Equality or prosperity?
‘Inequalities exist in all areas of life... should society restrain them because these inequalities of character or nature create economic inequalities’?
Tel Aviv social justice protest [file] Photo: Ben Hartman
Israel survived the 2008 global economic crisis intact, becoming a byword for
economic success in news stories around the world. While countries from Europe
to the United States were spending themselves into bankruptcy, Israel was smart
enough to keep government expenditures under control and reduce its budget
Four years later, the over-spenders are crying for bailouts,
their citizens are out of work and their economies are still not growing. In
contrast, Israel has a relatively low unemployment rate and an expected rate of
growth of 3.2 percent. Israel’s success was based on fiscal discipline and a
simultaneous liberalization of the economy.
Why, then, would our
government suddenly decide to join the European over-spenders on the road to
increased deficits? It surely sees that these are the policies that have brought
Spain, Greece, Italy and Cyprus – the list is growing – to economic
The government argues that the budget deficit and higher taxes
are necessary to attain “social justice,” to finance programs geared toward
reducing poverty and economic inequality. Poverty is of course a bad state and
there seems to be general agreement in Israel that efforts should be made to
lift the poor out of this condition through work participation and income
support when necessary.
With inequality so often mentioned together with
poverty as the enemy, the public has been forbidden to examine its assumptions
and ask: is inequality such an evil concept? Inequalities exist in all areas of
life. Some people are smarter, more beautiful and more athletic than
Should society restrain them because these inequalities of
character or nature create economic inequalities, as suggested by Kurt Vonnegut
in his satirical story “Harrison Bergeron,” which describes beautiful people
being forced to wear masks, athletic people having to carry weights, and
intelligent people forced to have radios in their ears to interrupt their
thoughts with loud noises? FEW WOULD give their assent to these drastic
So why do they adopt that attitude toward individuals who
are economically successful? The question of course refers to people who
attained their wealth honestly; crooks belong in jail, for the protection of
But being rich is no sin, at least not according to Judaism. As
Rabbi Issac Lifshitz, a senior fellow at the Shalem Center, put it, “economic
success is considered a worthy aim, so long as one achieves it through honest
means,” and “Judaism holds a fundamentally positive view of individual
The handicapping of the smarter, stronger and more intelligent
members of society will obviously prevent them from succeeding. Higher taxes for
people who succeed are a similar disincentive to excel. We should be asking if
the equality is more important than economic prosperity. And we should ask if
people are suffering because some of their compatriots are richer than they are
(inequality) or because they cannot afford basic items (poverty)? The creation
of wealth benefits society at large but it will not benefit everyone in the same
way. Israel’s rich got richer but few would argue that poor Israelis are worse
off than they were 30 years ago; the poor also got less poor.
expenditure survey data from the Central Bureau of Statistics shows the average
income of the lowest decile (poorest 10 percent) was 1.77 times higher in 2010
than it was in 2004. The same survey also shows that poor people have gained
access to goods such as cellphones, computers, air conditioners and DVDs. True,
poor people can buy less than wealthy people, but they can buy more than they
could have five years ago.
THE CHALLENGE Israel faces today is not to
weaken those doing well, but to strengthen those who are left behind. As
economist Gary Becker, winner of the Sveriges Riksbank Prize in Economic
Sciences in Memory of Alfred Nobel, pointed out, “It would be hard to motivate
most people if everyone had the same earnings, status, prestige, and other
Equality of opportunity should be Israel’s goal, not equality
of results. Equality of opportunity means fair competition and the elimination
of arbitrary discrimination in access to jobs, housing and loans. As of now, 70%
of loans in Israel are given to 1% of borrowers because the government has
refused to reform the bank sector by introducing competition.
also rationed, by the Lands Authority, which refuses to release enough land for
construction; this keeps real estate prices artificially high and limits access
for many. High paying jobs are also difficult to get, especially given that the
highest paying jobs are in government controlled or protected monopolies like
the Electric Company, the railway, the water company, the ports and so
One exception to this dark picture is the hi-tech
Because it is based on incentives and rewards, talented people
can make it to the top regardless of their lack of family ties and “proteczia.”
Needless to say, it is Israel’s most dynamic economic sector. The government
could do much to increase equality of opportunity by continuing on the path of
liberalization in other sectors.
This may be a bigger challenge than
overspending, and it may even be counterproductive in an election year, but it
would be the responsible and mature decision to make.
The writer is
co-founder and director of the Jerusalem Institute for Market Studies, an
economic policy thinktank.