Business Scene

Frenkel credits Bank of Israel Governor Stanley Fischer with helping Peres lay the groundwork for the new era in Israel's economy.

By GREER FAY CASHMAN
frenkel peres 88 224 (photo credit: Ariel Jerozolimski)
frenkel peres 88 224
(photo credit: Ariel Jerozolimski)
"YOU WOULD have made a great central banker, I'm convinced of that," Paul A. Volcker, chairman of the board of the Group of Thirty and former chairman of the US Federal Reserve, told President Shimon Peres at a dinner at Beit Hanassi on Sunday night. Volcker was responding to an hour-long dissertation by Peres on the history of Zionism and Israel that dealt more about economics than idealism and ideology. Peres said the Zionist movement had developed to a large degree in Communist Russia, where some of the leading figures were Jews. The brilliance of the Jewish people in Russia was a waste of time, he said, adding: "Russia created an unintelligent movement that produced the most intelligent people," some of whom rejected Communism and created the State of Israel, "a great intellectual triumph." G30 chairman Jacob Frenkel, a former governor of the Bank of Israel, introduced Peres to the gathering. In addition to the G30 delegation, there was a large representation from the Association of Israel Banks. Peres was often referred to as a dreamer, Frenkel said, "but if you want your dream to come true, you have to wake up. So he's awake, but he's also a dreamer." In listing the numerous positions held by Peres over the years, Frenkel dwelt on his achievements as finance minister and prime minister, and his success in radically reducing inflation, which had climbed beyond 400 percent. That period, Frenkel said, was the point of change in the reality of Israel. Frenkel credited Bank of Israel Governor Stanley Fischer with helping Peres lay the groundwork for the new era in Israel's economy. Fischer is also a member of the Group of Thirty, which is a private, nonprofit international body. It was established 30 years ago and is composed of the most senior representatives of the private and public sectors and of academia. Its objective is to advance the understanding of international economic and financial issues and to explore the international repercussions of decisions taken in the private and public sectors. According to Peres, Fischer had told him before he rose to speak: "Why not show them your credentials as an economist?" Although he had studied economics at university, Peres said, he did not consider himself to be an economist, adding, "I'm accidentally in the business." Peres said he had become intrigued with economics after meeting Fischer. "It was the first time I met an economist who told me that if you do such and such, this and this is what will happen - and it did," he said. The problems in the Middle East, Peres said, "are more economic than political or military." The Middle East is very good on politics and strategies, he said, "but we are paralyzed because we don't make use of economic opportunities." In comparison, Peres lauded the pragmatic attitude of his mentor, prime minister David Ben-Gurion, who despite the odds and his knowledge that Israel would instantly be attacked after his declaration of independence, nonetheless went ahead so that Jewish refugees who were survivors of the Nazi death camps would not continue to be the victims of the embargo imposed by the British Mandate, but would have a homeland. A product of the kibbutz movement, to which he is still fiercely loyal, Peres said that when people talk of Israel's achievements, they see Israel as a hi-tech country, "but that's not the story." The story, he said, was in the life styles introduced by the kibbutz and moshav movements, which today represent 1.5% of the population, 7.5% of GNP, 20% of IAF pilots and a third of decorated soldiers. Expounding on one of his favorite theories, that economic opportunity will pave the path to peace between Israel and the Palestinians, Peres said he deeply regretted the loss of human life on both sides that was the outcome of the Arab refusal to accept the November, 1947, United Nations resolution on the partition of Palestine. Peres said necessity was the mother of invention when it came to hi-tech, which was born out of Israel's security needs. This is also one of the reasons that Israel is a world leader in homeland security; it was a field that was forced on Israel "because we are targets of terrorism," he said. Israel's propensity for inventiveness and innovation can be attributed to her disproportionately large scientific community, Peres said. "We don't have enough territory, but we do have enough scientists per kilometer to be a living laboratory or a pilot plant," he said. Peres attributed Israel's success to an innate Jewish sense of dissatisfaction. "We're never satisfied; we're always wanting to change the world," he said. Explaining the evolutionary attitude in Israel's economy, he said, "It's an economy of what you're going to penetrate and innovate, not one of what you have accumulated - which loses value every day." Volcker, seizing on Peres's reference to Jewish dissatisfaction, opined that this might be the reason that there were so many good Jewish central bankers. He said he was convinced that Lenin "had some central banking blood in him," because in his New Economic Policy, which he introduced in 1921, he had said: "If we stabilize the ruble, we will win." The problem, Volcker said, was that he never stabilized the ruble. Peres was a little late in arriving for dinner, having previously been at the Wolf Prize presentation ceremony at the Knesset. One of the prize winners was American mathematician David Mumford, professor emeritus at Brown and Harvard universities, and a co-winner with Pierre Deligne and Phillip Griffiths of Princeton University. Mumford decided to donate his share of the prize money to Bir Zeit University to help Palestinian academics thrive and survive. This is more or less in line with policies advocated by Peres, who believes that hostilities will subside when Palestinians can live in economic security and improve the quality of their lives.