Netanyahu Is Living in La-la Land

After all, there's no such thing as television overseas, so foreign investors, merchants and ordinary citizens simply don’t know what's happening here.

Nehemia Shtrasler
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Prime Minister Benjamin Netanyahu looks on during a press conference on October 8, 2015, at his office in Jerusalem.Credit: AFP
Nehemia Shtrasler

If there’s one sentence Benjamin Netanyahu is particularly fond of, it’s this: There’s no connection between the diplomatic situation and the economic one. There never was. The wave of terror attacks, stabbings, demonstrations and shootings doesn’t affect the level of investment, tourism, consumption and growth.

After all, there’s no such thing as television overseas, so foreign investors, merchants and ordinary citizens simply don’t know what’s happening here. Consequently, the economy isn’t affected. It’s so much fun to live in a Netanyahu-style la-la land.

This week, Knesset members returned after a long recess for the winter session, and in just over a month (on November 19), they will have to approve the state budget for 2015-16. The budget is optimistic. It forecasts a higher growth rate, of 2.9 percent, in 2016, as well as a sizable increase in tax revenues.

Evidently, senior Finance Ministry officials also live in la-la land. Growth will actually be lower, tax revenues will fall rather than rise, and the deficit will be dangerously large, reaching crisis proportions.

About two months ago, a group of business executives met with the prime minister to discuss the state of the economy. The businessmen voiced concern over the low rate of growth and the decline in investments and exports. And this was before the current wave of stabbings began.

Yonatan Bassi, chairman of the Kibbutz Industries Association, told Netanyahu that the kibbutz industries had switched to investing overseas six years ago already, because in Israel, everything is much harder: The bureaucracy sets up obstacles, the Israel Lands Authority causes delays, and any ties with the government are criticized as constituting a corrupt relationship between big business and government. Moreover, the repeated port strikes hurt exporters, and many overseas businessmen say explicitly that they’re afraid to sign contracts with Israeli companies because during the next military operation, when Israel comes under missile attack, the companies won’t be able to supply the goods on time.

Bassi added that the tax burden is one of the most important variables in deciding where to invest, and with the high taxes like Israel has, investors will seek other, more profitable, locales.

And indeed, an analysis of Israeli tax policy reveals that 2012 marked a turn for the worse. Netanyahu converted to a different economic faith and began raising taxes. Growth responded immediately, falling from a fast clip of 5 percent a year to the current rate of just 2.6 percent, one of the lowest in Israeli history.

But the lack of desire to invest in Israel, the boycotts of Israeli goods and the high taxes aren’t the only reasons for the slowdown. There are other reasons as well: a decline in the growth rate of the labor force, a drop in demand for Israeli high-tech due to the slowdown in Silicon Valley, a steep decline in tourism since the war in Gaza in summer 2014, a decrease in private consumption, a rise in government spending that pushes the private sector out of the market, an atmosphere of hostility against businessmen, excessive regulation, failure to carry out reforms, and the inability to finally start extracting natural gas from the Mediterranean seabed.

And if, to all these, we add the escalating wave of stabbing attacks, the picture becomes even grimmer. The few economic delegations that were still coming will stop coming, Israel’s international isolation will worsen, the wave of boycotts against Israeli exports will expand, investments will fall, tourists will stay away, and even Israelis will stay home instead of going shopping or eating out. And that is liable to move us from a mere slowdown into a genuine recession.

But none of this makes any impression on Netanyahu. After all, he knows there’s no connection between the diplomatic situation and the economic one. And if such a connection nevertheless exists, then even so, he isn’t responsible for the wave of stabbings. Other people are to blame: the inciters, the Arabs, the leftists, the Europeans and the Obamas.

In fact, the entire world – except for him.