The Israeli economy is experiencing a slowdown. For the last three years it has grown at an annual rate of 2.5 percent, rather than the desired rate of 4 to 5 percent as it did until 2011. This means zero per capita growth, lagging even farther behind the West, and the absence of any possibility of raising wages and the standard of living.
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Admittedly, the situation is influenced in part by what is happening elsewhere in the world. But it definitely also has local causes, including the outdated, growth-hindering management of key areas of the economy – such as the military industries, ports, Israel Electric Corporation, and others.
Prime Minister Benjamin Netanyahu is aware of the problem and has been pressing Finance Minister Moshe Kahlon to introduce a mandatory arbitration system, which would make it harder to strike in essential economic services – via the Economic Arrangements Bill (the supplementary legislation to the budget) – and also to work resolutely to ease the regulatory burden. Netanyahu is right. In our political system, the big unions and the Histadrut labor federation exploit the politicians cowardice and prevent proper management and reforms.
Kahlon, however, doesnt want to clash with Histadrut chairman Avi Nissenkorn. He argues that Netanyahu wont back him all the way, but will abandon him at the midpoint when the issue reaches the Knesset, because many members of Netanyahus Likud party will side with the unions and oppose arbitration. This, however, is a lame excuse. The finance minister must fight for what is right – for the good of the economy – and not think about his image and public relations.
But Netanyahu isnt exempt from blame, either. The regulation that he complains about and wants to ease has actually grown wildly during his terms of office. Similarly, the prime minister expressed disappointment over the size of the budget deficit – indeed, 2.9 percent is a large and even dangerous deficit. Yet the main reason for it is the expensive coalition agreements he himself signed 18 months ago.
The budget proposed by the Finance Ministry is devoid of important, growth-encouraging reforms, like addressing the absolute tenure enjoyed by public-sector workers, streamlining the defense budget and introducing some kind of logic to the noncontributory pension system. Netanyahu and Kahlon arent promoting these reforms. On the contrary, this week they repealed the law requiring schools to teach the core curriculum. That will harm ultra-Orthodox teens who, when they grow up, will have trouble finding work that pays a decent wage.
Instead of hurling criticism at each other, Kahlon and Netanyahu must unite and work together for the good of the economy and all Israelis, and not just for their own continued rule.