Netanyahu Stands by His Ten-year Vision

The ten-year speech, the fiery speech saying Israel could be ranked among the ten richest countries of the world within a decade, restored Finance Minister Benjamin Netanyahu to the headlines. After countless political blunders and seeing his relations with Prime Minister Ariel Sharon reach rock bottom, Netanyahu pulled the ten-year speech out of his sleeve and, in the blink of an eye, became relevant again.

True, most of the headlines may have mocked the man and discussed the weaknesses in his forecast. However, this didn't ruffle the feathers of Netanyahu, who hasn't seemed so self-confident in quite a while. Perhaps the numbers are fuzzy and Israel isn't even in the same ball park as the top ten states, but Netanyahu has set a goal for himself and he is forging ahead.

Prof. Shmuel Kandel, Dean of Tel Aviv University's Management Faculty, ran a calculation demonstrating that your vision does not match the numbers. European countries would have to undergo negative growth for us to reach the top ten in gross domestic product per capita.

"If he's so smart then why is he a professor? Why isn't he very rich? With all due respect to professors and economists, it's businessmen who make the economy."

Leave Kandel out of it. The numbers do not support your declaration.

"That's incorrect. I said that within 10 years we are capable of reaching the Western European average. While this includes Germany and France where per capita GDP is high but stagnant, it also includes countries like Greece with much lower per capita GDP. The average per capita GDP in Western Europe stands around $22,000, and we stand at $17,500. It's not so far off, especially if per capita GDP grows at a conservative annual rate of 3.5 percent."

Conservative? Isn't that an annual growth rate of 5 percent for total GDP?

"Correct, and we've already done that."

When? In the beginning of the 1950s.

"In the 1990s as well."

That lasted exactly two years, and that was only thanks to Russian immigration. You're talking about 10 consecutive years of this type of growth.

"It's difficult but possible. In fact, look at the growth in Ireland - where it's all because of structural reforms. Western Europe is much richer, but it's growing at 0.5 percent per capita per year. If we implement reforms that liberate the economy, that allow Israel's potential growth to be realized - we could catch Europe within several years.

Is this realistic?

"I have to stress that no one is promising we'll get there. You need vision, political will and political power for this. It's clear that it won't happen if we return to our old economic policies. We must maintain budgetary restraint, lower taxes and implement reforms.

"We have been treading too long in a monopolistic economy, brimming with taxes, allowances and strikes. It's kept us at low growth, but that's absurd. It's my vision that we will move ahead much faster than everyone else, but this requires broad consensus. In countries where this has succeeded, it was because eventually, such a vision was held by everyone. In Ireland, even the unions joined in the government's vision, because they understood that economic success would benefit everyone, including the workers. And they were right."

When did your vision coalesce?

"Two years ago."

Why did you only present it this week? Is it because of approaching elections?

"The idea for the vision arose two years ago, but if I were to talk about it then - in the middle of a crisis - they would have run me out of town or tried to have me committed to one of the well known institutions. They would have laughed, `the man is daydreaming,' just as they laughed at me in 1995 when I warned that radical Islam would bring down the Twin Towers. Everyone also laughed at me when I said that we would soon pull out of the economic crisis, not to mention the idea that Israel could nestle among the ten richest countries in the world. It is true that I love to say things before their time.

"I have been thinking about this vision for 20 years. And it's not only because of my natural admiration for the Jewish people but rather because I believe that we have the most talented people in the world. No country has more scientists, technicians, researchers, or physicists relative to the size of its population.

"We register more patents in the United States than the Chinese, Russians and Indians put together. The potential of know-how is the potential for future wealth in the world. The richest man in the world today is Microsoft's Bill Gates. Fifteen years ago it was still the Sultan of Brunei. Know-how is the source of wealth, and we've got it. But if the culture of handouts continues, we'll waste that potential."

Let's return for a moment to the problem of your data. You attack the culture of handouts, and demonstrate that the number of people receiving handouts grew 15-fold within a decade. Yet you forget to mention that the growth was primarily in child and old age allowances.

"So what?"

Child and old age allowances do not constitute a culture of handouts. These are not the ones who could work but don't.

"That's incorrect. Child allowances are also part of the culture of handouts."

And what do you think about the NIS 700 million coalition agreement with Shinui?

"In my opinion, we could have reached agreement with Shinui without paying them anything."

Nada? Zero?

"Yes, just like with the Labor Party. I felt that parties which support the disengagement would not let it fall through because of the budget, but the prime minister thought otherwise. He thought that he couldn't rely on Shinui."

And what did the PM think about your position?

"It's a fact, he didn't see eye to eye with me on this issue."

What do you think about the budget funds being directed toward disengagement?

"Every additional shekel used for disengagement above what was budgeted, be it for settlers' benefits or temporary housing expenses, will have to come out of [somewhere else in] the budget."

They didn't allocate enough?

"The government allocated a lot of money, but if there are additional needs, they need to be considered."

You don't feel that things are getting out of control, money is being distributed indiscriminately?

"The sums have not been out of line so far, and in fact it's less than what was given to those settlers evacuated from the Sinai.

"The only way to add resources to the disengagement now, without coming at the expense of other budget lines, is by allocating Israel Lands Administration plots."

You recently said that the security budget would be reduced in 2006. What did you mean?

"The Defense Ministry budget, not security."

What's the difference?

"The difference is that you don't have to harm security . I propose reducing Defense Ministry operations without harming security itself. For example, we currently have 200 emissaries who perform $2 billion in arms procurement. Egypt, which receives similar security aid, employs three men and an Internet site. It's a bit difficult for me to be in a position where I have to use Egypt as an example of bureaucratic streamlining, just as it was difficult from me to use Russia and Poland as examples of tax reduction. But what can you do? Our governmental structures are extremely bloated. It turns out that we direct our tax money to the virtual needy of the Defense or Health ministries instead of to the truly needy.

"It's true that security is a holy cow because the security budget is a prerogative of the prime minister, and I respect that. I wouldn't change that structure. But economic analysis should guide these decisions, allowing budget cuts without harming security. I know that the defense establishment's typical response to efficiency demands is to amputate limbs. They're asked to cut back, so they eliminate an IDF division or close down a naval squadron. It's clear that this kind of amputation hurts security. But there are alternatives to amputation, and that's dieting. They even say that dieting improves fitness."

How much do you think should be cut from security?

"I already proposed cutting a billion shekels in 2005. It didn't happen. Instead, I changed the flat cuts in ministerial budgets, taking half from defense."

Do you feel you'll be more successful with the 2006 budget? Security establishment workers always manage to torpedo such proposals.

"It's the strongest union in the country - the security establishment workers and their generals. These people have built reputations because they fought for the state's security, and with much heroism. But we have to reach the level of maturity where our national wealth is based on solid socioeconomic foundations. We can't maintain a strong army over the long haul without a strong economy. Look what happened to the fabled Soviet army."

Is the prime minster with you on this point? It seems that your political errors cost you his support.

"I don't know that the prime minister doesn't support me. His economic backing has been good until now, and it's important that it remains that way."

But still, has the economy been hurt because you lost political power and no longer have the ability to pass economic plans?

"I judge myself by results. We have passed practically all the reforms we wanted. The only reform that didn't pass was the merger of the local authorities, and that was because the objection of the Union of Local Authorities cut across political lines. Despite this, I did manage to reduce the number of deputy ministers. Oops, what a Freudian slip. I meant the number of deputy mayors, by 50 percent.

"Until we create a profit-generating economy, we won't be able to guarantee this in the long term. It's a basic principle. The rest is demagoguery."

Nu, so are you going to reduce taxes after Passover?

"We decided in principle to reduce taxes if tax receipts this year exceed expectations."

We are already one-third through the year. Where do receipts stand relative to expectations?

"We still don't know."

Will the Bachar committee reforms pass the Knesset? We hear that the banks are doing some legwork around there.

"They have no legwork to do, because it's now the Passover recess, and even Shlomo Nehama [of Bank Hapoalim] is allowed to go on vacation."

The question is whether you are committed to passing the Bachar reforms.

"I'm always being blamed for helping the rich, and I ask in response if they think I'll be elected by the votes of the rich. I don't help the rich. I do things because I believe in them. In actuality, I give a lot of rich people sleepless nights, because I open up the markets. Here's one. One of Bank Hapoalim's owners, Lew Ranieri, was here, and he accused me of being a socialist. I told him that this was one accusation I had yet to hear."

You didn't answer the question.

"I am committed to the Bachar Committee reforms."

And what about privatizing Bezeq? We heard that privatizating it doesn't interest you any longer now that your friend Nochi Dankner has pulled out of the tender.

"Bezeq will be privatized by May 9."