The Bottom Line / Where in the World Is Che Guevara?

Amir Peretz's critics from the left say he is extinguished, pale, his enthusiasm has dissipated, that he has been scared by the capitalist economists around him. They miss the old Peretz, the revolutionary, who slammed Bibi and shredded free market theory.

They want him to say that free market is a failure, that we must return to big government, that minimum wage must be hiked immediately to $1,000 a month without limitation and without negotiation. They press him to declare he will bring back the tax wall, resurrect welfare allowances, but chiefly beat the evil rich into a bloody pulp by raising marginal tax back to 60 percent, imposing substantial estate tax, and show them who is boss. That's what's happening today in South America, and that's what should happen here too, say the revolutionaries pining for the good old Che Guevara.

But what can be done if Peretz understands reality better than they do? What can be done if Peretz understands that free market economics have won? He realizes that first you have to make the pie bigger and only then can you cut it up and hand it out. He understands that the communist approach - that the government knows best how to distribute means of production - has failed. He knows the that Adam Smith's Invisible Hand will better allocate resources, capital and land, according to the preferences of the public through pricing mechanisms. And only by achieving high productivity will it be possible to argue about how to distribute the pie - and that is exactly the point where the state should intervene, to reduce gaps and prevent poverty.

At a news conference this week, Avishay Braverman said that Labor doesn't like the excessive economic dominance by a select few. "A small group should not control the state. It isn't good economically, morally or governmentally."

Words to live by, but the innocent listener might think - as do those left-wing activists that surround Peretz - that in the 20 years since the implementation of major reforms and privatizations, economic dominance has increased - and it hasn't.

Until the early 1980s, the Israeli economy was controlled by just three entities: the state (through a huge budget and copious state-owned corporations), the Histadrut labor federation (through Bank Hapoalim and Koor) and the Recanati family (through IDB Holdings and Israel Discount Bank).

Back in those "good" old days, no deal could be made against the wishes of the banks, the Histadrut or the state. Everything was managed from above. Deals closed or collapsed in a single phone call. The economy was many times more centralized than it is now. There was almost no competition, and prices were very high.

And then, in 1983, the "bank share collapse" caused an earthquake, and as a result, the banks were forced to sell the huge corporations they owned. Later came the economic stabilization plan of 1985, and the state and the Histadrut also had to sell off holdings. That's how "the families" were born.

True, 36 families would be better than 18 - it would be better for the economy and better for competition. But lest we forget, our situation today is far better than the nostalgic days of backwardness to which the knights of socialism would like to roll back the clock.

Before the market economy and privatization revolution, we were controlled by three people: the finance minister, the chairman of the Histadrut, and Raphael Recanati. The situation is far better today. Economic concentration is far smaller. FYI for the followers of Che Guevara.