Uriel Lynn, president of the Federation of Israeli Chambers of Commerce,
recently published a book about the Israeli government and the economy entitled
The Cornerstone – Seven Positions in the Public Service. Lynn has held various
key positions in government and business since 1969. He was the director general
of Jerusalem Jersey; director of the Israeli Investment Authority; director of
State Revenue in the Finance Ministry; director general of the Energy and
Infrastructure Ministry; and a Knesset member (1984-1992).
He rose to
prominence in particular during his years as chairman of the Knesset’s
Constitution, Law and Justice Committee. The Jerusalem Post once called him
“Father of the reform” because of the many changes he introduced into our
During the last 10 years, Lynn has been president of
the Tel Aviv and Central Israel Chamber of Commerce and of the Federation of
Israeli Chambers of Commerce, Israel’s largest business organization. He is also
member of the board of two important international organizations: the
Eurochambres and the World Chambers Federation (WCF).
In this interview,
following the publication of his book, Lynn talks about the economy and the
local system of government.
“In the last 40 years I have been deeply
involved in key issues related to our country such as the economy, taxes,
domestic security, legislation, state-owned companies, the Israeli legal system,
the courts, our political and electoral systems and the nature of the Israeli
written constitution,” says Lynn. “I also managed to accomplish dramatic, even
revolutionary, changes in our tax system, energy market and the political
system. I started my working life as a litigation lawyer, proceeded as business
executive and moved to politics in the early 1970s, where I held three key
government positions and key positions in the Knesset,” he says.
and introductory passages in my book describe the deliberations and changes in
our economic and political systems from the position of personal responsibility
and not from the view of the academic world. It is a book of reference for those
interested and involved in economics, law and legislation. This book can also
serve as a good reference for students in the political and social studies and
law faculties. Because we cannot understand the present without understanding
the past," he explains.In a previous talk, you told me that the
Federation of Chambers of Commerce is organizing a sort of non-political
pressure group to promote the interests of the business sector. This is somewhat
ironic, since in 2009 it was you who weakened the Coordinating Bureau of
Economic Organizations by removing the Federation of Chambers of Commerce from
the umbrella organization of the local business sector, which was a very
effective pressure group.
Yes, it is true that I was instrumental in
seceding from that group. We did that because, in our opinion, they were
betraying the interests of the business sector. This was especially true in
regard to the erosion of the basic rights of the employer on this issue; the
chairman of the Coordinating Bureau did not choose to side with the business
We need a strong apolitical pressure group, and I don’t mean an
apolitical party, because the social unrest and social pressure groups that
emerged last summer show that in this country, as well as in most democratic
societies, well-organized apolitical pressure groups get results.
motivated by the fact that you own a successful company that specializes in
I firmly believe that a successful economy must have a
very flexible labor force. The best way corporations can achieve such
flexibility in their labor force is by sub-contracting part of the work. Doing
away with outsoucing will cause our economy grave harm. I believe in a
free-market economy, and at these times sub-contractual labor is one of the
tenets of a successful and competitive economy.
Let me remind you that
many companies in Israel collapsed, such as construction giant Solel Boneh,
because of their rigid labor force. The welfare state in Great Britain collapsed
for that reason, etc. In our modern mobile economy, with its vast tempo of
change, flexibility is the key to success, and that includes the labor
force.You are a strong advocate of the free-market economy. In your
view, the failure of democratic socialism as practiced in Great Britain or the
totalitarian socialism in the Eastern bloc countries, not to mention the decline
of institutionalized socialism of Israel, highlights the success of the
capitalist system. But the system is not perfect. It creates great inequalities.
In most capitalist free-market societies, they have in themselves the seeds of a
Let me paraphrase Winston Churchill, a great democrat and
free-market advocate, who said, “Democracy is not the best system of government
but the least worst.” The free-market system has its faults, but it is the least
harmful. It is true that it has created great inequalities, but it has generated
vast economic growth. It is the most favorable system to generate economic
growth, as it makes efficient use of resources.
The best way to solve the
problems of inequality is by regulations that will eliminate abuses. We need to
amend the capitalist system. The reason for the current financial and debt
crisis is because the financial sector abused the system.
With regard to
sub-contractual labor and the social inequalities in Israel, I would suggest the
1: Increase the minimum wage.
2: Upgrade the unemployment
benefit plan so that the bona fide unemployed -- that is, people who became
redundant in their place of work and are looking for other employment – receive
benefits more or less equal to their average salary during the past 12
3: Give sub-contractual workers the same salary as other
employees are getting for the same work they are doing in the company to which
they are being sub-contracted.
4: Continue the pension funds. Pension
benefits will not be affected by a change in the place of work or by the fact
that a certain individual has been out of work for a certain period of time and
monthly payments have not been made during that period.
In times like this, the
labor force has to be mobile. The old concept of security of employment in one
particular company should not be allowed to the point that it will destroy the
business. In the past, a person would be employed in a certain place of work all
or most of his working life. Today, the place of work is changed at frequent
intervals. Consequently, an unemployment safety net is more necessary than
If a sub-contracted worker would get the same salary as someone who
was contracted directly, the cost to the employer would be higher, so why should
he hire a worker from a sub-contractual company?
Because of the flexibility.
Sub-contractual labor has advantages beyond the financial benefits.You
are very critical of local industry. Why?
I am not critical of the Israeli
industry. I am critical of the preferential treatment it receives from the
government, which is based on outdated ideas. Industry is an important part of
our economy, but so are the other elements in our economy.
Services and commerce
generate annual exports of $28 billion. They employed 1.37 million workers
compared to 420,000 by industry. During the last decade, industry has created
20,000 jobs, while services and trade have created more than 400,000
This figures show the importance of services and commerce in
our modern economy; but nevertheless, the industrial sector is getting large
subsidies in grants, as well as deductions.
The industrial company Iscar,
located in the North, and other elite companies are getting tax deductions worth
over NIS 6 billion, despite the fact that they are very profitable companies. In
the past, the industrial sector was the mainstay of the economy; however
nowadays most Western economies are based on services that include commerce. Can
a modern economy exist without its productive facilities – that is, industry --
and can industry exist in the Western world without government subsidies because
of competition from low labor cost countries?
Industry as such is a matter of
semantics. Industry includes design work, production, packaging and marketing. A
large industrial firm will do its design work in Germany and its marketing from
Germany, but it will sub-contract its simple production lines and packaging work
in a low labor cost country.Recently, Finance Minister Yuval Steinitz
told the Knesset Finance Committee that Israel needed a stronger system of
government. You were a senior civil servant, as well as a Knesset member. Do you
No, I disagree. The current problems of government are, in my opinion,
caused less by the present system than by the lack of leadership. The strongest
democratic system of government, in my view, is a presidential system, coupled
with regional elections, British style. No system will work if there is lack of
leadership and discipline in the coalition Parliament ranks.
holds true in Israel, where there is lack of leadership, which is one of the
reasons for the vast increase in costly populist legislation. The quality of the
politicians and their dedication to the public’s interest are far more important
than the electoral system.