Yesterday something happened in Israel. Populism won by a knockout.
Prime Minister Ehud Olmert played the role of the savior, which is a lot more fun than playing the role of the politician tossed out in disgrace.
The Finance Ministry put up a valiant fight, but was vanquished. True, the safety net is a wizened thing, in contrast to the desire of labor leaders and Olmert himself. But it's supposed to kick in right away, despite Finance Minister Roni Bar-On's efforts to postpone implementation until a crisis actually arises.
The safety net is regressive. People who have no pension savings - and that's hundreds of thousands in Israel - will be financing bailouts for those with savings.
The safety net is bad for the capital market. It creates confusion. It will force the investment funds and the government to set up mechanisms that check the wealth of each and every person. The treasury will have to set up a Safety Net Administration, employing hundreds of economists. Bureaucracy will run riot and complaints will pile up. And it's far from clear that labor leaders and Avishay Braverman will settle for the shrunken safety net being proposed.
The safety net won't change the capital market, because it doesn't protect the entire saved amount, only a small part of it. Therefore, the capital market trend won't change. Corporate bonds and stocks won't suddenly turn hot. Maybe quite the opposite, because of the confusion and uncertainty the safety net brings.
It is wasteful, expensive and wrong. It is a political move that renders the 2009 election the most expensive in Israeli history.
Not even one righteous man in Jerusalem could be found. Not one politician was courageous enough to stand up and say, Enough. Stop the mad race for the safety net. Stop frightening the public over nothing. The safety net is poison for the capital market and the economy.
The battle for the title of Most Populist was begun by Ehud Barak, who demanded the safety net, while blaming Benjamin Netanyahu for the capital market crash. Bibi struck back and suddenly demanded a huge safety net, so everyone would love him and vote for him in February.
Tzipi Livni joined the race a tad late, also demanding a safety net. She could have presented another stance, a more responsible one, scoring points among the public. But no, she also took the low road and started spouting slogans, while taking the opportunity to blame Bibi for all of Israel's economic ills.
We have to conclude that the leaders of Israel's top three parties think people are total morons, that all they need to do is disseminate promises, never mind how idiotic.
The race has a winner, and it's Ofer Eini, leader of the Histadrut labor federation. He threatened a general strike unless the government weaved a safety net for the richest workers in the land, the ones at the Israel Electric Corporation and Mekorot water company. Who will shoulder the billions? The poor people with no savings at all. That's socialism a la Eini, abetted by his Sancho Panza, Shraga Brosh, president of the Manufacturers Association. Good thing their crazy idea didn't pass yesterday.
Never mind the facts. Bibi didn't cause the damage, a global hurricane did. Losses to pension savings in Europe and the States were greater.
From 2003 to 2007, pension and provident funds gained 65%. This year they've lost 20%. They're still up 32%. But it seems to serve somebody's purposes to harp about the losses, not the gains.
Tel Aviv mayor Ron Huldai also accused Netanyahu of causing the harm and demanded payback. But does he realize that provident funds gradually adopted capital market investments (rather than government handouts) from 1987 to 2002, before Netanyahu was even minister?
On Sunday, Haim Ramon shared his own idea for a safety net. He thinks it should assure returns for all the money put into savings since Bibi's time. He thinks little of billions, when it's the public's money. Good thing his proposal didn't even reach the stage of debate.
Want to enjoy 'Zen' reading - with no ads and just the article? Subscribe todaySubscribe now