If one were to judge by what the political economic leadership of this country is telling us, the local economy is in excellent shape. The macroeconomic figures are excellent: low inflation at an annual 1.2 percent; a low unemployment rate of 5.8%; and an annual GDP growth of slightly less than 3%. These are excellent figures, but there’s a catch. Macroeconomic figures are averages. And averages have a tendency to hide the true picture. In Israel, what they
hide are glaring inequalities that in the long term can be very dangerous to the stability of the state.
On the BBC's TV comedy series Yes, Prime Minister, the fictitious Sir Humphrey Appleby, the cabinet secretary and consequently the highest-ranking civil servant, says of politicians, “They are only worried about getting over the evening’s voting session in the House of Commons.” What he means is that in a democratic system of government based on the whims of the electorate, it is not always easy to formulate a policy that will have long-term benefits.
Prof. Avishai Braverman is a prominent economist known worldwide. He is an MK and chairman of the Knesset’s Economic Committee. He is also the only professor in the Knesset and is deeply involved in economic affairs.
In an interview with The Jerusalem Post, Braverman says, “The current economic policy is flawed mainly because it has created many inequalities. Israel is one of the most unequal socioeconomic societies in the Western world, and these inequalities will have long-term, far-reaching consequences. No society, let alone a free society, can survive large inequalities. At some point, they will explode.”
He adds, “Most revolutions are caused by a deep divide between the haves and the have-nots. I am sorry to say that in this country we have a small minority that is living well very well, while the majority is barely making ends meet. The salaries they get are insufficient, the cost of living is sky high, and the cost of housing has reached unacceptable levels."
You were a proponent of a free market economy. Have you changed your mind?
No, I still believe that a free market economy, despite all its faults, is the best system. But what we have at the moment in Israel is not a free market economy. It is not free because the system is flawed. We have a very centralized economy. Such an economy is not free because it cannot be competitive. There is no real competition, and an economic system cannot be called free if there is no competition.
Ours is a perverted free or capitalist system in which the haves are getting richer and the have-nots poorer. I realize that in every society there are those that have more than others, but what I object to is when these differences are enormous and can have a destabilizing effect on the economy.
In your opinion, what is causing the big socioeconomic divide?
The government economic policy in general. The whole economic system has created a framework in which the benefits of a rise in GDP are benefiting only a small minority, while the majority is left out in the cold, as it were. What I object to most specifically and what I think is causing the most harm is the fact that from a ‘start- up nation,’ we have become an ‘exit nation.’ We still are an innovation powerhouse, but our scientific talents are being wasted because they are benefiting the few and not the many.
We have developed a philosophy that I call ‘take the money and run.’ Entrepreneurs create a start- up company and after they have developed the technology, they sell it to the highest bidder. In my opinion, that a very big mistake and is one of the causes for the socioeconomic divide.
When these entrepreneurs sell their start- up companies when they are still at the developing stage or even at the end of that process, they are denying the local economy the opportunity to create an industrial company that will supply jobs to a much wider segment of the workforce than any start-up can.
The employees of a start-up consist mainly of engineers, programmers, etc. They are highly trained and talented people who, because of their high level of education, come from a very limited sector of the community. These start-ups should become large and prosperous industrial companies such as CheckPoint and Nice. They began as simple start-ups and have now become large multinationals that employ engineers and programmers, as well as production personnel, office workers, cleaning staff and drivers -- all the staff that a large industrial concern usually employs.
When a start-up is sold to a foreign buyer, only the entrepreneur and a few others benefit. But when a start-up becomes a large industrial concern, the benefits are much more widely spread