What is the Israeli economy's biggest problem? Is it the bloat in the public sector, which consumes 51% of the gross national product, leading to onerous taxes? Could it be that only 55% of the adult population actually works? Maybe it's the giant monopolies that strangle competition, such as the Ports Authority, the Israel Airports Authority, the Israel Land Administration, the Israel Electric Corporation, the Israel National Water Company, and the banks? Or maybe it's the all-mighty unions, which inhibit efficiency and managerial freedom?
With all due respect to these issues, the main problem with the Israeli economy lies in the political sphere: government instability.
An incoming prime minister cannot plan four years down the road. Within months of assuming office, as he attempts to implement any sort of meaningful process, his seat begins to totter.
So it has happened to each and every one of our prime ministers. Long-range planning for the prime minister means no further into the future than the evening news. This is bad.
A prime minister that is so insecure in his chances of seeing his term of office all the way through lacks the ability to effectively operate. He is dependent on small coalition parties and on "rebellious" MKs, while the government bureaucracy gnaws at him, "Yes Minister" style.
Any manager will tell you that this is no way to run a business. Reforms always involve costs, layoffs, and other hardships. Only after two or three years does the company begin to reap the rewards.
But what happens if you do not have two or three years? The result is that the Israeli politician will not invest in truly important concerns - education, infrastructure, transportation, reduction of the public sector, consolidation of local authorities, restructuring the military, and other major reforms - since he knows that someone else will reap the rewards.
The Israeli method has given us 31 governments in 58 years, meaning each government lasts an average of 1.9 years. Ministers and directors-general also last about that long, which is why nobody tackles the real problems.
The most stable system is in the U.S. There they hold elections every four years, always on time, even during world wars. Often the president stays for eight years, so he can actually formulate long-term plans, and see them through.
We don't have to adopt a presidential system. We could achieve stability by other means, for instance by reducing the number of parties in the Knesset. There should be two big parties between which government shifts. That could be attained by raising the barrier for entry to the Knesset, or English-style regional elections.
Whatever the method, it's open for debate. But what's sure is that Israeli democracy is sick, and it's hurting the economy. It is time for change.
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