital in society, [and] a more modern and fair taxation policy, and of course education and housing,” Herzog added.

“The biggest mistake was that there was a total disconnect between economic discourse and diplomatic discourse. There is a direct connection that cannot be severed between the diplomatic process and growth and prosperity. You cannot talk about social justice that stops at a roadblock on the road to Judea and Samaria [the West Bank], and you cannot talk about freeing up [resources] for education and health while always living by the sword.”

Herzog and Teva

When layoffs were announced at Teva Pharmaceutical Industries last month, Yacimovich bitterly criticized the company’s then CEO, Jeremy Levin, and called on members of the public to contact Teva’s board of directors in protest. By contrast, Herzog spoke with Levin and Histadrut chairman Eini on the matter, along with the head of Teva’s workers committee, Eliran Kozlik, encouraging dialogue among the factions on the issue. In reaction to criticism of Teva for taking advantage of tax breaks the government made available, Herzog said the company was not the enemy, although he added that if there was a desire to change the incentive policy, it could be looked into.

Among the practical economic steps he is calling for is a reduction of the value-added tax rate, currently at 18%.

“There is a dilemma in the world,” Herzog added, “over how to build a model in which there is a fairer distribution of capital [carried out] in a balanced way that allows everyone to develop personally and to develop their potential.”