The Bottom Line / Jacob's dream
Maybe some of the public have forgotten, but Jacob Frenkel was close to being finance minister in the past once before. It happened when Benjamin Netanyahu set up his government in 1996 and suggested that Frenkel exchange his top seat at the central bank for the one at the treasury.
Maybe some of the public have forgotten, but Jacob Frenkel was close to being finance minister in the past once before. It happened when Benjamin Netanyahu set up his government in 1996 and suggested that Frenkel exchange his top seat at the central bank for the one at the treasury. Frenkel agreed and the deal was almost done, when Dan Meridor suddenly began voicing objections - and Frenkel gave up.
Now Ariel Sharon is pressuring Frenkel to take on the job, although the economic situation is far, far different, as is Frenkel's personal position.
Today, he is having a ball. He has a super high salary (several times that of a minister) and a respectable position as head of Merrill Lynch International. He travels the world, as he enjoys, and is a recognized success story, as the man who managed to bring inflation down in Israel to a western level.
If he should take on the post of finance minister, there is a good chance that he will fail. If, in any case, he takes the post, we will be getting a finance minister who believes in the free market and shrinking the bloated government sector.
He will insist on keeping the deficit rigidly under control, while reducing it to almost nothing, so that we finally comply with the Maastricht criterion of a national debt of 60 percent of GDP. He will try to substantially increase investment in infrastructure, while cutting contributions to the National Insurance Institute. He is in favor of sweeping reforms, selling state-owned companies, allowing pension funds into the capital market and other growth-engendering moves.
Frenkel will meet no obstacles when it comes to the governor of the Bank of Israel, David Klein. The former is against the Bank of Israel Law, which the government passed in March 2002, as proposed by Silvan Shalom, and which is bad legislation. He is of the monetarist school, which believes that money supply and interest rates determine inflation, and he, therefore, has no problems with Klein. Both he and Klein believe, rightly, that price stability is a necessary condition for long-lasting growth.
But the truth is that there is no chance of implementing any of these wonderful notions. Someone like Frenkel surely knows Ariel Sharon. He must remember the times that Sharon has promised to stand firm, to take action, to make cutbacks (see cutting back the Negev Law or the Large Families Law); but in the end, the prime minister will capitulate, leaving Frenkel embarrassed.
The moment you have no political backing, Sharon's support is like a toy gun. Yes, he will give all the support he can while you draw up the plans and the programs, but at the moment of implementation, he'll be off, running away from the tough decisions - because that's Sharon.
And, likewise, there is no chance that Sharon will renew the peace process; and that's Frenkel's condition for taking the job - because he understands the connection between security and the economy.
So rational analysis brings us to one conclusion: Frenkel will say no, but will stay on as unofficial economic advisor (or official) to the prime minister.
Then again, who said that all our decision are rational?
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