Bloomberg’s correspondent found an interesting angle on housing prices in Israel: “Israelis invented advanced missile interceptors and some of the world’s top treatments for cancer,” wrote David Wainer, and brought it home: “Yet when it comes to the mundane task of building affordable housing, this nation of scientists and software engineers hasn’t quite cracked the code.” Great lead, especially for readers who associate Israel with nothing but war in the Middle East and Startup Nation. But does the one have to do with the other? What is the solution?
- Kahlon: We don’t want housing prices to decline significantly
- Housing starts in Israel grew in first half of 2015, but slumped in last six months
The best place to start the discussion isn’t the high cost of housing in Israel, which is as much as double the global norm in terms of purchasing power, or the Israeli eco-system that cultivates entrepreneurship. The best point of origin is the birthplace of Bloomberg, namely, the United States. Covering America, we might find ourselves writing headlines like “The country whose scientists are responsible for most medical breakthroughs can’t create equality in medicine,” or “the strongest democracy in the world can’t seem to rein in legal corporation in politics even though the public noticed it and hates it.”
I could go on, but you get the message. The U.S. is the richest country in the world, with a gigantic domestic market and no major economic bloc that could constitute real competition, yet it suffers some of the worst economic and social problems in the West. Why? With all that wealth, technology, science, initiative, freedom and its magnetic attraction to the best brains in the world, why hasn’t it solved all its problems?
Simple, and the answer to Wainer’s opening question is the same. The problem isn’t absence of talent, ability or technology. It’s a political problem.
I don’t mean that it’s some partisan issue, a problem of left or right, Likud or Yesh Atid or Kulanu or Meretz, just as in the U.S. the problem isn’t Republicans or Democrats. In the last 30 years, during which these problems developed and mushroomed, there were both Democratic presidents and Republican ones in the White House.
The political problem is that the output of the democratic system is a very, very far cry from what we perceive to be the “democratic” ideal.
The democratic output often reflects the balance reached between interest groups with vast influence over the rules of the game, and the general public, which has very little influence. The present democratic protocols don’t deliver the goods. Throughout most of the capitalist, democratic world, they produce results that serve mainly the interest groups, not the public. In the U.S., it’s even more egregious than elsewhere – the influence of the interest groups on legislation, regulation and the rules is palpable throughout in finance, healthcare, education, infrastructure and everywhere else; and the weakness of the general public is equally glaring.
We say the middle class is being crushed, but should really phrase it differently. No politician, regulator or journalist ever woke up in the morning with a dastardly plan to destroy the middle class and increase poverty. What happens is that the politician, regulator or journalist in the democratic arena find themselves up against hundreds, if not thousands of interest groups with power, status means and knowhow with which they manipulate the rules and laws in their favor.
Powerful interest groups have always existed; it’s hard to say if they got stronger. Perhaps when economic growth was brisker, there was enough pie to share around with the public too. What is sure is that if we seek solutions for Israel’s social and economic problems, we need to look for a social, political and conceptual “technology” that would diminish the power of the interest groups and give the general public more power. The last decade has proven that present technological advance – more computerization, more drugs, more apps, more entertainment – isn’t advancing us toward a solution of the basic problem, which is the political and economic power held by a very few people who are not that interested in the greater good.