David's Harp

The Heroes and Goats of 2013 Aren't Always Who You Think

Tamar, Waze, Stanley Fischer and Karnit Flug were all lauded and Yair Lapid damned, but it isn't so simple

Picking out heroes and the goats among the people, politicians, businesses and events of 2013 is harder than you think. Some who were generally damned didn't always deserve it, nor did those showered with praise. Here are three heroes and one goat, and a contrarian history of the year.

The Curse of the Money: Who can complain about finding buried treasury like the Tamar gas field right in his own back yard. Even before the bigger Leviathan field is started up, Tamar, which went on line last spring, has reduced Israel's energy-import bill, rescued us from the unreliable Egyptians and is providing clean, inexpensive fuel. Natural gas may even prove to be a geostrategic asset vis a vis Turkey: A friend of need of energy is a friend indeed.

But Tamar is doing little else for the rest of the economy. The savings from gas is being eaten up by Israel Electric Corporation to cover its big energy bills from 2011 and 2012 when the supply of Egyptian gas was cut off. Natural gas may one day create new industries and new jobs, but for now it employs few people and most of them guest workers.

In the meantime, the export sector has been weighed down by a fat shekel: Its value against the dollar has risen 6.5% since the start of this year, while industrial exports (not counting diamonds and startup companies) have been flat at a time when global world trade was rising 2%. A shekel appreciation isn't an unmitigated disaster – it lowers some costs for manufacturers and the price of imported goods for consumers – but for an economy so reliant on exports for jobs and income, the gains pale beside the losses.

Wrong Direction: Waze and its CEO Noam Bardin became high-tech heroes after the navigation app startup was sold to Google for more than a $1 billion last June. Not only did Waze put Israeli startups into the 10-figure-buyout league, but Bardin insisted that the company and its staff remain in Israel after the sale. He expects Waze's Israeli payroll to double by the end of next year. Waze deserves our respect not only for building itself into a billion-dollar company but for its Blue-and-White credentials.

But the real high-tech hero of 2013 is Wix, a startup that makes website-building tools that, with much less fanfare, went public on Wall Street a few months later. It raised just $127 million, but the shares have soared and Wix today is also worth just a little over $1 billion.

The two companies also both counted 40 million [??] when they made their decisive step to either sell or go public, but by going public, Wix is saying it plans to remain a standalone business.

When Waze doubles its Israel staff it will employ close to 240 people. But Wix already counts more than 450 people on its payroll, 380 of them in Israel. That's the difference between a company that does only research and development and one that is a full-fledged business. Startup Nation should bow before the idol of Wix.

The Fischer King: Stanley Fischer's decision to step down as Bank of Israel governor this year was accompanied by so much drama that it is hard to make sense of what really happened. As it was portrayed in the media, it was tragicomedy whose Act I was the untimely loss of the hero, the economy's responsible adult and chief spokesman in the global arena. After a long intermission, Act II sees a prime minister choosing among the elite of Diaspora Jewish economists (or, in the worst case, an indigenous male) to serve as his new warrior in chief. In Act III, the heroine, Karnit Flug, emerges from back stage to triumphantly take the governor's seat.

The story is not so simple. Fischer's achievements as governor were immense, but like every hero he was flawed. He had failed to devise a workable strategy for preventing the shekel from appreciating, controlling the rise in housing prices or enhancing competition in the banking sector, to name a few. The process for selecting a new governor was problematic, but Netanyahu's candidates were, in fact, amply qualified for the job. And, if Jacob Frenkel, his first choice, was the weakest, it was not because he was accused of shoplifting but because of his age and signs that his views were out of sync with the times.

Flug has been unduly lauded by virtue of the fact that she is a woman and that she acted with such a grace at a time when she was being treated so shoddily by Netanyahu. We're still sitting through Act IV, where we learn whether she can indeed fill the role.

Mr. Middle Class: Yair Lapid was setting himself up for a fall when he entered politics. Ignorant of economics, and certainly of government finance, he captured the national zeitgeist by presenting himself as the defender of Israel's overlooked middle class.

It was gratifying to talk about "where is the money?" during the election, but when he reluctantly took over the finance portfolio he found that there wasn't any. Lapid set himself to be skewered in his first months in office for cutting back government spending and raising taxes, all to the detriment of the middle class; more lately he is accused of kowtowing to the middle class by rolling back a scheduled tax hike in 2014. In between, he was slammed for not even knowing what the middle class is when he suggested that a fictional member of the Holon bourgeoisie, Riki Cohen, was struggling on a combined income with her husband of 20,000 shekels a month (in fact, that is about right in terms of average for a two-income family).

Lapid would have to plead nolo contendere on the ignorance charge, but to his credit, he did what the first Netanyahu government had failed to do, which was to get the government's budget house in order.

It was never quite clear what his critics wanted of him. If he had acted otherwise, it would have been irresponsible and certainly of no long-term benefits to his voters. Strangely, Lapid was ridiculed for saying just that, which demonstrated his honestly (or naiveté), not his hypocrisy (as it was portrayed).


 

Reuters