Who Is Afraid of Rapid Growth?

The newspaper headlines trumpeted a new disaster: rapid growth. It has just arrived, and it has already caused the gaps in society to widen.

The newspaper headlines trumpeted a new disaster: rapid growth. It has just arrived, and it has already caused the gaps in society to widen. The Adva Center did the arithmetic this week and found that the rapid growth has benefited only the two highest deciles, and has harmed all the rest. In other words, without it, the situation would have been a lot better.

And indeed, the rapid growth of the past three years, which reached a rate of 5 percent annually, astonished the economic and social researchers at Adva, as well as all the rest of the social organizations. They do not know how to digest it. They had expected exactly the opposite.

They predicted that then finance minister Benjamin Netanyahu's economic program (which began in 2003) would lead the economy into deep recession and a rise in unemployment. Amir Peretz, then head of the Histadrut labor federation (and currently defense minister), said that Netanyahu's budget cuts, along with his tax cuts, privatizations and reforms, would increase the unemployment rate, then 10.7 percent, to at least 14 percent, and therefore, an alternative plan should be implemented: higher taxes, compulsory loans levied from the public and increased government spending, in order to emerge from the crisis. A kind of neo-socialist approach that was abandoned long ago by all Western countries.

But the years passed and the proof arrived: The 2003 plan led the economy into a situation of high growth, lower unemployment, an export surplus and zero inflation. And all this despite a very expensive war in Lebanon, a backdrop of threats from Iran and the chaos in the territories.

But the Adva Center decided to ignore all these economic achievements. The report it published this week does not mention the sharp drop in unemployment, from a record 10.7 percent in 2003 to 8.3 percent today. It does not note the fact that between then and now, 240,000(!) Israelis joined the labor market, and now get up every morning and go to work instead of sitting ashamed and frustrated at home. If that is not a huge social achievement, what is?

The increased social gaps must also be analyzed differently than the Adva Center does. The primary reason for the increase in these gaps is education levels. This is a process that is occurring throughout the Western world, the United States as well as Europe. There, too, inequality has increased in the wake of an increased return on education. Anyone who is educated and benefiting from the global technological revolution (the use of computers, information systems and the Internet) has seen his productivity, and hence also his salary, rise. But this revolution is passing over those who lack education and a profession, such as manual laborers in the construction, nursing care and service industries, without leaving a trace. Their productivity is not rising and their salaries are being eroded.

The second reason for the increasing gaps lies in the process of globalization. The moment that companies in the textile or leather industries can move production to China or Taiwan, competition increases, and wages in traditional industries go down.

And if these reasons were not enough, there is also the dreadful mistake that Yitzhak Rabin's government made in the 1990s, when it opened the borders of the country to foreign workers. And who were the foreigners? Not software experts from India or engineers from Thailand, but blue-collar workers from Romania, Kenya and China who entered the construction, nursing care and cleaning industries, lowering the wages in these fields and causing Israeli workers to be cast out of the market.

It is necessary to deal with all these problems. In order to give people knowledge and education, it is necessary to subsidize and to invest more in early childhood education and elementary schools, especially in the periphery and disadvantaged neighborhoods. Another important measure is to encourage people to start working through vocational training and massive subsidies for day-care centers. In addition, it is necessary to continue to reduce the number of foreign workers, because it is impossible to continue importing cheap workers and enjoying low construction prices while ignoring the damage to local blue-collar workers. Finally, it is necessary to find additional money in order to increase National Insurance Institute stipends for the elderly and anyone who is incapable of working.

All these plans require budgets, but this time, too, Amir Peretz has a magical solution: After having received an additional NIS 1.9 billion for the defense budget, he is demanding a further NIS 1.5 billion, and even saying that he opposes "the irresponsible attempt to pose the need for tanks versus the needs of the elderly, and the need for aircraft versus the needs of children." As far as he is concerned, there is no problem with increasing both. Peretz has no budgetary constraints.

The prime minister, with a certain amount of delicacy, answered him: "It's already been explained to you that both aren't possible." But Peretz is sticking to his guns. He does not understand that the current stability and the rapid growth are the result of the stringent diet that the "fat man" (the public sector) has followed, which enabled the "thin man" (the private sector) to grow and create jobs and also to increase tax revenues - which is what makes the current increase in defense and social expenditures possible.

Peretz lives in an unrealistic world that might perhaps be suitable for the Histadrut. However, as in 2003, he can only bleat hollow slogans, not act. It is lucky that he is not the finance minister.