David's Harp

A Woman at the Bank of Israel Isn’t a Feminist Fable

Karnit Flug is the right choice because she is likely to pursue the same policy agenda as her male predecessor, not because she’s female.

What a feminist fable we witnessed this week. A pack of middle-aged and older men – both those vying for the post and the ones deciding who would get it – trip, stumble and fall as they struggle to fill the empty governor’s chair at the Bank of Israel. Karnit Flug, meanwhile, quietly seats herself on the coveted chair, trying it out for size and brushing off the repeated insults of not being offered it for herself. Finally, her patience and fortitude is rewarded; ineptness and entitlement are vanquished.

Add to that the appointment of Lilach Asher-Topilsky as CEO of Israel Discount Bank a few days before. Two other Israeli banks, Bank Leumi and First International Bank of Israel, are also headed by women, Rakefet Russak-Aminoach and Smadar Barber-Tsadik, respectively. Women occupy top spots in the Finance Ministry, where Yael Andorn is the director general, Dorit Salingar heads the capital markets division and Michal Abadi-Boiangiu is accountant general. It all rather looks like a tale of triumph for Israeli women.

Are Israeli finance and economics rapidly becoming feminized? If so, will it make a difference? The answer to the former question is “not that rapidly,” to the latter “not in any discernible way.”

Men at work

Most of the top tier of the treasury, not the least the finance minister himself, is male, as is the Bank of Israel’s top management. Among companies traded on the Tel Aviv Stock Exchange’s benchmark TA-100 index – a good a sampling as any of Israel’s biggest businesses – only 7.9% have women CEOs and an even tinier 3% were chaired by women last year, according to a report by the global women-and-business organization Catalyst.

Catalyst ranks Israel fourth in the world for the percentage of women sitting on corporate boards, but the competition evidently isn’t that intense: In Israel, women only account for 16.6% of all directors.

Various studies by MSCI, McKinsey and Catalyst, to name a few, show that when more women hold senior management or board positions, their companies see increased profitability, return on equity and organizational effectiveness. Women are less likely than men to take big risks and more likely to seek additional information before making decisions, to avoid groupthink. On the other hand, a share price index created by Motif Investments of U.S. companies led by women has failed to outperform the S&P 500 over the past five years, both earning returns of just over 104%.

There aren’t enough women central bankers to know whether they are better at monetary policy than men. According to their most recent Central Bank Directory, only 17 of the world’s 177 central banks are headed by women, and until Janet Yellen was nominated earlier this month to head the U.S. Federal Reserve, none had led a major one.

In any case, decisions are usually taken collectively by boards that are mostly male. The Bank of Israel’s Monetary Council is pure stag apart from Flug herself, who a day after she was nominated governor appointed a guy to fill one of two vacant places.

What women really want to do

Do women make different monetary policy than men?

One study found that women who served on the Federal Open Market Committee in the three decades prior to 1996 were more likely to favor easier monetary policy, that is, lower interest rates.

“Women have different social networks, shop in different places. This makes for a more diverse representation of experience and interests,” DeAnne Julius, a former Bank of England policymaker, told Bloomberg News in an interview two years ago. The assumption is that women have a different view of the world, a more practical one based on the fact they are typically responsible for most of the family spending, more “firmly rooted in empirical evidence and experience of how people actually behave,” in the words of one (female) economist writing in The Financial Times to celebrate Yellen’s nomination.

The counterargument is that this is just sexism, because it generalizes about people based on their testosterone levels. Still, it could be sexist and nevertheless true. A better argument is that women who are talented, diligent and dedicated enough to reach the top of the policy or business establishment – and to earn salaries commensurate with their success – are unlikely to be informed by the same concerns as their ordinary sisters.

Are Janet Yellen or Karnit Flug thinking about picking up some cottage cheese on the way home after a debate over quantitative easing or macroprudential policy instruments? Are they recalling their last supermarket bill, wincing and saying to themselves that the central bank has to act?

If they did, how would they act? Raising interest rates would depress economic activity and put people out of work, hurting families. Not raising them might risk higher inflation, also making it harder on families. Which is the position that better reflects women’s concerns?

In fact, Flug has publicly called for raising the retirement age for women. She takes a tough line on deficit spending, which inevitably means cutting back social services and child allowances, and/or increasing taxes. On the other hand, she has expressed sympathy for the ordinary Israelis who have not shared in the country’s economic growth and went out in protest in the summer of 2011. She has faulted tax policy for being unfriendly to families.

Like Janet Yellen, Flug wants policy to focus on employment and ensuring consumer demand. But these are hardly outlier positions; in fact, they are very similar to those of Fischer, an archetypal male insider. Indeed, Flug and Fischer have more in common than Flug has with Labor Party chairwoman Shelly Yacimovich or social-protest leader Daphni Leef.

Israel stands to gain from Flug as governor, not because she is a woman but because she signals a continuation of Fischer’s broad policy lines, which have served the economy well over the last eight years. As much as we can know about anyone stepping into a new post, we know what she stands for and how she will act.

The one thing we don’t know is whether she will be able to pursue those policies with the same effectiveness as Fischer. The new Bank of Israel Law gives the governor less power than in the past, making him or her more reliant on the ability to lead, coax or scold, as needed. Being a woman will make establishing her authority harder, but Flug’s main problem is that she lacks the star power of her predecessor and has less-than-enthusiastic backing from the prime minister. The feminist fable, if there is one here, isn’t quite over.

Tomer Appelbaum