Bottom shekel / It's a nice plan, no more
Question: What do Botswana, China, South Korea, Oman, Malta, China and Israel have in common? Answer: All have taken a giant economic step forward.
Almost all modern economies are growing, by at least 1% to 3% per capita a year, over several years. Yet a few achieved a pace of 10%-15% per capita for 15 years or more, changing the face of their societies. Only 20 countries have achieved a great economic leap in the last 60 years.
History teaches that growth is easy, even over years, but an economic surge is difficult and takes extraordinary steps and grit. It takes daring, and thinking outside the box. All that is exactly what the economic emergency plan presented yesterday lacks.
Israel is one of the 20 leapers, but that was during the first two decades of its existence. In fact, says Gidi Grinstein, founder of the Reut policy think tank, the 20 countries have nothing in common. Some are authoritarian, some democratic, some pure capitalist and some semi-socialist.
The last time the U.S. took a giant economic step forward was in the 19th century. Since then it's been preserving what it has: making sure that its modes growth continues, and no more. Economic policy from Washington is designed to achieve that modest goal. To leap means to abandon that policy.
Each of the 20 leapers had a unique background and story but all had sheer determination. And the key capability is to carry out sweeping reforms, says Grinstein. In authoritarian regimes, the government can force reforms. In a democracy, they require popular support, and that's exactly this is exactly the right time, as the crisis reaches new heights, to make a leap. The crisis creates the opportunity for dialog and cooperation between sectors.
That's how Ireland sparked its leap. Twenty years ago its economy was in crisis, forcing government and manufacturers and labor to sit down and reach far-reaching compromises on wages and layoffs, in exchange for increased government investment. The secret of success is institutional collaboration. "Countries don't surge because they try harder," says Grinstein. "They have to make far-reaching changes, do things that no other country is doing, make painful concessions to earn more tomorrow."
The Finance Ministry's stimulus plan follows tamely in the tracks of regular policy. It does nothing unusual and may not give Israel an edge over the rest of the world. At most it will deflect slowdown. It may work beautifully and spur rapid growth for a few years, after which opponents to the changes will wear down the reforms and end the acceleration.
Maybe weathering the global recession should be enough? Well, the time to introduce a plan spurring a Great Leap is confined to crisis because only then will people work together and make painful concessions. Missing opportunity now means missing it for a long time.
Also, Israel is vulnerable to brain drain because the standard of living here is relatively low.
Israel cannot afford to miss this opportunity to improve its ways. What should it do? Stop settling for trivial solutions like tax cuts and investment in infrastructure. Everybody does that.
What Israel needs is a national sense of mission, which requires broad agreement on wage concessions, flexibility by the unions and reforms that open the bottlenecks - from the ports to education to the paucity of working ultra-Orthodox and Arabs. All these need to be developed to push the entire economy forward more than a baby step.
To achieve this, Israel needs to identify global trends in which it could have added value. And to do that, it needs government offices devoted to that very thing: people who identify Israel's relative advantage and develop it. One doesn't need to improve the whole government. Beijing is not some wonder of efficiency. All we need is a few government units harnessed to the mission, a dedicated prime minister, cooperation between the sectors - and a promise that this time, everybody will get a piece of the pie.
That is what Israel needs right now. There is nothing of that in the Finance Ministry's plan. What a pity.