With Israel’s election set for January 22, the major parties are already
stressing the differences between their visions for Israeli society more than
ever. Yet there is one striking commonality between the two of the major
parties: Neither the Likud nor Labor has put forth a coherent economic
plan.
Labor leader Shelly Yacimovich has focused her party’s election
campaign around a socioeconomic agenda. She claims Israel needs to choose
between the current government’s “ruthless free-market” ideology and a path of
social democracy, which she supports.
Labor was one of the first to
launch its campaign, with billboards throughout the country declaring, “Children
are not a luxury,” among other things. In the media, Labor candidates stress the
need for additional funding for social services and young families. Yet they
have declined to explain how a Labor government would fund such
initiatives.
As to public services, Yacimovich has stressed the need for
delivering them in an efficient and cost-effective manner.
Yet her
historic alliance with labor unions raises concern about her willingness to
implement reforms within the public sector to achieve this goal.
Labor
recently approved its platform for the 19th Knesset, vowing to focus on building
a strong economy based upon social justice. There are few differences between
this statement and ones made by Prime Minister Binyamin Netanyahu.
At an
address to Hadassah in October, for example, he said: “I see a future where
Israel is secure, our economy prospers and where we provide for those most in
need.”
Likud members list the government’s success in stabilizing the
Israeli economy in the aftermath of the global financial crisis. They maintain
that its responsible fiscal policy saved the economy from sharing a similar fate
to countries such as Greece and Ireland. The problem is that economic data do
not support such claims.
Throughout its term, Netanyahu’s administration
has constantly raised the government deficit. This year alone, it is expected to
reach 7 percent, some NIS 20 billion beyond the original projection.
This
past summer, international credit-rating agency Standard & Poor’s even
threatened to downgrade Israel’s credit rating over the deficit.
To
preserve its A+ rating, the government committed to foreign investors that it
would produce an austerity budget for 2013, with tax increases and budget cuts
totaling some NIS 30b.
Netanyahu often refers to his record with the
private sector when emphasizing the need for strong business performance. He
claims that the government’s role is to help businesses succeed.
In
reality, however, more than 120,000 businesses have closed their doors under his
administration. Growth rates have stagnated and industrial output is
underperforming countries such as Greece, Ireland and most of Europe, which are
still struggling in addressing their own debt crises.
On the issue of
public services, the current government has made some progress. It has expanded
dental coverage for children and committed to providing free early childhood
education, which despite early setbacks are helping to reduce expenses for young
families.
However, the expansion of programs and initiatives recommended
by the Trajtenberg Committee for Social Change notwithstanding, during this
government’s term, social inequality has reached an all-time high. Today, Israel
ranks fifth in income inequality among OECD countries, not far behind Chile and
Mexico.
The next coalition is going to have to pass a new budget and
present viable solutions for Israel’s growing deficit, sluggish growth and rise
in income inequality. It will need to do this by applying an austerity budget in
a turbulent global economy while still making smart investments that will
support local businesses and exports. It will also have to redesign public
services to better serve the people.
The Israeli public is very much
aware of the financial difficulties ahead; the Central Bureau of Statistics
tracking of consumer confidence last month indicated that 63% of the population
believes the country’s economic situation is going to get worse in the next 12
months. With such a projection, the public must not allow itself to be satisfied
with hollow slogans and empty statements.
As the 2013 election campaign
unfolds, Israelis need to demand that the major parties produce a viable
economic plan in exchange for their support.
Management expert Uri
Goldberg is the author of the book What’s Next for the Start Up Nation?
about
the future of Israeli hi-tech. He has directed key consulting projects for
Fortune 500 companies as well as governments in Asia, Europe and the Middle
East.