Was that Nir Barkat who unveiled the Likud’s economic program on Sunday in Tel Aviv? He sounded like a visitor from another planet who knows little about the ways of Earth in general and Israel in particular.
Based solely on the package of six reforms presented at the news conference, the only reasonable conclusion is that it was a close encounter of the third kind. Otherwise, he can only assume we have a politician with a worryingly poor grip on economic reality.
We’ll get to the particulars of the Likud program below, but let’s start with Barkat himself. Let’s assume that the press briefing was, in fact, held by an earthling who started his career as a venture capitalist and then took an evolutionary step backward by becoming a politician – first as mayor of Jerusalem, later as a Knesset member and more recently as wanna-be treasury boss.
For now, Barkat has been forced to settle for potential finance minister-designate in the next government, if Bibi forms it, rather than becoming finance minister right now. No matter, in his new capacity, he has the authority to present the Likud’s economic program, something the party had not seen necessary to bother with in either of the first two elections (held last year) or until now, the final two weeks before the third one.
Late is better than never, I suppose. And since Barkat comes from a business/high-tech background, we should have expected something reasonable, or at least relevant, from him. In the event, we got neither. Rather, we got a package of the patently absurd and the sublimely inane.
We’ll start with housing, where Barkat promised a “dramatic” fall in prices by releasing lots of state-owned land to the market, slashing red tape and giving more power to local authorities.
It’s useless to relate seriously to politicians’ promises to cut bureaucracy, which is traditionally the emptiest of empty promises. But it is worthwhile noting that the housing market isn’t in need of shock therapy.
Home prices in Israel are high, but they have stabilized for now. A dramatic fall would help first-time buyers, but it would come at a heavy cost to people who bought at the top of the market and get stuck with mortgaged homes worth less than they paid for them – possibly worth less than the value of the mortgage. We can look to America, year 2008, to see what could happen.
Economy in crisis / Doing great
Barkat also promised to cut food prices, which are also high, just like housing prices are. The plan? Cut duties on imported food and pare back regulations, break up monopolies, and increase subsidies to farmers.
Most or all of this has been done already to one degree or another, and food prices have stabilized and even come down a bit. There isn’t that much room to do more.
In any case, the bottom line on housing and food is that neither issue demands that much government attention. The consumer boom in Israel is proof of that. By focusing on prices, Barkat is simply taking problems from an outdated playbook that has no bearing on the situation in Israel today.
The Barkat reforms on high-tech and the labor market are less silly but equally vacuous.
In tech, he proposed that the government “lead” the industry in developing robotics, biotechnology and transportation technology. True, the state does have a role in fostering high-tech, for instance the health database project, but its role is very limited and should stay that way. The patient is healthy and doesn’t need the attentions of Dr. Barkat.
As to the labor market, there are certainly serious problems, although with record low joblessness generating more employment by isn’t one of them. The real problem is Israel’s low rate of productivity, its failure to bring more Haredi men into the workforce and its poor schools. About this, Barkat says nothing.
As to the rest of the Barkat program, why build four new hospitals to aid an overburdened healthcare system? Why not build eight? Except that Israel faces a big budget deficit. The next government won’t be debating where to lavish money but on cutting spending and/or raising taxes, another issue Barkat doesn’t relate to at all.
Behind it all is a kind of game that his boss, Prime Minister Benjamin Netanyahu, excels at. On the one hand, Israel is doing great; on the other, Israel needs far-reaching reforms.
“We’re going to do tremendous things that will prepare Israel for the technological future, and address remaining critical issues,” Netanyahu told the press conference, even though Israel is already ranked sixth in the world for innovation. And how will we pay for what is obviously going to be a very costly reform program? “The money will come from growth,” Netanyahu said, even though the economy is already growing more quickly than almost any other in the developed world but is still running a big budget deficit.
In fairness, Kahol Lavan isn’t perfect on the economy either. But, while its platform is fuzzy when it comes to solutions, it mostly succeeds in identifying what the real problems are. For instance, it correctly points out that the high-tech industry should be employing more people but breezily proposes to solve it by doubling the number of college tech graduates in five years. Just like that. So easy. Who knew it was so easy to be a finance minister?
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