How to Change Life in Israel

Why can't governments, here and elsewhere, run themselves properly?

"How do you think government will supervise privatized companies, monopolies and tycoons if we can't even supervise the government bodies before they're privatized?" growled one of the Trajtenberg committee members last week.

He has a point. En route to his point, he pulled the rug out from under the sterile, supremely pointless discussion on "privatization", a word detested by the protest movement.

The million-person protest rally in Tel Aviv this summer.

The Trajtenberg Report, like its predecessors, says that huge swathes of the public sector and government companies don't work for the good of the public, but for the good of themselves and their workers.

The Israel Electric Corporation is one example: It is a closely supervised, bloated body that utterly fails to link pay to performance or to market prices, and gives its workers profligate perks such as free electricity and generous pensions. It's also riddled with nepotism.

At the IEC, a senior pensioner can expect his grandchildren to get jobs at the company automatically, and is outraged if that fails to happen. The same applies to the seaports and airports. Israel's ports are among the least efficient in the world, but pay and pension payouts there are sky-high, as we learn each year from the public sector wages report.

We could continue to list the bodies for which the same applies, including the Israel Lands Administration, which is supposed to help resolve the housing problem in Israel but seems occupied mainly with preserving and improving the employment terms of its workers.

Nor is the army clean of pork barrels and hidden unemployment of the same ilk. As the Trajtenberg Report elegantly puts it: "The government budget for social services is not necessarily translated in full, or even in the greater part, into the accessibility of quality services to citizens that would contribute to the quality of life. That is mainly because of the inefficiency of the public sector."

The issue isn't piddling. In Greece, overblown benefits for public services brought the economy to its knees. Local governments in the United States, that bastion of capitalism, gave police, wardens and firemen such extraordinary wages and pension benefits that they wound up broke. When cities and states go broke, essential services break down. The wealthy decamp and the whole place goes to the devil fast.

Other people's money

Why can't governments run themselves properly? It's a common upshot of managing other people's money. The person managing the money finds ways to help himself and share it with cronies, at the expense of the money's real owner. The money, the budget, belongs to the public, but it's managed by politicians who have found ways to channel it to associates, or have succumbed to pressures from forces wielding political leverage.

Much the same happens in the private sector. The public's savings and pension money is managed by people whose loyalty is to their rich employer.

In both cases, watchdogs are supposed to stop the robbery. The supervisor of capital markets, the Antitrust Authority and the Israel Securities Authority were supposed to stop the party at the expense of savers. The government and Civil Service Commission were supposed to make the public institutions efficient. Both should have adjusted employment terms of workers to the services they supply.

They have done no such thing. The government has proved very poor at doing what everybody agrees needs to be done. Why? Because the decision makers don't have the power to take on the unions and change the status quo.

More accurately, they hadn't had the power. After the summer of 2011, when the public demonstrated its frustration in mass protests, even the most cynical politicians understood things had changed. But for something to change, the government needs not only to make decisions, but to enact and enforce them - and therein lies the rub. The way the civil service conducts itself must change.

In other words, reform needs to start with reform of the people who need to lead and supervise the reform. Otherwise there will be no reform; or worse, the situation will deteriorate.

War on economic concentration and the cost of living will go nowhere if the government has no enforcers. Decisions to build housing won't shelter anybody unless the government can push the Israel Lands Administration and local authorities into action. Whether or not a body is privatized won't matter if the regulator can't assure the general good is served, not that of some oligarch or other.

Two weeks ago, Manuel Trajtenberg presented a report that deals with a range of issues. It's hard to digest for that very reason. It's hard to see the forest for the trees. But it isn't too late. Trajtenberg and his team could declare 2012 the Year of Reform in which the public takes back the reins.

How exactly? His report contains some of the answers. Now, his challenge is to sell his vision to the public, whipping up enthusiasm for more reform.