The Right Economic Arrangements

Economic Arrangements Law implements the government's economic policy; without it we'd be living in a closed, poor, old-fashioned economy.


Knesset Speaker Reuven Rivlin is angry. He was convinced he had done away with the awful Economic Arrangements Law, but then the bill once again rose from the ashes and arrived at the Knesset for the legislation on the 2011 state budget.

Rivlin hastened to summon the Finance Ministry's budget director, Udi Nissan, for a conversation, making it clear that the Economic Arrangements Law in the current format would not pass. He would stop the legislation with his own hands, if necessary, with the help of 119 other MKs guided by the public good, social welfare and a will to boost the economy, even if Nissan did his worst to undermine all this.

If this is the case, maybe we should look into the terrible legislation we're dealing with. The Economic Arrangements Law was devised in 1985 as an instrument for structural reforms and changes that would modernize the economy, open it up to competition and give it a boost. It's the law that implements the government's economic policy. Without it we'd be living in a closed, poor, old-fashioned economy, and Rivlin would be proposing a Knesset debate on why we're so backward and poor compared to the rest of the world.

The first Economic Arrangements Law set rules to stop the hyperinflation. At the beginning of the 1990s the law helped open the economy to competition from imported goods, so today both we and Rivlin can buy a shirt for NIS 20 and a fax machine for NIS 200.

Without the Economic Arrangements Law, Israel would be vastly behind in communications. We'd pay through the nose for a cellphone conversation, and anyone who wanted to make an international call would have to dip into his savings. The treasury moved the Israel Defense Forces from a state-funded to a contributory pension system only via the Economic Arrangements Law.

It was also instrumental in opening the gas and fuel market to competition. If Israel has open skies and reasonable flight prices, it's only due to this law. This is also the case concerning the establishment of the Yes satellite company, which competes with the HOT cable company. And the postal field was opened to competition, to cite a few examples.

It is also wrong to argue that the Economic Arrangements Law is passed undemocratically in the Knesset. Rather, it's a long, complicated legislative process. At the first stage, the finance minister examines the budget director's proposals, approves some and deletes others. At the second stage, the attorney general meticulously sifts through the bill. Later, in October, it is submitted to the Knesset and the lawmakers have enough time to study it and introduce changes.

But in our populist reality the MKs aren't really interested in the bill's reforms. They care more about advancing their private-member bills, which can earn them a mention in the media. So these bills flood the Knesset and block all legislative channels.

So far 2,500 private-member bills have been laid on the current Knesset's table. One of the wackiest ones was sponsored by MK Carmel Shama (Likud ), who proposed a restriction on the price of popcorn in cinemas.

In such a populist Knesset atmosphere, no reform has a chance to be accepted unless it's part of the Economic Arrangements Law, because the moment a reform is separated from the bill it's doomed to a slow painful death in committee. There all the interested parties swoop in on it - the tycoons, the lawyers, the lobbyists and the big unions, who act relentlessly to convince the MKs that this is a terrible reform that would destroy the economy and harm the workers.

And they have all the time and money for their efforts at persuasion. So all the important reforms, those intended to improve and advance the economy, are stuck in committee or undergo such far-reaching changes that their harm is greater than their good.

Reality teaches us that without the Economic Arrangements Law we'd be trudging in the quagmire of a backward economy, low living standards and a high unemployment rate, and that's what the future holds for us if the Economic Arrangements Law is destroyed. Clearly Rivlin doesn't wish this bitter fate on himself or us.