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It is slowly but surely dawning on the Histadrut leaders that they are dealing with a new kind of finance minister - an ideological one. This is a minister who believes in free market competition and private ownership, one who knows that a smaller government that requires less taxes is good for the economy. He's one who understands that the preconditions for growth are dismantling monopolies, making structural reforms, and privatizing state companies.

However, even the most determined treasury minister cannot make such a revolution when environmental conditions are against him. Luckily for Netanyahu, conditions are on his side - the grave economic crisis is what is making difficult steps and decrees possible. When things are good and tax revenues flow, politicians oppose significant change.

Why cut welfare if there's no budget difficulty, they ask. It's true that the percentage of people who are actually employed in Israel is very low, even in times of growth. But why deal with that when everything else is so rosy? And why deal with monopolies at a time of prosperity? True, we all pay unnecessarily high prices for fuel, electricity, water, bank fees and all imports, but when there's prosperity, everyone has an income. And they ask, why touch the pension funds now? They aren't going bankrupt tomorrow, only maybe in another 10-15 years.

Netanyahu also has a political climate that plays into his hands and makes it easier for him to go ahead with reforms. Economically, this is the most right-wing government imaginable, with Shinui, the Likud, National Union and parts of the National Religious Party. Add to that the Netanyahu-Sharon rivalry. Sharon knows that if he circumvents Netanyahu by meeting Peretz, he'll immediately find Netanyahu warring with him on the diplomatic-security front.

These special political circumstances, so appropriate for reforms, are reminiscent of 1991, when Yitzhak Moda'i was finance minister, Moshe Nissim was industry minister, and Dan Meridor headed the ministerial committee on exposure to foreign trade. Nissim agreed to give up the enormous political power of granting import licenses, and thus allowed the external exposure revolution that changed the face of the economy.

Import licenses were canceled and goods from China, Taiwan, Latin America and Eastern Europe began arriving in the country, creating competition, lower prices and a rising standard of living for everyone.

Netanyahu wants the next revolution named after him. So far, he is doing everything right in the economic sphere. He even is taking serious political risks, because a significant portion of the reforms will in the short term hurt many traditional Likud voters. But he believes his reforms will irrevocably change the face of the Israeli economy, putting it on the path to growth, and reducing unemployment.

His big problem is in the political arena where he is an unrepentant hawk. He is not ready for painful concessions and withdrawals from settlements, and believes the economy can flourish even as the war with the Palestinians continues. How sad that he doesn't have the political wisdom of Dan Meridor and Meir Sheetrit.

Sheetrit well understands the Gordian connection. Just this week he said, "It is in our interest to reach a peace agreement with the Palestinians and courageous steps be taken in that direction. Give us a year of quiet and you'll see how the economy grows and flourishes."

Behind closed doors, Sheetrit is ready to be much clearer, saying bluntly that even if the bloodletting goes on for another 30 years, we'll still end up needing to evacuate all the territories, except for some minor corrections.

But Netanyahu doesn't have the courage to shake off old beliefs and recognize the clear truth, so he, and us, will pay the heavy price of the continuing recession and unemployment, despite all the correct steps he is taking in the economy.