A Dreamy Trip to Greece Meets Reality

MK Yossi Yonah responds to Nehemia Shtrasler's op-eds: It is the responsibility of the state to supply a reasonable level of educational, health and social services, as well as housing.

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Anti-EU protesters holding Greek flags in Athens, Greece July 13, 2015. The markets took a more postive take on Monday's deal.Credit: Reuters
Yossi Yonah
Yossi Yonah

Recently I was forced to join a virtual tour of Greece led by Haaretz’s Nehemia Shtrasler. As a result, it’s important that I explain that I’m a social democrat, not a communist and not a Marxist, as Shtrasler claims. The social-democratic approach doesn’t demand the overthrow of the market economy and doesn’t ignore its advantages. It believes that along with a market economy, the state must provide its citizens a social safety net. This means it is the responsibility of the state to supply a reasonable level of educational, health and social services, as well as housing. The privatization of these services is immoral and tends to seriously harm both their recipients and providers. The privatization of health and welfare services in recent years provides evidence of the painful consequences of these destructive processes.

I believe in the importance of trade unions to guarantee that workers provide service at a high professional level, as well as to protect their rights. I prefer the Danish model, which allows for workers to be dismissed or reassigned in exchange for a sharp increase in unemployment benefits and heavy investment in professional training. From conversations I’ve had with senior treasury officials, it’s clear that they are eager to implement only the first part of the Danish model, which allows for worker dismissals. They aren’t interested in hearing about the other part.

I will address two “policy sites” on Shtrasler’s virtual tour. The first is corporate taxes. Anyone familiar with complex economic calculations knows that a moderate increase in corporate taxes does not lead local or multinational companies to move their businesses to other parts of the world. The quality of human capital and transportation infrastructure, the local work ethic, political stability and the level of government corruption are significant additional factors these corporations consider. Here’s proof: Under the tax framework that Prime Minister Benjamin Netanyahu had outlined before the social-justice protests erupted in 2011, the corporate tax, which at the time was 24 percent, was to drop to 18 percent by 2016. The social protests forced a U-turn on this and the corporate tax is now 26.5 percent. Yet I haven’t seen corporations stampeding to leave Israel as per Shtrasler’s gloomy forecasts.

Civilian expenditure: The approach guiding Netanyahu’s economic policy before the 2011 protests was the gradual reduction of civilian expenditure. “Small government is good for the public,” was the mantra of this school of thought. This was also the position that guided the committee for socioeconomic change that was established following the 2011 protests. That committee, we should recall, was headed by Prof. Manuel Trajtenberg, now my colleague in the Zionist Union faction in the Knesset. Another committee, which I chaired together with Prof. Avia Spivak, urged the development of a long-term economic policy that was aimed at gradually increasing Israel’s civilian expenditure to the average for OECD countries. Our proposal was based on the belief that an expansionary policy could encourage economic growth and provide solutions to the social distress that had brought hundreds of thousands of people to the streets.

Our panel’s position was not accepted, but since then there has been a change in many people’s perception, including Prof. Trajtenberg himself, who now supports a gradual increase in civilian expenditure. Finance Minister Moshe Kahlon has also expressed support for this approach. It’s hard to believe that both have undergone an ideological conversion to communism such that only a tour by Shtrasler can rehabilitate them.

As for Greece – the virtual tour’s primary stop – I prefer other tour guides, among them Thomas Piketty and Nobel Prize laureates like Joseph Stiglitz and Paul Krugman. They argue that the austerity policy the European Union is trying to impose on Greece is not the right prescription for helping its economy recover. International Monetary Fund chairman Christine Lagarde also objects to this policy. These economic experts state that under the current circumstances the right steps are to grant Greece immediate financial support to extract it from the liquidity crisis plaguing it, and restructure its debt over a long period while forgiving some of it.

Economics is not an exact science. There is no dogmatic approach from either left or right that can adequately accommodate its complexity. Attempts to position an economy using hollow slogans is indicative of intellectual laziness.

The writer is a Zionist Union Knesset member.

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