The Bottom Line / And whom shall we thank?
In all of the many economic positions he has held over the years, Sharon has believed that the government has the most important central role; and that is to act, to do, to build, to promote.
At the start of the 1980s, the economy was caught in the worst crisis of its history. We were living under crazy hyperinflation, which peaked at 445 percent in 1984. Prices were updated twice a day, and the public lost faith in the shekel.
The watchword of the day was "green and far away." That is, anyone who could shifted money overseas or at least hid dollars under the mattress. Exporters stopped bringing in their export earnings, and Israel's currency reserves shriveled up.
A moment before the final collapse, two economics professors, Eitan Berglas and Michael Bruno, constructed a plan to stop the hyperinflation. They submitted the program to then-prime minister Shimon Peres and then-finance minister Yitzhak Modai. The plan included sharp cuts in the state budget, lower wages, a high real interest rate and freezing the dollar and prices. The cabinet held a special session (that lasted two days!) in July 1985, after which they voted.
Ariel Sharon, then the minister of industry, voted against! He didn't care for cutting the state budget. He has always believed more in government and intervention. But the plan was adopted - to our great relief. It saved the economy from the deepest pit in its annals and brought it round to recovery and growth.
In all of the many economic positions he has held over the years, Sharon has believed that the government has the most important central role; and that is to act, to do, to build, to promote - and therefore it should always have the budget wherewithall to do so, which naturally pushes taxes ever higher. It is an outdated worldview that does not believe in market forces, the private sector or the free economy.
After the electoral turnaround in 1977, Sharon became agriculture minister in Menachem Begin's government, but instead of dealing with farms he transferred large sums of money to the West Bank and built settlements on every hilltop and under every tree - because Sharon doesn't deal with the details, he wants to set the map of the country and its character too. He therefore also made sure that whatever position he had, it came with the purview of the Israel Lands Administration.
In September 1984, Sharon was appointed minister of industry and trade, and immediately adopted the Manufacturers Association's approach to stop competition from imports. He built up the walls of customs around Israel and set illogical standards to prevent imports - such as insisting pencils made in China had Hebrew written on them. The result was an industrial sector moving in reverse, which did not become efficient and did not move into new markets.
By 1990, Sharon became minister of housing and construction. Here too he would not let the private sector operate freely. He determined how contractors would build, where and to what standard. He even made sure the contractors got 100-percent guarantees on their projects for the new immigrants from the former Soviet Union. This led to the building of shoddy developments in unsuitable places where no one wanted to live. The mobile homes that he scattered across the country turned out be an enormous waste that made his Likud party buddies fatter. The situation was so bad that Modai, then the finance minister, threatened taking Sharon to court, no less, for exceeding his office's budget by billions. But then Sharon has never considered money a restriction, but simply a means to achieve political goals.
After winning the election in 2003, Sharon understood he had to replace Silvan Shalom as finance minister given the crisis in which the latter had left the economy. Sharon offered the job to Benjamin Netanyahu. It was an excellent decision, one that meant that the two have been cooperating for the past three years, despite the fact that they cannot abide each other.
Netanyahu was the one who promoted the free market economy: cutting back the fat man (the public sector) to encourage the thin man (the private). Sharon did not like this view but allowed Netanyahu to cut the budget, reduce public sector wages, reduce welfare payments, slash taxes and launch a slew of reforms. He actually backed his finance minister on the bottom line. His only intervention was on two points: making sure defense spending was not cut, and that farmers didn't have to pay more for water.
Sharon concentrated on matters of state. He proposed the disengagement, and saw it through. He brought about a substantial reduction in terror attacks. The disengagement breathed new life into the economy, brought Israel back into the family of nations and rekindled foreigners' interest in investing here. Reduction in terror brought the shoppers back to the stores - so with lower risk, growing investments and more private consumption, the economy grew, and fast.
So Netanyahu and Sharon are jointly responsible for getting the country out of the intifada crisis. Both contributed to the high growth in GDP, the drop in unemployment and the continued bull market on the stock exchange. But who deserves more praise? That, I leave to you to decide.
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