'We need a better educational system for economic growth'

Knesset Finance Committee Chairman Avishay Braverman speaks to The Jerusalem Post.

By JOHN BENZAQUEN, SHARON WROBEL
avishay braverman 88 224 aj (photo credit: Ariel Jerozolimski [file])
avishay braverman 88 224 aj
(photo credit: Ariel Jerozolimski [file])
Prof. Avishay Braverman, chairman of the Knesset Finance Committee and a well-known economist, is a relatively recent addition to Israel's political and economic scene. Braverman studied statistics and economics at Tel Aviv University and earned a PhD in economics at Stanford University in the United States. He served as a senior official in the World Bank in Washington, DC, specializing in economic development, with an emphasis on social justice. In 1990, Braverman returned to Israel to serve as president of Ben-Gurion University of the Negev. During his 16-year tenure, BGU was transformed from a relatively small institute of higher learning into one of the countries leading universities. Braverman eventually decided that politics would be the best way for him to help transform Israel into one of the world's richest countries. He was "recruited" in 2005, on the eve of the last general elections, by former Labor Party chairman Amir Peretz. He was considered to be a possible candidate for the post of finance minister, but it didn't happen. Now that general elections may be on the horizon, Braverman is gearing up for the next challenge. In a recent interview, he told The Jerusalem Post why he would like to become education minister in the next government and how this will benefit the economy. Three years ago you had your heart set on becoming the country's finance minister to set the economy to rights. Why so dramatic a change? The economic welfare of this country is based on its human resources; that is our only natural resource. With a good educational system, coupled with major reforms in our political and bureaucratic systems, we can easily become one of the world's richest countries on a gross domestic product per capita basis. I am confident that in a decade we can reach and even surpass countries such as Singapore and Ireland, which in the past had a lower GDP per capita than we had and now have a per capita GDP more than twice our own. In the past, our educational system was among the best in the world and the results were self-evident. The fruits of this excellent education system can today be seen in our world-renowned hi- tech industries, a vibrant research and development infrastructure, and a dynamic economy in which many of the world's leading science-oriented companies have set up R&D centers in Israel. But today our educational system is in a shambles. Our elementary and high school system produces the worst results in the western world, while our higher education system is starved of funds, and as a result the best brains in our universities find employment overseas, where they get much better salaries and R&D facilities. This situation will have dire consequences for our future. If our educational system cannot produce the scientists, the engineers, the programmers, the technicians, the executives and, yes, the teachers we need, we will soon slide down to the ranks of the developing countries of the world. That is why education is so important. To promote and develop our economy, we first have to set our educational house in order. It will also do wonders to close the gap between the "haves" and the "have-nots" of this country. And time is pressing. Therefore, together with defense issues, education must be our first priority. The country is fragmented, the necessary leadership is lacking and in such an environment promoting change in any sector is very difficult. How can it be done? It is not only a question of leadership, but also the need to reform the political system, which has created an anarchistic situation that has made governing virtually impossible. The founding fathers of Israel wanted a state based on British political values, and we have ended up with the chaos of the French Fourth Republic, which suffered from chronic political instability and an inability to take bold and sustainable policy decisions. It is not only the educational system that needs drastic changes, but also the political system. We need a presidential system of government with a strong leader. The electoral system should be changed so that at least half of the Knesset members would be elected through a constituent, or regional, electoral system. That way, the elected members would have a strong commitment to the electorate, and we could then dispense with primaries, which are having a corruptive and debilitating influence on the political scene. In my opinion, the last five years have been wasted because of our flawed political system. These were years of economic growth, and in such an environment it would have been relatively easy to reform our political system and streamline the bureaucracy, especially at the Israel Lands Administration, which, because of its archaic practices, is a serious impediment to growth. As a result, we have failed to develop the Negev or the Galilee, which in turn has perpetuated the stark geographical and socioeconomic inequalities inherent in our state. What are your views on the budget and economic policy? As chairman of the Knesset Finance Committee I will do all in my power to promote effective economic policies. With regard to the 2009 draft budget, I believe it is totally inappropriate for an economy that is cooling down and a country on the brink of big political changes. The next leader of the Kadima Party will have to adapt the budget to the needs of the economy along the lines I have proposed; otherwise, he or she will not be able to form a government. In my opinion, the budget expenditure ceiling for 2009 needs to be increased to 2.5 percent, or NIS 2 billion. The budget is based on an increase of 1.7% compared to the budget of the previous year, but it really is an increase of only 0.2%. The previous budget, the one for 2008, was increased by NIS 7.5b., or 3.2% compared to the 2007 budget. It was not only increased by 1.7%, but had also special allocations for defense and to finance the evacuation of the Jewish settlers from Gaza. It grew by 3.2% at a time when the economy was growing fast. In the 2009 draft budget, public expenditure will increase by 0.2%, since it is based on the 2008 budget plus an increase of 1.7%. But in real terms it is the 2008 budget minus the 1.5% extra expenditure, which means that the real increase is only 0.2%. In a situation in which Bank of Israel Governor Stanley Fischer is using the interest-rate mechanism to battle inflation, and in consequence is not lowering interest rates to generate growth, the only way to generate growth in a recessionary situation is by a moderate increase in government expenditure. Which means inflationary growth? Not exactly, since much of the current inflation is imported and is due to the rise in the price of oil and other commodities. I fully understand Fischer's policies; inflationary pressures are growing and he wants to return inflation back into the target range of 1% to 3%. I can understand this policy. What I cannot understand is the insistence on a straight-laced budget. This budget is a terrible mistake. It will further dampen the economy by not expanding public spending. The result will be an increased economic slowdown and major redundancies, which will further widen the gap between the rich and the poor in this country. This is especially true when exports have been negatively affected by a strong local currency, which is also harming industry. The additional NIS 2b., which I believe should be added to the 2009 budget, would promote growth because it would be spent on education, infrastructures in the peripheral areas and on improving the lot of the elderly by increasing their spending power. The elderly feel cheated and with good reason. They devoted their life to building this country, they made hefty monthly social-security payments all their working lives, and what they get as social security has impoverished them. The financial subprime mortgage crisis in the US seems to be deepening and spreading globally. How will this affect Israel? The US is facing the greatest economic crisis since the crash of 1929. It has been caused by the irresponsible economic policies of President Bush. The subprime crisis, which has badly affected real estate, the banking crisis, the tremendous increase in oil and commodity prices - all these have buffeted the US economy. The policies of Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson are adapting essentially Keynesian policies, which favor government intervention in moments of crisis. Bernanke himself studied the 1929 crash. He knows that that crisis was worsened because banks tightened credit. He has followed a policy of lowering interest rates and expanding credits to overcome the crisis. Both Bernanke and Paulson are determined to avoid the mistakes of 1929. The current economic situation in the world is dicey. In consequence, our economic situation in the next few years may be adversely affected. Economic growth will be less robust than that of the past years and the less-affluent sectors of our society will suffer the most. Thanks to a strong hi-tech industry, the Israeli economy has generated hefty growth rates during the past few years. But during the period of 1973 to 2000 the annual growth rate amounted to barely 1.1%. During those years we were overtaken economically by countries such as Spain, Greece and Ireland. If we overhaul our political, educational and economic system, this will not happen again, and by making optimal use of our human capital resources, we can achieve sustainable growth of 6% year-on-year.