The Blossoming of Israel's Big (Economic) Lie

The media say the recession is approaching, exports are collapsing and poverty is worsening, so it all must be true, right? Uh, no.

Nehemia Shtrasler
Nehemia Shtrasler
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The Super-Sol at Glilot Junction. Israelis still have to eat, but consumer spending is down.
The Super-Sol at Glilot Junction. Israelis still have to eat, but consumer spending is down.Credit: Daniel Tchetchik
Nehemia Shtrasler
Nehemia Shtrasler

Israel’s economy is in crisis. The recession is approaching, poverty is worsening, the gaps are growing wider and exports are collapsing.

That’s what the newspapers are writing and that’s what the politicians are saying.

But the truth is completely different.

Let us start with prices. The year 2014 ended with an inflation rate of negative 0.2 percent. Various observers call this a failure, a sign of recession and unemployment.

The truth is that it is an excellent statistic, showing how competition in the economy has sharpened.

The food producers cut prices due to public criticism, and the prices of furniture, shoes and clothing came down as well. Competition is pushing down prices of communications services and multichannel TV. On top of all that, luck was with us when oil prices were halved, enabling water and electricity costs to drop.

Zero inflation is good mainly for those who are financially weak; their salaries are not being eroded. They could buy at the end of the year what they could buy at the beginning.

These are people who do not benefit from the automatic salary increases that employees of state agencies, Israel Electric Corp. and the banks get.

The enormous headlines reporting that the shopping basket for the lowest income quintile rose in price more than that of the top quintile - in other words, that the poor were being screwed over again - didn’t appear either, simply because the exact opposite happened.

The lowest quintile’s shopping basket became 0.8 percent cheaper, while that of the top quintile increased 0.2 percent, which means lower-income consumers’ situation improved relatively.

Instead, headlines announced that the low CPI heralded a recession and higher unemployment. But that’s not accurate either.

Yes, economic growth is not rapid enough, but 3.2 percent a year is not a recession. That was the pace of real growth in 2014, adjusting for the third quarter, which included Operation Protective Edge, the war in Gaza.

In addition, exports and manufacturing have improved in recent months because the shekel has dropped in value against the dollar. That makes exports cheaper for overseas buyers.

So anyone who thinks recession is approaching is living a political fantasy. After all, unemployment is at its lowest in a generation 5.6 percent - while participation in the workforce has increased sharply to 65 percent, the accepted level in Europe.

It happened mainly due to a marked increase in the employment rate among ultra-Orthodox-Jewish men and Arab women.

Ah, but the gaps widened, the rich got richer and the poor got poorer, right? After all, the media always say they do.

No, again. The latest report on poverty shows a decline, to 18.6 percent of all families from 20 percent two years ago. So the newspapers pushed the data to the inner pages.

The drop reflects more people joining the workforce and higher salaries at the lowest levels of the workforce. And it happened even as government subsidies for children were cut back. So it’s a good thing that the agreement to raise the minimum wage to 5,000 shekels a month within two years was signed this week.

Economic observers often say that growth does not trickle down. The opposite is true.

The Gini income-distribution coefficient, both of economic revenue and net income, has improved in recent years. If we add in the decline in unemployment, it means that growth trickles down, and more than trickles.

So in the election ads, the political parties (and the journalists who cover them) must tell the truth: how we are heading back to 5 percent annual growth, reducing disparities and poverty even more, and improving the quality of life through reforms.

But wait a moment. What am I talking about? Truth and sincerity? I was pulling your leg. After all, Election Eve is approaching, the time for the Big Economic Lie to blossom.

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