Taking Stock / State of a Nation, Rolling in Slime

Forecasting is useless, yet we dare to predict: We are entering an era of many crises.

1 Say there's an imaginary country. In this country, the CEO of a bank that controls 10% of the public's assets is suspected of criminal wrongdoing. The chairman of the bank is suspected of corruption and the leader of the country's most popular political movement has been arrested for allegedly brokering bribes between businessmen and tax officials. In that imaginary country, the top taxman, the commissioner himself, is suspected of graft.

Seven of the top people in that popular political party, including two prime ministers, were convicted or are suspected of criminal activity. The president of that pretend country is a proven serial rapist yet nobody raises an eyebrow. Moving on: A third of the country's economy belongs to just 20 people, and a third of the public's savings and investments are controlled by just 10. The term "corporate governance" causes shrugs and all too many of the country's regulators and economists think it doesn't exist. Money can buy not only bread but also politicians, regulators, journalists, lawyers, accountants and tax assessors.

Frog in a swamp

This is not an imaginary country, and half of that horrendous list came to light in just the last few weeks. And there are all those scandals we simply overlook to make room for new ones, for instance the corrupt prime minister who appointed a corrupt finance minister, perhaps to have a marionette - who is now in jail.

As the miasma of corruption rose and gushed in recent years, arrests and indictments did ensue and a great collective sigh of gratification was released. But nobody was surprised. The absence of integrity, the conflicts of interest, the affection for bribe money in envelopes had been well known, not least to the many who came into contact with that gang.

So there was relief that the authorities finally were collecting evidence and chasing these people. But time passes and the members of this gang continue to walk among us with heads held high, despite having been exposed in all their wretchedness and corruption, and thus the satisfaction at their exposure has waned. Mainly, because if the public continues to perceive corruption as an inevitable, endemic part of public service, then no police pursuit or court crackdown will help: The State of Israel will continue to slither down that slimy path, carved up by the corrupt who feast on its economy and gnaw at productivity, competition, equality, quality of life and the very joy of living.

2 How economic growth can destroy: Four months ago, hundreds of prominent members of the Arab and international business community convened in Marrakesh. The outlook at this convention of the World Economic Forum, which normally meets in Davos once a year, was highly optimistic. Many of the Arab nations had achieved substantial economic growth in 2010: some of the business leaders and pundits dared to predict that the Arab world would be joining the "emerging markets" like China, India, Brazil and Russia in terms of their economic growth.

Of course they paid lip service to the need for reform, and listed seven areas: international trade, corporate governance, capital market development, education, social leadership, macroeconomic stability and a nurturing business environment. Ricardo Hausmann, director of the Center for International Development and professor of the Practice of Economic Development at Harvard University, calls some of these plans "social programs for the rich." In most of the Arab world, the current and planned reforms were designed to make the rich richer, and to benefit the paper-thin middle class. The rest of the millions and millions of people were left languishing in poverty and hunger.

Conference participants mentioned the need to find jobs for 100 million young Arabs in the decade to come. But it didn't occur to anybody - or nobody dared to postulate - that within mere months, those millions upon millions of young people, and older ones too, people who had nothing to lose, would rise up, flood the streets and overthrow entrenched regimes.

Israel is in infinitely better condition than these countries where riots have broken out in the last few weeks. Israel's middle class has been eroding in status, but it's much broader, and much better fed.

But our leaders would do well to learn from the lightning speed at which the Middle East has morphed from the next economic miracle into a mess of bloody instability.

They should take note that it is precisely when the economy is expanding that the public's rage can overflow. Because growth in and of itself isn't enough. If it isn't inclusive, if the feelings of deprivation and inequality are great, if the vaunted economic growth benefits mainly the cronies of the people in power - it can turn from a blessing into a curse. Social solidarity and unemployment may prevail in the public's mind over "economic growth."

In Israel, the status quo has served wide swathes of the population - the ones feeding off the government's plate, the ones connected with the monopolies and cartels. But the greater the number left out, the more threatened the status quo will be.

There is no point in making forecasts based on the past. All forecasts in every area, be it politics or economics and certainly finances, are wrong. The great crisis that erupted in 2008 almost destroyed the global financial system. I dare a forecast: It wasn't a one-time meltdown. Its sheer speed and the intensity of the surprise portend an era of many crises, which will all be unexpected, and will all be tremendously powerful.

If the beneficiaries of the status quo don't come to their senses and start pursuing reforms, and change their thinking about the rest of Israeli society, they will wake up one morning, be it in 10 or 20 years, like the leaders of Libya, Egypt and Tunisia - in the middle of a nightmare.