For better or for worse, Israel looks more and more like America, albeit a somewhat paler version. We’ve never developed America’s firearms fetish, but we carry guns as much as Americans do. We can’t quite recreate the same shopping experience because prices are too high and the quality of services too low, but we’ve adopted American-style consumer culture. It’s hard to measure, but it’s even possible that Israelis are even more polite in public than they were a couple of decades ago.
Now, it looks like Israelis have become American in their attitude toward taxes and government. That has important implications.
It wasn’t too long ago that even with Israel’s transition from a state-dominated economy to the free market one we have today, people expected government could and would solve problems, like stopping a factory from being closed and jobs lost, or intervening in the foreign exchange market to protect the shekel. They didn’t object to high taxes. No one was in principle against big government, not even business.
A survey this week released by the Israel Democracy Institute shows that is no longer the case. It found that while 86% want more services from the government, just 37% were ready to pay more taxes to get them.
Why won’t they agree to pay more? The answer is that three quarters of Israelis don’t think higher taxes will bring more of the services they want, which are overwhelmingly for improved healthcare and schools. They simply don’t think the government is capable of using the extra tax money effectively.
Israel has no Tea Party movement, or armies of lobbyists and think tanks pushing for small government, but the same attitudes that animated the Tea Party movement in America a decade ago seem to be shared by a majority of Israelis.
The level of distrust and dissatisfaction in Israel is quite surprising considering the state of the economy. Israelis never experienced the trauma of the Great Recession a decade ago that left many people in the U.S. and Europe feeling that elites, especially those in government, were little more than a self-serving interest group. The result was a populist wave that gave us Donald “drain the swamp” Trump and Brexit.
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But the story in Israel is different. The economy has been growing almost non-stop since the early 2000s, unemployment is at record lows, wages are rising, consumers are spending mightily and the high-tech sector is thriving. What’s there to complain about?
Unfortunately, there’s a lot, and the biggest problems are where the government is most involved. The schools are failing, the healthcare system is on the verge of collapse, roads and the public transportation network are overburdened. Plans to bring the Haredim into the workforce have faltered and those for integrating the Arab minority have come in fits and starts. It took years for the state to get even the semblance of a grip on soaring home prices. About the only thing the state does consistently right is defend the country.
This creates a serious dilemma. The economy can’t continue to grow and standards of living can’t rise if these problems aren’t fixed. Poor schools are preventing Israel from catching up to the rest of the developed work in terms of workers’ skills. Chronic traffic jams make workers less productive by forcing them to spend time commuting when they could be at the office or factory. Poor healthcare means more days lost to sickness.
Fanatics are convinced that privatizing everything will solve all these problems, but that’s a fantasy caused by excessive exposure to Ayn Rand. In America, where healthcare and education are privatized to a high degree, the results have been less than impressive. The reality is that to do their job properly, education and healthcare not only have to be delivered efficiently: they have to be universal and affordable. The private sector isn’t good at ensuring either; it’s either the government or no one.
In one critical way, Israel is in a good position to deal with these problems. Taxes are among the lowest in countries belonging to the Organization for Economic Cooperation and development and until recently the government was running small budget deficits. If it wanted to spend the money to upgrade education, health and infrastructure, it could.
The Bank of Israel has been pushing the government to do exactly that, but to no avail because Netanyahu and Finance Minister Moshe Kahlon think cutting taxes is a vote-getter. The idea of raising them is out of the question -- and apparently that have a majority of Israelis behind them on that.
I share those doubts about the government’s ability to tackle problems. The politicians who run it have horizons that don’t extend past the next election day and/or are too beholden to sectoral interests. Public sector unions resist change and efficiency. Pay in the civil service is so good that it should attract the best and brightest, but anyone with ambition or drive looks wants to work elsewhere.
Netanyahu talks frequently about fixing the bureaucracy but in practice he’s more focused on getting the bureaucracy to subordinate itself to its political masters, which can only make things worse. A good, albeit small, start on the way to better government would be to remove him from office.