Taking Stock / Our Self-proclaimed Economic Chiefs

As they jockey for position ahead of national elections , each of Israel's potential leaders flaunts his economic credentials. All are fundamentally flawed.

And it came to pass that the people of Israel woke up and cried out, and the face of Israeli society began to change. Israeli politics, which had been mired in the peace process for decades, perhaps since the establishment of the state in 1948, began to change form as well. Suddenly the standard of living, the nature of Israeli society and its values took center-stage in the public discourse, supplanting the usual vacant bleating about security and diplomatic affairs.

The best indication of the dramatic changes triggered by the "social justice" protests of last summer and fall is Shaul Mofaz's declaration of victory when he won the Kadima party primary two weeks ago. "I will lead the protest," vowed the ex-general, who never had been associated with economic affairs, barring a short stint as transport minister.

Shelly Yacimovich, who has confined her attention to economics, visiting Pri Hagalil plant.
Yaron Kaminsky

It seems that even Mofaz, "Mr Terrorism", realized that while the United States might lap up his stories about Iran, come this Passover the Israeli electorate wanted to be spoken to in earthier terms, nearer to home.

Thus for the first time in Israeli history, with national elections looming in a year's time or less, we find ourselves with the leaders of the three biggest political parties - Likud, Kadima and Labor - jockeying for position, each styling himself as Israel's next "economic leader."

Shaul Mofaz meeting voters ahead of the Kadima primary.
Tomer Appelbaum

True, this process is in its infancy. But the new discourse will, ultimately, bring about real change in economic policy. Meanwhile, let us take a closer look at these self-proclaimed "economic leaders."

Shelly Yacimovich breaks the mold

Yacimovich, chairwoman of the Labor Party, has made economics her sole issue.

Until the Yacimovich era, politicians who focused their manifestos on economics or society were relegated to the margins. To be perceived as a leader with gravitas required routinely burbling about the peace process, the absence of a peace process, the territories, the occupation, and a sprinkling of existential threats.

Yacimovich became the first to break the mold. She dived into the muddy waters of economics and found a wealth of political treasure. She studied the issues quickly and overnight turned into the most eloquent, fluent speaker in the economic sphere. She didn't need to hitch a ride on the protest movement: it merely helped her pick the fruits of seeds she had been sowing for years and years.

The Labor leader has dramatically influenced the public debate on economic affairs and has provided a serious alternative to the discourse of the Finance Ministry and of Prime Minister Benjamin Netanyahu. She flouted the convention, debunking a number of axioms that had taken deep root in the public discourse.

But Yacimovich's strategy and ideology are more suited to opposition politics, not leadership per se. She knows how to attack, criticize and point out problems. But she has no plan for creating economic growth, for turning Israel into a welfare state with an effective, progressive public sector, making it a player in the competitive global economy. Yacimovich could take a lesson or two from the finance ministers of Sweden, Denmark and Finland, who jealously guard the public kitty while incessantly aspiring to increase their countries' economic competitiveness.

It would be difficult for Yacimovich to speak of competitiveness in Scandinavian terms, which first and foremost requires a flexible labor market. She draws much of her strength from the powerful unions, which like things just as they are and do not want change. In that the big unions are just like the tycoons.

Yacimovich's terrific popularity is due, among other things, to her avoiding discussions of complicated issues such as structural economic reforms and flexibility of the labor market, which the trade unions of the great monopolies view as threats.

She stands to gain many followers among people disappointed by the economic policy of the last decade. But the more sophisticated the economic discourse becomes, the more the public will grasp that without profound reform of the public sector, Israel can't become a welfare state - the harder it will be for Yacimovich to avoid these issues.

Shaul Mofaz, a man in a double bind

Shaul Mofaz, the former army chief of staff who took the reins of the Kadima party from Tzipi Livni in March, thinks he's "socially aware." He's absolutely convinced of it, and it's completely authentic on his part. He's also confident that he's the real thing, while Netanyahu is a cold cynic.

But Mofaz never did wave the flag of social or economic affairs before. He stayed in his comfort zone of security affairs, turning his back on social issues. Until recently, Netanyahu had better credentials in this sphere than Mofaz did - at least Netanyahu viewed economic affairs as central to his political agenda.

It was the social-justice protests that transformed Mofaz into a socially-minded leader. He realized that the public wasn't buying his usual theme and that these days the cost of living, the state of education and health care, pensions, and social gaps are preoccupying the people more than security. They can't be drugged with existential threats any more.

If Yacimovich can expect difficulty in contending with structural changes in the public sector (and elsewhere ) because of her ties with the big unions, Mofaz will be doubly challenged. Not only does he have close ties with a bunch of big unions and will be hard put to shake off their embrace; without attacking the vast layers of flab in the defense budget, it will be impossible - practically and morally - to reform the public sector.

Also, Mofaz may consider himself socially aware, Kadima is the party of choice for the business barons. Kadima is the only party whose leaders never even touched the issue of economic concentration and how the tycoons conquered the economy and politics.

Netanyahu is the one who set up the economic concentration committee, tasked with elucidating whether Israel has a problem (yes, the committee decided ) and what should be done about it. None of the Kadima leaders were involved. Netanyahu oversees the one who, as finance minister, declared war on the banks, forcing them to sell their holdings in provident and mutual fund management companies, with no input from Kadima. Tzipi Livni, the freshly ousted leader of Kadima, settled for vague mumbling while the political machers surrounding her spent their time cozying up to the rich and powerful.

Mofaz could create an ostensibly authentic alternative to Netanyahu on social affairs, thanks to his hardscrabble personal background - born in Iran, emigrated with his family to Israel as a child, developed a career as a soldier. But his statements - for instance that he doesn't believe in competition - could attest to the fact that his hands are tied by his supporters in the great monopolies. If he really aspires to social awareness, he needs to digest the price that the monopolies exact; and the price that millions of "unconnected" Israelis - the ones he purports to protect - pay for the monopolies' inefficiency.

Benjamin Netanyahu: Baby steps

The social-justice protests caught the prime minister off-guard. Netanyahu barely touched economic affairs during his first two years as prime minister (this time around ), settling mainly for repeating his tired, worn-out mantras and ignoring developments in Israel and everywhere else in the 10 years since his stint as finance minister, in the Ariel Sharon government.

Netanyahu continues to emit slogans about privatization, seemingly without understanding that in Israel, the policy was mostly a failure: either no true competition arose, or service to the public deteriorated. Netanyahu remains enslaved to the heady story of "Start-up Nation", the book published in 2009 by Dan Senor and Saul Singer about the marvels of Israeli high-tech, without realizing that high-tech is a tiny fraction of the labor market and that it hasn't been driving the economy forward for years.

Netanyahu seems not to grasp that if he doesn't fundamentally tackle the structure of the non-high-tech business sector and the effectiveness of the public sector, Israel's economy can't become one of the more advanced in the world, as he fantasizes.

Netanyahu has failed to heed the people who told him that sustainable economic growth cannot be achieved unless it filters through to all segments of society.

Now he's starting to understand his mistake. He doesn't shrug off the protest movement any more. He realizes he needs to once again restore economics to the top of his agenda, if he wants to survive politically.

He has a terrific advantage over Yacimovich and Mofaz: experience and knowledge of economics. But those won't help him unless he realizes that the economic models to which he's clung for decades don't work any more. The United States can't be a role model, not for Israel and not for any other country that wants to achieve an economic breakthrough and supply quality service to its citizenry.

Netanyahu can count several achievements in recent months, first and foremost the establishment of committees - the economic concentration committee and the Trajtenberg panel - each dealing with various aspects of the high cost of living and other social and economic afflictions.

The prime minister's critics tend to overlook the fact that Israel's economic maladies took decades to evolve: Netanyahu cannot take the blame for them. But Netanyahu must accept that his achievements so far are just the beginning. The public demands real change in Israel's economic agenda.