Who Benefits From Privatization?

Without privatization, we would still be mired in a backward government-Histadrut economy. Luckily some of our leaders got up and did the right thing.

Nehemia Shtrasler
Nehemia Shtrasler
Nehemia Shtrasler
Nehemia Shtrasler

It is rather frightening to look around and see how everything we built here over the last 25 years is being destroyed before our very eyes - to the point of putting the state itself in danger.

If until two years ago, there was a broad consensus that government expenditure should be cut and the deficit should be kept low, today's bon ton seems to be expanding the budget. And if until recently, we venerated reforms and privatization, today, reforms are nowhere to be seen and privatization is taking blow after blow.

But the economic truth is that there is no substitute for a conservative budgetary policy to avert crises, and there is no better recipe for rapid growth and improved living standards than privatization and reforms.

Without privatization, we would still be mired in a backward government-Histadrut economy. Luckily, in the mid-1980s some of our leaders, untainted by populism, got up and did the right thing, without relying on public opinion polls. They started a long privatization process and changed the economy's structure for the better.

Instead of the government and Histadrut labor federation calling all the shots, businessmen took command, and management and performance genuinely improved - thanks to people like Zadik Bino, Ted Arison, Yitzhak Tshuva, Lev Leviev, Muzi Wertheim, Nochi Dankner, Idan Ofer, Matthew Bronfman and Haim Saban. And the list goes on.

The Israeli economy thereby underwent the most important transformation in its history: from an economy comprised of government-owned and Histadrut-owned companies - whose goals were to increase their staffs, appoint friends and relatives and dish out benefits to the unions, without any aspiration to make a profit or break into new markets - Israel's economy became one comprised of much more dynamic and innovative private companies that sought to integrate into the globalized world, thereby propelling the economy forward.

Have we forgotten the days in which we would wait seven years for a phone line, along with the 200,000 other people on the waiting list, back when Bezeq was the Postal Ministry? Have we forgotten the cartel of the fuel and gas companies, most of them governmental, that made fools out of all of us? Do we not remember the government-owned El Al, plagued by endless strikes and chronically late takeoffs?

And who can even count the billions paid by the public into Israel Military Industries, which its workers still refuse to privatize? And what about Israel Shipyards, a chronically ill, money-losing enterprise that used to go on strike twice a week before it was privatized?

So there is not much importance in the fact that the private Bank Hapoalim now has lower profits than Bank Leumi. It happens. It doesn't say a thing about privatization as a whole.

There is no way to guarantee 100 percent success. But when a private company is ailing, the old management goes home and a new management comes in and tries to fix it - something that does not happen in the public sector. Moreover, the banking sector has seen successful privatizations, like Mizrahi-Tefahot, Discount and First International.

Obviously, things would be better if alongside the privatization, the economy had become even less concentrated in a few hands. Yet some reduction in concentration did occur. Obviously, it would be better if instead of 20 tycoons, we had 50, and if instead of two big banks, we had 10 medium-sized ones. But the greatest enemy of the good has always been the "very good." And "good" is still better than "unsatisfactory."

That is why privatization must not be stopped. In fact, it must be accelerated, and Bank Leumi must be sold off as quickly as possible. This can be done without increasing centralization, and in fact while decreasing it, by selling the bank to a new businessman or an international group with no other significant investments in the Israeli economy. Later on, other government enterprises, like the Postal Bank and the seaports and airports, should also be sold.

But it seems our instinct for self-destruction will not let us do what is right. So instead of continuing to slim down the public sector and making it more efficient, it is being expanded, and instead of continuing privatization and reforms, the reforms are being stopped and privatization is being hindered. And thus the two great locomotives of growth are being stalled.

When will we change course again? Apparently, when the next crisis hits.



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