Taking Stock / The anti-Bibi
When Amir Peretz conquered the Labor Party two months ago, and there seemed for a moment to be a realistic candidate for prime minister, panic spread through much of the business sector.
As a Knesset member and chairman of the Histadrut labor federation, Peretz had fought economic reforms and marketed himself as the anti-Bibi. He portrayed himself as a caring politician who would drastically change Israel's economic policies.
Sober economists did not lose their cool. Arik Sharon changed his attitudes 180 degrees and uprooted settlements he had established himself. Peretz, if ever given responsibility for Israel's economy, might also understand the difference between shouting empty slogans from the opposition benches, and managing a modern, advanced economy.
In an era of open markets, a politician seeking to reduce competition and manage the budget irresponsibly is asking for a painful comeuppance delivered by investors, savers, consumers, and the markets.
But even we could not have imagined Peretz's U-turn happening so fast, that three months before the elections even arrive he would morph into a Bibi look-alike. His new attitude became apparent when he sent his candidate for finance minister, Avishay Braverman, to map out an economic policy that looks strikingly like the one laid out by Benjamin Netanyahu.
Braverman, who until now has refused to speak with the press, granted a short interview to Yedioth Ahronoth on Friday. The paper ran it on the back page and it barely attracted attention, but don't make light of what he said. The professor dropped one economic bombshell after another.
Let's start with the headlines. Braverman, as we said Peretz's candidate for finance minister, announced firmly that he is completely coordinated with the party chairman. And then he went on to say:
* Our economic policy will be good for employers and the middle class (in utter contrast to fellow neo-Laborite Shelly Yachimovich, who wants employers to pay a higher tax).
* We shall embrace almost all the reforms and policies adopted during the Netanyahu era (in utter contrast to things stated by Peretz and Yachimovich).
* We shall not roll back the pensions reform or even tweak it, for instance like lowering the retirement age, or restoring designated treasury bonds (in utter contrast to Peretz's own public statements on the issue).
* We shall not raise taxes. We shall maintain Netanyahu's tax policy. We shall not target the rich through imposing estate and inheritance tax (in utter contrast again to both Peretz and Yachimovich, who have said Netanyahu cut taxes for the rich and the trend should be reversed).
* Under no circumstances shall we recommend re-imposing punitive Customs or quotas on imports (who was it who said, a month ago, "We won't spread our legs to imports"? Yes, it was Shelly Yachimovich. Braverman evidently believes the opposite).
* We are firm supporters of globalization. Israel's economy should be completely open to the world. (Globalization? A dirty word for Peretz and his people, until now.)
* We shall not kick up the minimum wage. If we raise it at all, it will be done moderately and in coordination with employers. We shall not touch it in sectors that cannot cope with the increase, including small businesses (the election hasn't even been held yet, but they're gradually furling their flag).
* We support the reform of granting incentives to work. We shall not restore the regime of allowances. (Braverman, did Netanyahu write your text?)
* We shall stick to deficit targets. We shall not expand the budget. (Excuse me. Until recently you were saying that deficit targets were not sacred and that employment comes first.)
Has Braverman lost his mind? How does all that fit with Amir Peretz's image and Shelly Yachimovich's inflammatory speeches about closing off Israel to imports, increasing the deficit, halting the reforms, raising the minimum wage, and hiking taxes for the rich?
Who said that?
It does not fit, not even slightly. In fact, it is the complete opposite of Peretz's stated positions. The policy Braverman outlined is just like Netanyahu's, and that is no coincidence.
Braverman is a professor of economics. He is not a politician, and as long as he takes himself seriously and seeks to maintain professional integrity, he has no choice but to support a competitive free market that is open to the world, as he told Yedioth.
He admits that he composed his economic policy together with four economics professors, including Yoram Gabay, David Brodet and Amir Barnea, who supported most of Netanyahu's economic policies in recent years.
Braverman is promising that Amir Peretz will be a free-markets man not because open doors are perfect policy. Far from it - it can be cruel and many violent, horrible things happen because of it. But it's like democracy: a terrible system of government that happens to be better than the alternatives.
How does Braverman distinguish himself from Netanyahu? He talks of the urgent need to raise welfare payments for the old and disabled. But even Netanyahu admits that the cuts in those payments should be restored. He began rolling back that reform a year ago, explaining that they had only been cut at all because Israel's financial condition had been so awful three years ago.
Where would the money for those old and disabled people be found? Braverman says he is committed to preserving the budget and its deficit. Where would the money come from?
This is where Braverman stumbles. Not only has he no answers, he says he wouldn't cut the defense budget because Labor is committed to preserving Israel's military might and the military industries.
This is where Braverman lets the nascent politician in himself overcome the economist. He knows that the issue is not Israel's security, and that the defense budget is bloated. He knows the issue is not Israel's military industries, but streamlining them. But he also knows how much clout their unions have in the Labor Party center.
The dark side
Braverman was not asked, and so did not discuss, a few complementary questions: Wages and nepotism in the big unions; the need to reform the great government monopolies; and his ideas on making the economy even more competitive.
These would be questions that would have had him squirming: as an economist, Braverman knows that without competition, prices won't drop, service won't exist, and the economy won't grow and advance. But the primary is around the corner, and the unions have terrific electoral power.
Another way Braverman distinguishes himself from Netanyahu is to attack regulation. "Our economy suffers from over-regulation," the professor said, "from too much invasive legislation, and from over concentration of power in the hands of a few bureaucrats, especially at the treasury's budget department."
Is that so? Conversations we have had with Braverman in the past left us with the impression that he believes our economy suffers from excess red tape (which has nothing whatsoever to do with regulation); from the absence of effective supervision (which is why competition is so weak in many sectors); and from over concentration of power in the hands of some 20 tycoons who torment the bureaucrats and manipulate the politicians.
Of all that, all that's left is a few wicked treasury officials?
And Braverman has another surprise to spring, a weird one. "We shall also recommend sharply cutting back the powers of the treasury's wages director, who in his overdone zeal has neutered the powers of the managers of public bodies to set competitive wages that would attract quality people to the public sector."
Competitive wages? That sounds like a cry to raise salaries of the managers and outstanding workers. Rewarding excellence is good, but the way to achieve it is first and foremost to create efficiencies that free the money for the rewards, but Braverman doesn't go there.
Peretz has attacked Netanyahu for instituting a policy that failed to create a significant number of jobs. But Braverman admits that economic processes take time. "Labor has no magic formula to fight poverty," he says. "It takes resources and patience. It won't happen overnight."
Braverman knows how to read data and knows that if not for the economic revolution in recent years, we would have no resources and no leisure to sit around being interviewed and kick about ideas for improving education, eradicating poverty, and raising wages in the public sector.
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