Netanyahu's OECD Report Card

A recent report by the Organization for Economic Cooperation and Development gives Israel a failing grade on poverty and suggests the prime minister has much to learn about the importance of the welfare state.

Ravit Hecht
Ravit Hecht
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Ravit Hecht
Ravit Hecht

When schoolchildren get their midterm report cards on Tu Bishvat or their third-of-the-term reports on Hanukkah, it gives them a measure of their achievements, in numbers or letters. The Organization for Economic Cooperation and Development, which Israel’s economic decision-makers are so proud to be a member of, arranged to give Prime Minister Benjamin Netanyahu a pretty awful report card for the past decade this Shavuot.

The OECD report shows that the growth the Finance Ministry has been celebrating for the past decade – the pride of our economic policymakers as the Western world was drowning in a deep financial crisis and debt – didn’t help most Israeli citizens. For most of that period, budget discipline was maintained, the deficit was relatively low and our international credit ratings were flattering. But according to the OECD, as well as the Bank of Israel, which issued its data last month, Israeli citizens became poorer.

The report was upsetting: The percentage of poor people in Israel went up from 14 percent in 1995 to 21 percent in 2010; poverty increased particularly sharply in the shorter period from 2007 to 2010; poverty increased among children and young adults, and we are now a member of a dubious club: the five countries with the greatest inequality. But it isn’t just the data on the past that’s worrisome, after all, the severe economic recession in the West sentenced many countries, including the much-glorified Sweden, to higher income gaps and increased poverty.

What’s more worrisome is the deficient understanding of the report’s conclusions, namely that the welfare state is critical during periods of financial crisis. Over the past few weeks, many senior economists all over the world have begun to conclude that allowing overly aggressive budget discipline to undermine welfare policies is a destructive move in the long term, because it stifles growth and destabilizes economies, societies and states.

The new budget approved by the cabinet, which novice Finance Minister Yair Lapid is not really responsible for, despite the hatchet job being done on him, shows that despite the cries of the masses, there is nothing new under the sun. The price of the budget cuts will once again be paid by the poor, who due to cuts in allowances will in theory be pushed to go out and find work but who in practice will be forced even deeper into the mire of poverty. In the absence of any kind of safety net, and with the planned hike in regressive taxes, like value added tax, which harms the poor the most, it isn’t clear how the poor will survive let alone turn into productive citizens who contribute to the Israeli economy.

Netanyahu – the great economic reformer, the uber-minister of economic affairs, the man who “saved the Israeli economy from collapse” at the start of the previous decade – must now face a series of failures that have his name written all over them. The failure to bring weaker sectors into the workforce by dismantling the welfare state, the failure to bring down the cost of living that sent the masses into the streets and the failed budget management that has resulted in the current NIS 40 billion deficit, the reduction of which will be felt by each and every one of us, both rich and poor (but mostly poor).

While uncontrolled spending and the creation of huge deficits is indeed irresponsible, the inequality and poverty rates that have developed here as a result of the weakening of those who were already weak are a much greater social danger than temporarily deviating from the deficit target. It isn’t Greece or Spain that Netanyahu needs to be afraid of, but the next Moshe Silman, who was desperate enough to set himself on fire at a social justice protest last summer. The despair of people like him is the real powder keg we’re all sitting on.

Prime Minister Benjamin Netanyahu.Credit: AFP

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