Endless chatter about Iran is depressing Israel's economy
It's not possible to expect a local or international businessman to open a new production line here, or buy a company, or sign a deal, when the prime minister and the defense minister are telling him afresh every day that Israel will soon take military action against Iran, and the response will be missiles on Tel Aviv.
There is nothing worse than unemployment. There is nothing more depressing than unemployment. There is nothing sadder than waking up in the morning and not knowing how to get through the day. There is nothing more embarrassing for a father or mother than standing helpless in front of their children because they have no work.
Therefore, the government's most important social mission is to ensure full employment. No objective is more important than that.
Yet the latest figures from the government employment service are extremely worrisome. A record number of people lost their jobs in July - 16,084. Every one of them is a world unto himself. While it's true that no conclusions can be drawn merely from one month, and it's also true that the number of people fired during the summer is always high, nevertheless, this figure must be treated with the utmost seriousness, and steps must be taken to reduce it.
The rise in unemployment stems from the drop in the economy's growth rate. The current rate is some three percent per year, and that is too low. When economic activity drops and demand slows, companies begin to lose money and have no choice but to fire workers. This is true in all sectors of the economy except the public sector, which lives off the fat of the land and has permanent tenure.
Of course, the Israeli economy is affected by the crisis in Europe, because exports are a major component of our economy. Thus when Europe is sick, we are also infected: Exports decline, and employment along with it.
But real problems aren't the only the thing that matters; economics are also greatly affected by psychology - what is known as expectations. Economic theory states that expectations are self-fulfilling, because when you are anxious and fear what is going to happen, you withdraw into yourself, begin saving more, spend less, and cause the entire economy to move into low gear. And from there, the way is short to economic slowdown and dismissals.
It's not possible to expect a local or international businessman to open a new production line here, or buy a company, or sign a deal, when the prime minister and the defense minister are telling him afresh every day that Israel will soon take military action against Iran, and the response will be missiles on Tel Aviv. The fear caused by such statements alone is sufficient to put brakes on the economy.
This can clearly be seen on the stock exchange, where the volume of trade has dropped to a worrisome low of NIS 500 million to NIS 600 million per day. No institutional investor will invest in a stock exchange of that kind, due to fear that it won't be able to realize its investment when it wants to. A narrow market of this kind is also fertile ground for fraud, because when volume is relatively low, it's possible to manipulate prices.
Raising the capital gains tax has also contributed to the bourse's premature demise, as has excessive regulation. The head of the National Economic Council, Prof. Eugene Kandel, said this week that he has been told by a long list of foreign investors that Israel has become an unattractive venue, due to excess regulation that has become an obstacle. And it's true that each of our regulators is vying with his colleagues over who can issue more castrating and restrictive regulations, which make doing business difficult and expensive and thus hamper business activity.
All this is happening at a time when the social protest movement is still bubbling in the background. The middle class - which is the class that works hard, pays taxes, serves in the army and does reserve service - sees how, when things are tough and people are being fired from their jobs, owners and executives of publicly-traded companies are still giving themselves exaggerated salaries and mind-boggling options and bonuses, even though the companies they manage are losing money. A member of the middle class sees them driving luxury cars and flying in private planes even as they are imposing "haircuts" of hundreds of millions of shekels on their creditors. And the gap between his situation and theirs drives him crazy.
A member of the middle class doesn't engage in shady business deals. He doesn't go to tax advisers who can find him a tax haven in the Seychelles; he doesn't get any benefits from the government; and he also doesn't receive VIP treatment.
But now he is not merely furious, he is also afraid. He is scared that his savings will be gutted and his pension will be wiped out. He doesn't sleep well at night because he dreams that in the morning, he will be the next person fired. And then how will he look his children in the face?
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