Commentary: Wanted - An economic platform

As election campaign unfolds, Israelis need to demand that major parties produce viable economic plan in exchange for support.

Shelly Yacimovich at Labor Central Committee 370 (photo credit: Marc Israel Sellem/The Jerusalem Post)
Shelly Yacimovich at Labor Central Committee 370
(photo credit: Marc Israel Sellem/The Jerusalem Post)
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.
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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.