A Prize for Failure

If Peretz becomes finance minister, Israel can say good-bye to all the reforms and structural changes that are so crucial to the economy. Because Peretz opposes all privatization and reform.

Ehud Olmert can be criticized for promising convergence and a peace process but in practice rejecting every Arab initiative to negotiate. He can be criticized for the failure of the Second Lebanon War, and for the way he has conducted himself in dealings with his rich friends. But there is one thing you can't take away from him, and that's rescuing the Israeli economy.

During the coalition talks a year ago, his insistence on not giving Amir Peretz the finance portfolio was a critical one. He saved us from wallowing in the mud of economic crisis, low growth and soaring unemployment. He kept investors from fleeing and interest rates from going sky high.

For that reason it was downright frightening to hear Peretz say this week, in front of hundreds of cheering party members, that on the night he is re-elected chairman of the party (May 28) he will give up the defense portfolio and demand the treasury.

Some political commentators opined that Peretz wasn't right for defense because of his inexperience and lack of military expertise. In the same breath, however, they said he was right for the Finance Ministry because this was a subject he understood. They are making a mistake. Peretz understands finance, but upside down, and that is even worse than understanding nothing.

Peretz's economic outlook is dogmatic and outdated. He believes that the government - any government - knows better than its citizens what should be done with the money. Thus he is in favor of raising taxes: more income tax, more value added tax, more corporate tax. With the incoming money (that will never really come in because it will end up somewhere else, with a recession sure to follow) he will boost spending, hand out gifts and increase manpower. And to hell with the deficit.

In 2003, when the economy was in deep trouble, Benjamin Netanyahu presented his plan: budget cuts, tax breaks and reforms. Peretz came up with an alternative plan: raising taxes, levying a compulsory loan and increasing government expenditure. A kind of neo-socialist approach that was cast aside long ago, even in European social democracies.

The years have gone by, and now we have proof. The 2003 plan brought high growth, a sharp decline in unemployment, export surplus, zero inflation and very low interest rates. If the government had adopted Peretz's plan, the economy today would be in shambles. Joblessness would be hitting the roof, and there wouldn't be money in the coffers for negative income tax, mandatory pensions, subsidized day-care centers or narrowing economic gaps.

If Peretz becomes finance minister, Israel can say good-bye to all the reforms and structural changes that are so crucial to the economy. Because Peretz opposes all privatization and reform. He opposed the sale of Bank Leumi, and now he opposes the privatization of Israel Military Industries. He opposed competition in the seaports, and now he opposes structural changes in the Israel Electric Corporation. He does not want to see the post office privatized, and was against privatizing the Oil Refineries. And of course he wouldn't touch the Israel Airport Authority or the Israel Lands Administration. If he could, he would restore government control of Bezek, and we would go back to waiting on line for seven years for a phone line.

Toward the end of 2006, the Finance Ministry and the Defense Ministry haggled over the increase in the defense budget. "You can't pit the need for tanks against the needs of old people and children," Peretz declared at the time. Nice. Demagoguery at its finest. But in real life, every housewife knows that budgets have limits. You get this or that, but you don't get both. Peretz, always looking for a way to make people like him, is trying to be an alchemist.

The cemeteries are full of people who thought they couldn't be replaced. Peretz is convinced he is the only one who can lead a social revolution. In a progressive country, a minister who fails at his job the way Peretz has, goes home. Accepting responsibility is a basic norm of government. The idea that he should get a prize for his failure is simply absurd.