Lapid, Israel’s new political maverick, is part of problem

The recent elections in Israel produced one major surprise – the Yesh Atid party (which loosely translates to “There is a Future”) won 19 seats in the 120- seat parliament. This party was founded just a year ago and is led by Yair Lapid, a former TV presenter with no public record, and no discernible qualities that indicate he is fit for public office (although the latter could be said of most politicians).

The main reason for Lapid’s success is easily traced to the growing desperation of the Israeli middle class. This desperation is mostly economic – the tax burden (including indirect taxes) on the Israeli middle class amounts to more than 50 percent of income. In addition, the cost of living in Israel is considerably higher than in most other OECD countries.

Relative to purchasing power and average salaries, most international comparisons suggest that Israelis are faced with expensive housing, clothing, cars, petrol and food (although Israel does compare favorably in some areas, such as health care).

Squeezed between a high tax burden and high cost of living, the middle class is gradually getting poorer. Double-income families can hardly make ends meet, and singleincome families are rare. As this impoverishment process seems to have been taking place for many years and under successive governments from the Right, Left and Center, the public finds itself voting for a newcomer who, on the face of it, seems unfit for the job.

Indeed, Lapid is not the first out-of-the-blue maverick to stun the system with an electoral victory. Unfortunately, he’s likely to disappoint like the ones before him, paving the way for another false messiah to benefit from middle class misery.

THE REASON Lapid will fail is because he’s misdiagnosing the problem – Lapid thinks the government is not doing a good enough job managing the economy and the lives of its citizens. Accordingly, he believes the solution is to tweak the system, make some adjustments, expand state control, and all will be well.

The education system is one example: There is a general consensus in Israel that the system is failing – costing a lot of money but producing poorly-educated kids. Lapid’s solution is basically to maintain (and even increase) the state’s already totalitarian hold over the system (there is some talk about a national education council). This is unfortunate because at best it will leave the system in its current degenerative condition, and at worst will cost even more – but in either case it will not result in any improvement.

What Lapid fails to realize is that the problem is not that the government is doing a poor job managing the system, but rather that the government is managing it to begin with. It appears as if some Western countries (Ireland, Sweden and Holland) understood that the government is part of the problem, and chose to try the school voucher system.

It is unfortunate that the school voucher idea is getting no air time in Israel and that Lapid, a supposedly fresh political leader, is sticking to the old, stale and sure-to-fail big government solution. Lapid is also choosing the same tired path when dealing with other issues such as the high cost of real estate – again his solution is even bigger involvement of the state in the market.

The realization that big government is the problem rather than the solution is manifesting itself in parts of the Western world not only through education reforms. UKIP, a British libertarian party, is making impressive political headway in the UK. The popularity of Ron Paul and the growing libertarian wing of the American Republican party indicate that the US might also be getting ready to jump on the small government bandwagon.

Israel is way behind, possibly because the state was established along socialist lines, perhaps for other reasons. The type of political thinking represented by Ron Paul and Nigel Farage is utterly absent from Israeli public discourse. It seems we are destined to suffer under the boot of big government for a long time to come. Lapid and his new party will simply add their weight.

The author is a senior analyst at Excellence Nessuah. He was formerly with Merrill Lynch NY and Commerzbank London.