Global Agenda: Doing things right

Many members of the general public seem to have difficulty getting their heads around the fact that the same people can do good and also bad things.

This column is aimed at addressing, although not redressing, the main comments I get by way of feedback – and apologies to those who write in that you don’t receive replies, but I do pay attention.
The main complaint, of course, is that the content is too negative – to which the answer is: Too bad – the world, that is; nothing personal.
If you believe, or like to pretend, that everything is hunky-dory, skip this space; better yet, don’t read newspapers at all. Another often-repeated comment is to write more about Israel. This is a legitimate request, but basically a nonstarter for a column called Global Agenda.
However, occasional forays into the Israeli economy are possible, even desirable. So let’s make everyone happy by closing out the year on a positive note and doing so by considering one of the most hotly debated topics in business and financial circles in Israel over the last year: Why and how is the Israeli economy doing so well, relatively and even absolutely? Let’s start, as usual, with a hot news item. Here is the BBC’s online report about what’s going on in France: Public-sector workers in France are staging a series of strikes, affecting transport and disrupting schools across the country. Trade unions have called the strikes over government plans to reform the pensions system and raise the retirement age from 60 to 62.
Oops, sorry, that news item was from June 24. But never mind, here’s Tuesday’s news item: Hundreds of thousands of protesters have taken to the streets of France to register anger over the government’s austerity measures. The rallies come as a 24-hour national strike has disrupted flight and rail services and closed schools. The activists are angry at government plans to overhaul pensions and raise the retirement age from 60 to 62.
Clearly, this is a big issue in France and one that seems to be getting worse. In fact, it encompasses almost all the European (and other Western) economies, because it relates to one of the biggest challenges facing them: the patent inability of almost all governments and many firms to meet the pension obligations they took upon themselves over the years.
The hows and the whys of this issue are very complex, but the bottom line is very simple: Pensions will not be paid as promised. Everywhere, a combination of two factors will be used to modify (read “reduce,” or “significantly reduce”) the existing obligations: The retirement age will be raised, so that the pension will be paid for a shorter period; and/or the level of benefits will be reduced.
None of this is new. On the contrary, it has been abundantly clear for at least 15 years, and as life expectancy has extended, the looming pension crisis has intensified. The boom years on global stock markets delayed the inevitable, but the crash then hastened the collision between make-believe and reality.
From California, to France, to Japan, the game is now up. And as the latest news item noted, the move to government austerity in Europe means that bullet-biting time has arrived.
There are, however, two or three countries around the globe that are not facing a pensions crisis, or even a pensions crunch. One of them is Israel. The main reason we are not facing that crisis is that we instituted pension reform – including raising the pension age – in good time.
First we made a half-baked reform in 1995, and then we did it right in 2003. True, the timing of that latter reform was critical: The government took full advantage of a severe crisis to do what needed to be done.
More correctly, the Treasury mandarins persuaded then-finance minister Binyamin Netanyahu and thenpremier Ariel Sharon that this was the opportune moment to execute the reform they had already prepared.
But that is why politics is called “the art of the possible.”
The crucial aspects of pension reform in Israel were not the financial ones but rather that: a) the political will to go ahead with a tough but necessary reform existed, and b) the wider sociopolitical consensus – encompassing unions, employers and other key groups – necessary to successfully implement major initiatives was also achieved. In many European countries the first condition has been absent until now, while the second remains unattainable in many of them.
Pension reform is a major issue, but it is only one example of a wider phenomenon. For the last 25 years the Israeli governmental system – comprising ministers and senior civil servants, heads of agencies, etc. – has made a long series of correct decisions and then implemented them. That these are the very same people who made many bad decisions, and failed to properly implement many good decisions, is also true. That many of the key individuals have also been involved (allegedly or proven) in bribery, corruption and all the rest, is also true.
Many members of the general public seem to have difficulty getting their heads around the fact that the same people can do good and also bad things; make wise and visionary decisions and also stupid, shortsighted ones. The same people can be heroes and also villains. The record is quite clear on both counts. But then, what else did you expect from human beings?