Don't Blame the System

The upper class pays with its taxes for the lower class. This is right and this is just. But it is not capitalism. It is a market economy with social sensitivity.

The latest craze is to draw a demon on a wall, call it "Capitalism" and wage an all out war against it. But the demon does not exist. It is merely an imaginary painting on a wall.

Our economic system is not capitalism but rather a market economy with social sensitivity. Take, for example, income tax: Capitalism says that everyone has to pay the same tax, a per-capita tax, regardless of the level of his income. But in Israel, direct tax (income tax, National Insurance payment and health fees ) is amazingly progressive. All five of the lower deciles (the lower class ) transfer a mere 2.8 percent of all the dues to the government, while the two top deciles (the upper class ) give the government 82 percent (! ) of the total.

In other words, the upper class pays with its taxes for the lower class. This is right and this is just. But it is not capitalism. It is a market economy with social sensitivity.

Those same neo-socialists have forgotten too that we have a marvelous public health system, despite all the slanderous remarks about it. Even if you do not work, if you don't pay a cent, if you have 10 children, you will nevertheless get one of the best public health services in the world. Yes, that's the truth.

There is also free public education in both elementary and high schools in Israel, and parents' participation is nothing more than a minute part of the giant education budget (NIS 35 billion ). There is no young person who wants to study at a university (at a subsidized rate of some 80 percent ) who is not able to do so. There are stipends, there is assistance, and there are subsidized loans. And as for the claim that the standard of education is low, that's true - but only because of poor management on the part of the state and not because of a lack of funds.

And the National Insurance must also not be forgotten; it distributes NIS 60 billion every year in the form of stipends to the weak - the elderly, children, disabled, victims of work accidents, unemployed, those who do not earn enough, and grants for frail care and births. It can be argued that all of this is not enough and that more is needed, but it is not possible to say that this is "piggish capitalism." We are really not there at all.

It is also strange to hear the argument that the market economy has failed. After all, in the past 25 years, during which time the economy went over from socialism to a market economy, reforms were set in motion that jump-started it forward. The government and the Histadrut labor federation privatized public companies that were faltering and losing money, and the private entrepreneurs improved them, so that they increased employment opportunities and exports.

Israel's industry was opened up to competitive imports and improved unrecognizably. Only recently the economy moved over from a situation of chronic deficit in its balance of payments to an impressive surplus. The capital market was opened to the rest of the world and the restrictions on taking loans from abroad or holding foreign currency were lifted - and this made additional development possible.

The bottom line is that the standard of living went up, unemployment fell and growth increased.

It must be said that the neo-socialists constantly demanded that the government deficits be increased and that more and more money be spent, rashly. If they had listened to them, the economy would now be in a deep crisis, with unemployment along the lines of Greece, Spain, Portugal, Italy and France.

It must also be understood that most of the problems that are being put on the public agenda at the moment are not the result of the market economy but rather just the opposite. A market economy fights against monopolies, cartels and giant conglomerates. The Israel Lands Administration, which did not free land and in that way caused the price of housing to rise, is a government monopoly that controls the land according to the best socialist theories. The high taxes on the import of food products that cause the high prices in the supermarkets are in total contradiction to a market economy that believes in free commerce, without taxes and without restrictions. And who is currently opposing the opening of the economy to the import of milk products? Once again the same agricultural lobby, and once again the neo-socialists.

None of this comes to say that the system of a market economy with social sensitivity is a system without problems. There is no perfect system anywhere in the world. The excessively huge salaries paid to those in top positions is a problem that needs to be dealt with. That is true also of the lack of equality.

But it is clear that this system is preferable to a neo-socialist system that leads to a lack of initiative, to poverty, to shortages and to huge gaps - until it collapses.