Prime Minister Benjamin Netanyahu hasn't said much about economics since pushing the budget for this year and 2010 through Knesset. He has more burning issues commanding his attention, such as Israel's relations with the United States, and the fires that his foreign minister, Avigdor Lieberman, keeps setting. In any case Netanyahu apparently doesn't want to be known as "Mr. Economy." He'd rather be associated with grander issues.
But as the prime minister and his team start acting, economic circles may be startled to find that they have an economic agenda that's nothing like the ideas Netanyahu presented when serving as finance minister, leader of the opposition, and leading prime ministerial candidate.
Seek not the Netanyahu who tilts against the great monopolies, Netanyahu the tax cutter, Netanyahu the union crusher or Netanyahu the savior of the "thin man" (the tax-paying business sector) from "the fat man" (the bloated public sector). These Netanyahus are gone. We have a new Netanyahu, with new slogans.
The change isn't necessarily for the worse. One can find economic logic in his theories and directions. But the burning question is whether Netanyahu's changes reflect changes in the economy, in our threats, challenges and opportunities, or whether the story is simpler: Netanyahu hasn't got the strength or willpower to engage in pitched battles with giants any more, and he'd like to be a prime minister everyone loves.
Netanyahu 2003-2008 wanted to streamline the public sector, break the monopolies, privatize the companies, cut taxes and ram through structural changes. Netanyahu 2010 has three goals: to reform the Israel Lands Administration and the planning and building committees, and to invest in transportation infrastructure.
One thing hasn't changed with Netanyahu: his commitment to economic programs once he's decided on them. The same fervor with which he spoke about severing the provident and mutual funds from the banks will reappear in the effort to bring the periphery closer to central Israel by improving transportation. He will prophesy about making business easier thanks to new laws and less red tape.
Netanyahu doesn't formulate these plans by himself. His biggest source of inspiration is Uri Yogev, former Finance Ministry budget director and now a private businessman. Another economic adviser who may become key is Eugene Kandel, a Hebrew University professor who was appointed to head the National Economic Council this year. Kandel and Yogev have fairly similar economic views. Both believe that the "thin man-fat man" therapy is over. The Israeli government is exactly the size it should be. Their agenda is to make it easier to do business in Israel.
Previously, the conventional wisdom had been that to make business easier, the first thing was to break the monopolies and reform government services, such as the ports. Now there's a new theory: Reforming how Israel handles land will drive growth. Privatizing it, registering it, rezoning, developing. This reform is part of a grand design to "bring the periphery closer to the center" with the help of train tracks and roads.
Yogev and Kandel also envision a series of mini-reforms to lift Israel from the bottom of the list of countries where government bureaucracy makes business difficult.
Netanyahu bought their vision of stimulating the economy and narrowing gaps. Soon the policy of developing the periphery through grants and subsidies will be declared dead. Netanyahu calls it the "end of Intelization" or "Sde Bokerization," in reference to the chipmaker Intel, which received huge grants to build a plant in the unemployment-hot spot of Kiryat Gat. As for Sde Boker, it was emblematic of David Ben-Gurion's vision of developing the Negev.
Netanyahu and his advisers believe that the way to develop Israel's periphery, raise standards of living there and narrow economic gaps is to turn the area into "bedroom communities" - induce stronger populations to move there, while continuing to work in the center. They'd commute by public transportation.
The surge in real estate prices, which some feel has reached bubble proportions, plays into the prime minister's hands. He sees the influx of money into property in recent months as testimony that investors ("smart money," as he calls it) see the potential in his reforms. If you think prices in the center are inflated, downright insane perhaps, Netanyahu and his advisers suggest you move out to the periphery and wait for the new roads and trains they're promising to build.
Economists won't easily accept Netanyahu and his team's infrastructure-development plans , once they're formally announced. They'll question the speed at which the land and transportation reforms can be executed, and the soundness of the whole theory about "connecting the periphery" to the center. But their reservations won't matter: Netanyahu and his team are believers.
There will have been other extreme changes in Netanyahu's policy. Remember his clashes with the unions? History. The "package deal" he and Yogev sewed up with Histadrut labor federation head Ofer Eini was not an accident: Yogev and Netanyahu decided that from now on, they're working with the uber-union, not against it. Yogev believes Eini is a new kind of labor leader, a man open to change and reform, and that working hand in glove with him will be more useful than banging heads. Unarguably, building strong coalitions is a much better way to spur change. But the question is whether Netanyahu's conflict-avoidance is based on sober reflection, or fear of conflict.
Netanyahu and his team are lucky that the economy of Israel is in much better shape than that of peer countries. Israel didn't take part in that credit madness that gripped so many other nations. Netanyahu's people optimistically think the deficit will be far smaller than expected this year, allowing them to relieve high earners of extra taxes ahead of schedule. But the dust from the global economic crisis will start settling only in a matter of months, which is when we will learn whether investors are buying the new Netanyahu, or concluding that he simply doesn't care about economic revolutions anymore.
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