Oh, Jerusalem

By DANIEL DORON
Choose any place in Israel that suffers from aggravated social and economic problems and you can be certain that it has been the beneficiary of special government attention. Over the years, the Negev, Galilee and development towns have been the object of many government programs to resuscitate them. The cost has been in the billions, but the results are dismal. These efforts usually failed, and often made things worse. Jerusalem, our capital, is no exception. Indeed, it is a prime example of how government interference - national and local - creates and aggravates problems. Politically motivated, heavy-handed governments invariably shift resources from an economically productive, competitive and efficient private sector to a monopolistic and wasteful public sector. They impede economic growth, including healthy urban development. Consider the period when the famous Teddy Kollek was mayor of Jerusalem. If there ever was a talented, dedicated and energetic civil servant Teddy was it. He was also a man who, under David Ben-Gurion, wielded immense political power. The real general manager of the country, he was beloved and respected by many and feared by others. He was also one of the best-connected men, of immense charm and savoir faire. He became the ultimate fund-raiser. In his 26 years as mayor of Jerusalem he raised for his foundation close to half a billion dollars, $20 million a year in his last decade in the post. This enormous sum endowed Jerusalem with some important public edifices. But it did little to build a productive basis for the city. Had Teddy Kollek devoted just half the energy he spent on fund-raising to facilitating the economic development of Jerusalem, he could have developed a strong economy with a wide tax base. That would probably have generated the money he relied on charity to provide. More importantly, the city probably would not have suffered the steep economic decline that started under his stewardship (and that was aggravated during Ehud Olmert's mayoralty), a decline that threatens Jerusalem's viability more than any political danger. Jerusalem's mayors saw that young people were leaving the city in droves, mostly because of lack of housing and jobs. Instead of asking the national government for temporary palliatives - public housing, or hand-outs, which just create a culture of poverty and desperation - a powerful Jerusalem mayor could have convinced government to abandon its destructive housing policies; he could have fought to abolish the government's land monopoly and other construction-related monopolies such as the notorious cement one). It is the monopolies that are making housing scarce and expensive, forcing young Israelis to mortgage themselves - for a small apartment - for life. Jerusalem mayors should have understood that in a city replete with tax-exempt public institutions the burden on tax-paying citizens is immense. City Hall was in no position to support an inefficient, mammoth municipality full of featherbedding and corruption. The mayors should have understood that small businesses are the city's life-blood, its vital tax base. They should not have undermined them by adding to their impossible burdens involving bank credit and high taxes. They should have tried to protect them from the national Byzantine bureaucracies which harassed them with ludicrous requirements which often force businesses to operate for years without a license by paying fines or bribes. In short, mayors should have realized that a city is not made viable by more government hand-outs, the inflating of the public sector or additional public monuments, but by a thriving economic base created by private-sector entrepreneurs. An interview which ran in The Marker with Ruth Cheshin, Teddy's successor at the Jerusalem Foundation, demonstrates how alien free-market thinking is to our elites. Cheshin lists many of the city's ills and their dire consequences. Her solution? To have Prime Minister Ariel Sharon establish a "Jerusalem Administration" - another bureaucracy - that she thinks would give Jerusalem top priority in funding and would move all government bureaucracies to Jerusalem. Cheshin does not even mention economic revival as a possible solution. She does not even realize that her "solution" has been sapping private-sector resources and crowding out heavily taxed and regulated entrepreneurs. Israeli elites, not least the very wealthy (like Cheshin, a Teva heiress worth some $200 million) have been indoctrinated in our universities to believe that government is the ultimate guardian of the public good and can be relied upon to take care of all our needs, and then some, like abolishing poverty and creating "equality." They therefore habitually advocate ever more government, disregarding its systematic failures. But governments, alas, are not benevolent parents taking care of their wards, the citizens. They are unstable coalitions between competing political forces which pursue careers and ambitions usually at the public's expense. They equate the public good (whatever that means, seeing that what distinguishes most publics are different interests) with the advancement of their own interests and those of the vested interests of those who support them. Given its systematic failures, government is the last instrument you would want to use to do something positive, like reviving Jerusalem. The most good government could do is to remove its heavy hand, and let the creative people initiate an urban revival that could finance those public goods that government aspires - but so often fails - to provide.