Israel's economic debate has taken a raucous, common and variegated turn in recent years, thanks to a certain retreat of the military-defense smokescreen, and to globalization, and to demographic and cultural changes.
There's been no obvious parallel leap forward in the quality of the debate, though. At its heart you'll still find an oversimplified categorization of most economic controversies under the titles "capitalist" and "socialist".
But economic reality is more complex, and globalization and technology make it more complicated and dynamic by the day. The result is that "capitalists" and "socialists", from the phonies to the true believers, wind up brandishing flags that are totally divorced from the economic realities.
Thus we get "capitalists" who ostensibly believe in free markets, but who understand nothing about the importance of regulation, competitive market structures, the need to fight corruption. They don't understand the fundamentals of democracy, the free press and mainly, social cohesion.
We also get "socialists" whose principles suddenly rear their heads mainly when the issue at stake is the interests of powerful labor unions and the controlling shareholders of monopolies and pressure groups; but who and struck dumb when it comes to weak workers or when the state and politicians dip their hands into the public's pockets - directly by inflating the budget, or indirectly by failing to create market structures that encourage growth, entrepreneurship and competition.
The latest example is the calls rising from "industrialists" for the government to intervene in the forex market, the labor market or financial markets in order to "save" industry from the collapse of the dollar against the shekel.
For decades we have been hearing calls on the government and Bank of Israel to help Big Industry when the local currency is gaining muscle. But this time, the industrialists have a problem.
In the past they used to call on the Bank of Israel to lower interest rates in order to weaken the shekel, but today calls like that sound rather hollow. Israeli interest rates are 1% lower than interest on the dollar, and may soon equal interest on the euro.
The theory that the industrialists propounded for years, that it was the Bank of Israel's fault that the shekel is so strong, collapsed as interest rate gaps between the shekel and foreign currencies shrank, and finally reversed. The upshot has been for Big Business to call on the Bank of Israel to start intervening in the forex market, by buying dollars.
That is ridiculous, when coming from "capitalists" who are supposed to be "experts" on the free market. They know perfectly well that Israel's forex market is completely open, and the moment the Bank of Israel tries to regulate exchange rates, it will be exposed to a violent speculative attack. Within days the Bank of Israel would discover what all other central banks in the world already know: it has no chance against market forces.
Yesterday a new cry arose. The former president of the Manufacturers Association, Oded Tyrah, evidently understood that the Bank of Israel can't actually regulate the forex market. So he came up with a twist: since the dollar is dropping, wages in Israel should be "adjusted". The impending hike of the minimum wage should be canceled. (You know what it means when manufacturers say 'adjust').
Gracious. The "capitalists", the knights of the free market, keep saying why everybody should adjust to global competition, and suddenly they're running to the government asking it to intervene, just when the market is working against them. Why didn't we hear from Tyrah - based on the same logic - call to raise the minimum wage when the euro (which is the currency in which most industrial exports is denominated) strengthened by tens of percent against the shekel?
When "socialists" demand that the minimum wage be raised, the "capitalists" like incumbent Manufacturers Association president Shraga Brosh et al tell them that growth can't be created through the minimum wage. They say that the solution to unemployment and poverty is education, which will raise wages in the long run.
But when "capitalists" have a problem with the currency market, they refuse to countenance long-term solutions like changing their business model. They want the government to step in.
Brosh recently remarked that in retrospect, the war he and his cronies waged against abolishing quotas and opening Israel's economy to the world was wrong, biased, and short-sighted. Opening the market forced Israeli manufacturers to seek new markets, new models and new industries, which are today responsible for no small part of issr economic activity.
Brosh, Tyrah and the rest of the manufacturers would do well to learn that lesson an decide whether they're really capitalists who believe in the free market, in globalization and in competition as social and economic concepts, or whether they only advocate them when they happen to suit their short-term interests.
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