Analysis |

Israel’s New Finance Minister May Be the Bulldozer We Need

The coronavirus exposed Israel’s shortcomings and creates a window of opportunity for reforms. Yisrael Katz just may be the one to lead them

Meirav Arlosoroff
Meirav Arlosoroff
Yisrael Katz at the Knesset in Jerusalem, in 2019.
Yisrael Katz at the Knesset in Jerusalem, in 2019.Credit: Emil Salman
Meirav Arlosoroff
Meirav Arlosoroff

A funny thing happened during the first week of the new government: A tractor met a bulldozer on the road and gave it right of way.

The tractor was Agriculture Minister Alon Schuster, whose first undertaking in his new job was to send a letter to Finance Minister Yisrael Katz asking him to restore duties on imported butter.

Bibi’s slash-and-burn strategy puts Israel on trialCredit: Haaretz

A kibbutznik, Schuster was showing himself to be an agriculture minister of the old school – a protectionist, looking out for his own interests and those of his fellow farmers, and not the country’s interests. He is so much of the old school that he didn’t even try to hide his agenda.

In his letter to Katz, Schuster cited the stand of the ministry’s previous director general, Shlomo Ben-Eliahu, who supported ending the duties “because when there’s a conflict between the good of the farmers and the good of the consumers, the consumers should get preference.” Said Schuster: “My view is different.”

Schuster’s favoring of growers over the rest of the economy comes as no surprise. Generations of agriculture ministers acted in that spirit. They were from the kibbutzim or the moshavim, members of the agricultural club who put national interests second to sectoral ones.

That changed for a while under Schuster’s predecessor. During their five years in office, Uri Ariel and his director general, Ben-Eliahu, adopted policies that took into account the needs of the entire economy. But that was a temporary disruption of business as usual at the ministry. Schuster aimed to set things right again.

Katz, however, was having none of that. Within a few hours of receiving Schuster’s letter, he was putting the minister in his place.

“As I acted on behalf of the citizens of Israel in the Open Skies reforms and in increasing competition at the seaports that I implemented over much opposition, and after examining all the options before me, I am choosing again in favor of the citizens of Israel, who are coping with the high cost of living and the impact of the coronavirus crisis, I have decided to allow the free import [of butter] without any additional tax restrictions,” Katz wrote him back

It was Katz’s first decision as finance minister, so it’s safe to assume it signals his attitude going forward, just like Schuster’s first act signaled his. Katz has arrived at the treasury with the aim of getting things done – more done than his predecessors did – and cement his reputation as a bulldozer.

In his previous job as transportation minister he created that image with Open Skies (a 2013 agreement with the European Union to open up the air travel market) and the ports (creating two private facilities to compete with the government monopoly).

Israeli Prime Minister Benjamin Netanyahu listens to then Foreign Minister Yisrael Katz during the weekly cabinet meeting in Jerusalem October 27, 2019. Credit: Gali Tibbon/Pool via REUTERS

His record wasn’t perfect. Later in his term he surrendered to powerful pressure groups inside his Likud party, for example, in his decision not to break the monopoly of the Israel Airports Authority by allowing the authority’s powerful workers committee to control the new Ramon Airport that serves Eilat. Katz also succumbed to the taxi drivers by barring Uber from offering its full array of services in Israel.

In other words, Katz knows how to be a bulldozer when he wants. The question is, does he want to be one? His response to Schuster offers more than a little hope that Katz has come to the treasury to effect change and in so doing to make himself a player in the post-Netanyahu Likud.

His predecessor, Moshe Kahlon, tried to be nice and popular and failed miserably. We can only hope that Katz has learned that the way to excel in the job is to do what Netanyahu did when he was finance minister 17 years ago: Undertake as many structural changes as you can, no matter how painful, and leave an impression. Finance minister is a job for tough politicians, not softies.

Like Netanyahu in 2003, Katz enjoys strong public backing for reforms. In Netanyahu’s case it was a deep recession that made the public aware that change was needed; in the case of Katz, it’s the coronavirus lockdown. People are ready to make sacrifices and Katz should exploit the opportunity.

The coronavirus crisis has done a lot to make apparent where change in Israel is necessary. Red tape prevented state aid from reaching those who needed it in timely fashion. The public is up in arms over the bureaucracy, mainly at the Israel Tax Authority, which creates the perfect opportunity to stare down the wrath of the workers’ committee and implement reforms.

The pandemic revealed the Education Ministry’s inability to effectively control the schools. The last great reform was undertaken in 2008 and the time has come for a Dovrat 2 committee to explore changes like reforming the school calendar (for instance, putting an end to classes on Friday) and spinning off control of schools to local authorities.

Haredi society suffered an immense trauma when the pandemic pointed up their lack of modern education and alienation from the rest of Israeli society. Even if the ultra-Orthodox parties are powerful forces in government, they can’t ignore the calls for changes such as the need to expand the state-Haredi school system and to make way for vocational training.

Katz himself faces the problem of more than one million jobless. As much as there is a common desire for these people to return to their old jobs, the odds are that won’t happen for many – and that’s for the best. Many businesses learned that they can manage with a lot fewer workers, so Israel’s poor labor productivity should improve. That still leave hundreds of thousands unemployed and for them the government needs to provide effective retraining programs. The programs that now exist don’t meet the necessary standards.

The public sector was exposed as disconnected from the rest of the Israeli labor market, with its guaranteed jobs and pay and teachers who regard their full summer vacation as sacrosanct. Until now, the public sector has contributed almost nothing to the national effort to cope with the coronavirus.

Under Arnon Bar-David, the Histadrut labor federation has taken a new direction, and that’s an opportunity to reach an agreement on structural changes in the civil service – introducing more technology, more labor flexibility and pay based on excellence, not time served.

Three obstacles stand in the way of change. One is that Katz’s record for pushing through in depth reforms is a mixed one; the other is the rest of the government , of 35 ministers many of whom lack any real experience and others who have no interest in making any real changes.

The third is Netanyahu. The reformist finance minister of 2003 has become the self-interested prime minister of 2020. His insecurity deters him from appointing strong ministers who want to accomplish big things. In that context, Katz’s appearance by Netanyahu’s side at the opening the prime minister’s trial Sunday didn’t send the same positive signal as his letter to Schuster.

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