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What is the Israeli economy's main problem? There are those who say it is the excessive size of the public sector, which takes 54 percent of the national product and thus imposes an exaggerated tax burden. There are those who argue that it is the low proportion of people who go out to work - 55 percent of the potential. There are those who hold that it is the large monopolies: the Ports Authority, the Airports Authority, the Israel Lands Administration, the banks, the Israel Electric Corporation and the Mekorot Water Company. There are those who claim it is the Histadrut labor federation and the large workers' committees, which thwart efficiency measures and freedom of management. Apparently, however, the central problem is in the political realm: the lack of stability in the regime, which is a result of the proportional electoral system.

A prime minister who comes into office cannot plan ahead for four years; a few months after he comes into office, when he tries to carry out some significant move, the threats to the stability of the coalition begins. This has happened to most of Israel's prime ministers, and to current Prime Minister Ariel Sharon. Therefore, the planning range of a prime minister in Israel is only a few months, and this is bad.

Every company director, even the director of a small company, knows it is impossible to make a recovery plan with a range of only a few months. At the beginning of every recovery plan there are expenditures, firings and other difficulties, and it is only two or three years later that the company harvests the fruit and becomes profitable. This also applies to managing a country. In the economic realm, for example, a politician will not invest in the things that are really important - infrastructures, railroads, education, cuts in the public sector, consolidating local authorities and major reforms - if he is not certain he will be around to harvest the fruit. The thought that he will be the one to invest, to cause unemployment, to get all the mud slung at him, and that his political rival who succeeds him will be one to harvest the fruits of the growth - gives him gooseflesh.

Even the replacement of government ministers does incalculable damage. When National Religious Party MK Effi Eitam was minister of construction and housing, most of the ministry's money was directed to the territories. Now the new Minister Tzipi Livni has stopped the flow. Tomorrow or the next day, when someone from Shas or the Labor Party comes into the ministry, the policy will change yet again. Thus, without stability and without continuity, it is impossible to manage large systems.

Up until the disengagement crisis, the government had a clear economic line. All its elements supported a free economy, favored decreasing the excessive size of the public sector, encouraging people to go out to work with the help of decreased welfare payments and a decrease in the taxes on labor. They all backed the fight against the large monopolies and the fight against organized labor, to enable greater freedom of management. Finance Minister Benjamin Netanyahu believed in this, and he had the full backing of the Likud, Shinui the National Union and the National Religious Party - apart from Welfare Minister Zevulun Orlev.

Now the situation has changed entirely. If the ultra-Orthodox come into the government and Shinui leaves, it will end the attempt to get people receiving welfare payments and the unemployed back into the job market. Shas will see to the cancellation of the cuts in the National Insurance Institute child allotments, to the return of the support payments for yeshiva students, to an increase in the budget for its ultra-Orthodox Ma'ayan Hahinukh education system and to the return of discrimination at the Interior Ministry. The attempt to increase the number of people who are employed in the economy will end in failure and the economy will tumble backward downhill.

The representatives of the Labor Party are more sophisticated. They are rounding corners so that everyone will love them. They don't want to increase the deficit, but at the same time they want to increase grants to the municipalities, the universities, the recipients of guaranteed income payments, the elderly, education, health and the weak strata of society. A kind of hocus-pocus. They are in favor of reform at the ports, but only through negotiations with the workers, who are not prepared to give up the monopoly. They are also in favor of reform at the banks, but without taking the provident funds and the trust funds away from the banks. They are in favor of lowering taxes, but not all at once.

It is possible that the economic-social outlook of Eli Yishai and One Nation MK Amir Peretz is more correct, but it definitely cannot live under one roof with Netanyahu's.

Therefore, the system of proportional elections has gone bankrupt. It causes chronic instability, frequent political crises, short-range planning, risk aversion and the neutralization of any political plan to disengage from the Gaza Strip or for economic recovery. It does not allow any side to go all the way with its plans.

Thus it is necessary to adopt a system in which the prime minister will be elected directly for an entire four-year term without the Knesset being able to overthrow him, as in the American system. Only in this way is it possible to establish a stable government with real power to make decisions, a government that will take risks and is headed by someone who knows with certainty that he has four years in which to act - only then will he dare carry out what is so very necessary: an exit from the territories, and economic and social reform.