David's Harp Hugo Chavez, Yair Lapid and Useful Pigs

It may not be fair to devote more attention to the middle class than the poor, but it’s the class that gives back the most to society.

David Rosenberg
David Rosenberg
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David Rosenberg
David Rosenberg

The death of the Venezuelan leader Hugo Chavez last week couldn’t seem less relevant to Israelis thousands of miles away. Except for an occasional foray into anti-Semitism and some high-profile but low-utility friendships with his fellow autocrats in Iran and Syria, the caudillo’s 14-year-rule seems to have little bearing on Israel.

Then again, maybe not. Chavez presided over a revolution in Venezuela, a vast effort to transfer the country’s wealth into the hands of its poor. Had Bibi Netanyahu gotten his way we might well have seen something very similar albeit on a more modest scale. Shelly Yacimovich, as finance minister, would have – aided and abetted by the Haredi parties – certainly tried something very similar.

She would not have imported Cuban doctors to man health clinics for the poor or seized control of the energy industry, as Chavez did, although you can imagine her hosting 12-hour marathon television programs. But the idea that the country’s socio-economic ills can be cured by a government-directed transfer of resources to the weakest classes is some something Chavez and Yacimovich share. The Haredim, having no ideology except to keep the fires of the yeshiva-centered community stoked, would have been happy to go along for the ride.

If Yair Lapid does in fact take over the treasury we have been promised a revolution of another kind. If it happens – and that is by no means assured since his first problem will be how to claw his way out of the fiscal hole he has been bequeathed by Netanyahu—it will be a middle-class one – a quiet, well-mannered revolution whose heroes are a two-career couple with three kids, a dog, a house in Ra’anana and satellite TV.

Two questions beg asking about economic revolutions aimed at serving one specific class or another. One is can they ever be effective and the second is whether they are just and fair.

The revolution that worked by coincidence?

Chavez’s so-called Bolivarian Revolution has what could be called headline successes, meaning if you reel off a series of numbers, they look very impressive. It’s only when you start examining the details that they look more equivocal.

For instance, the rate of poverty and infant mortality have fallen sharply in Venezuela since 2002, but the poverty rate for countries like Peru, Brazil and Mexico fell even faster during the same period.

Chavez paid for his revolution with oil revenues. He was fortunate with timing: he came to office as global petroleum prices were climbing and he simply used the national oil company as an ATM to pay for social programs.

Why not? There are certainly plenty of countries that squander their oil wealth (Nigeria and Libya come to mind); better to put it to the service of society.

Yet such a revolution is hard to sustain. Saudi Arabia has been desperately trying to create new industries and upgrade its workforce with shiny new and hugely expensive universities, medical centers, airports and industrial complexes. But when the money is so easy, it’s hard to get people to work, much less become entrepreneurs.

In Venezuela the proportion of working age people in the labor force fell 52% pre-Chavez to 46%.

In education, the number of students enrolled at school relative to the school age population has grown sharply while the number of students studying in institutes of higher education reached 80% in 2009, double the 2003 figures and higher than the three other countries.

But it would be reasonable to ask what kind of education they are getting. Chavez’s Universidad Bolivariana was started in 2003 and already has a student population in the hundreds of thousands. And the University of the Armed Forces grew from 3,200 students to 224,000 in four years. Admissions are open to everyone without any reference to academic qualifications.

It’s a blow for equality, but it is hard to imagine that many of these graduates are doing much to upgrade Venezuela’s stock of human capital in a way that can benefit the economy so that the next generation won’t need neighborhood clinics or free government housing paid with oil money.

Wanted: A cure, not a crutch

Social programs can alleviate poverty just like a crutch can you get you on your feet, but the real problem is how you mend a broken leg so you can stand on your own. Chavez had no answer for that. He probably wasn’t looking for one either. Like the Haredi politicians here, his goal was not to alleviate poverty but to create a dependent relationship between a poor and needy population and its political leaders.

As to justice, it’s not obvious why Lapid should be directing his efforts at the segment of society that is doing well, relatively speaking, when there are many people – more than 20% of the population according to the National Insurance Institute—who are outright poor.

Yes, our middle class husband and wife do more than their fair share serving the army and paying taxes. They even went out into the streets, albeit briefly, to protest in the summer of 2011. But let’s face it, they can still afford private lessons for the kids and annual vacations abroad. Compared to a tycoon or an Ashdod Port worker, they are not so well off, but compared to the single mother of five in Dimona they are doing just fine. She needs Yair Lapid more than they do.

But there is little justice in economics. Imagine that the $1.3 billion in state subsidies that went to Intel to build its semiconductor plant in Kiryat Gat over the last decade had instead been directed to child allowances, or building better schools, hospitals and roads in the development towns. But while Intel doesn’t strictly speaking need the money, it gave back in return $4.6 billon in exports last year alone and employs more than 8,000 people in desirable and well-paying jobs. The return on the investment is fast and easily defined.

Investing in the middle class through a change in government priorities is similar.

It may not be fair to devote more attention to the middle class than the poor, but it’s the class that provides the most value-added work and gives back the most to society. Even if its belly-aching is exaggerated, if the middle class feels alienated, cheated or abused, we will pay for it in the form of lower productivity and slower economic growth.

Yair Lapid’s prospective revolution may have the scent of piggishness in the sense of giving more to people who are the most in need, but let’s face it, the pig is a useful animal.

Posters of Venezuela's late President Hugo Chavez in a Caracas street.Credit: Reuters

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