Enormous gas wealth can be a blessing or a curse

Rabbi Michael Melchior watched Norway struggle with finding large oil, gas deposits in the 1970s and the near ruin it brought to the country.

By EHUD ZION WALDOKS
Rabbi Michael Melchior 521 (photo credit: Courtesy)
Rabbi Michael Melchior 521
(photo credit: Courtesy)
Michael Melchior has been the rabbi of Norway for decades. Born in Denmark, he first went to Norway as a young rabbinic student in the mid-1970s. He moved to there for a time starting in 1980.
Melchior watched Norway struggle with finding large oil and gas deposits in the 1970s and the near ruin it brought to the country in the mid-1980s. Yet he has also seen how Norway has become a country with the one of the highest standards of living in the world thanks to its natural resources.
Norway has gradually built up a $500 billion Sovereign Wealth Fund out of the government take of 87 percent of gas and oil profits. The interest from that fund – some $20 billion a year – is used to create educational, environmental and social programming.
From a poor country with a huge US-based diaspora, “the nation stands at the top of the Human Development Index, ranks third in the world in per capita GDP ($53,451), is listed fifth on the Gini Index, has negligible rates of unemployment (less than 2%) and records scarcely any poverty,” according to his organization’s English website.
The former Labor-Meimad MK who spent 10 years in the Knesset as an educational and environmental crusader emerged early last year at the head of the Israel Civic Action Forum. The forum is intent on keeping the debate over gas royalties and taxes in the public eye and lobbying policy-makers for the creation of a fund similar to Norway’s.
According to estimates, the gas finds could be worth as much as $500 billion.
The Jerusalem Post caught up with Melchior recently to get his take on the gas revolution in Israel.
“Every country has gone through what’s known as the Dutch disease. It originally comes from an article in the Economist in 1977. And it’s not only in Holland. Every country that has found great wealth in natural resources has gone through that disease – an overheated economy, great inflation, a revaluation of the currency, a fall of the traditional industries and many other things that happened,” he says.
“In Holland, many foreign workers also arrived because people didn’t have to work or work a lot. Holland is still paying the price because the social fabric was not ready to absorb this,” he says.
“The Norwegian model was developed slowly, and I followed it all those years. It is saying something very important. This enormous wealth – beyond what we can envision – has to do two things to be a blessing and not a curse. And in many countries it’s been a curse,” he says.
“One, it has to be planned in a way that it can create a model society, one with smaller gaps, social welfare, justice in society, improving with reforms that everyone agrees must be made – in education, social security, environment.
“The second thing is that it’s not just for our generation. This wealth has been there since the creation of the world. All the jokes about how Moses went wrong when he came to this country because we’re just flowing with milk and honey but we have no rain and no natural resources have suddenly become meaningless. Because of the technology, our generation has been able to benefit from it. But we cannot spend all of it. It has to be created in such a way that the foundations are laid down in education and environment, as well as financial foundations so they will be able to benefit from this many years after us.”
Melchior also stresses the Jewish, Zionist value of the creation of such a fund.
“I think this is important to say from a Jewish perspective. There’s a feeling that we’re here but not really here; we’re here just for a time. People ask if there is a future for the Jewish state, for Zionism. And there are many skeptics. When you take such wealth and say, ‘We’re not going to spend it all now because we’re here to be here,’ or ‘We’re willing to give up something we have now to ensure future generations,’ that’s a crucial statement in every country; but even more so for the Jewish people and the State of Israel.”
Melchior says his model has received widespread support among decision-makers, experts and the public.
“We were the first ones to put it on the table, but it’s more or less been accepted by everybody. I just heard the prime minister talking about it, his chief economic adviser, Eugene Kandel, is a big supporter, I’ve discussed it with the Bank of Israel governor [Stanley Fischer] and many others who think this is right from an economic perspective, but I think it’s right from a Jewish perspective and a Zionist perspective.
“This is probably the most important economic social issue since the creation of the state. I know how it was dealt with in the past – that a minister sits with some tycoons in a closed room and they close a deal – and these deals are usually made at the expense of the public. We know what happened with the [shrinking of the] Dead Sea and many other issues, including the issue of oil and gas previously. I and my friends came to a resolution that this would not happen again this time. This time the interest of the general public was going to be represented,” he asserts.
MELCHIOR TALKED with experts from around the world before forming the Israel Civic Action Forum and its platform. According to Melchior, momentum is building. “We worked together with Knesset members to build a strong caucus in the Knesset. We’ve had big conferences, three or four events every week,” he says.
Conferences, demonstrations outside the Prime Minister’s Office and an online petition are just some of the tools of the campaign. In the future, every MK will get a fact sheet with clear information.
Melchior also promises that in the near future the forum will start exposing the corruption surrounding this issue.
“We’ve started to see how easy the corruption can go. When we began, a lot of people said we aren’t talking about large quantities or that it was not so important or all sorts of arguments that it was a breach of agreements or nobody wants to come here to exploit oil and gas. We refuted every argument.
Now we don’t have to refute them anymore. All the expertise that has come out, all the independent experts on the legal issue. They’ve all said there is no such thing as retroactivity in this,” he says, “Twentyeight countries have changed their laws over the last three years, and no one claims this is retroactivity.
There is no such agreement with the oil and gas companies.”
Melchior also notes the wide breadth of support for his model. “All the economic experts, including international experts – the heads of the OECD, the big banks – have come out, people very far from my economic and social attitudes. It doesn’t matter now if it’s right or left, not an issue of religious and secular,” he says.
Melchior also criticizes what he calls the smear campaign against the Sheshinski Committee members.
“I don’t remember a campaign this dirty in the history of the state. It is a committee of experts, not people with vested interests, appointed by the finance minister. These are the biggest experts on how to finance projects, on taxes. So if now we must ensure that – at minimum – the recommendations should be accepted and that a foundation should be under the leadership of the Bank of Israel governor, not for social justice NGOs. They will find a way to do this and to benefit society and pass a law that will ensure that this will go for sweeping reforms, which we hadn’t been able to before.”
Melchior also analyzes the committee’s interim versus its final recommendations.
“There’s no doubt that the interim conclusions were their professional conclusions. They had talked with all the experts. They read thousands of documents.
They knew what they were talking about.”
The debate has become about the nature of our democracy, according to Melchior. “If this does not happen now, it’s not a question of how we divide wealth or social responsibility and commitment, it’s a question of the substance of our democracy, if we are a democracy. Who runs this country? “There is a reason that these people are spending millions and millions of dollars to persuade the ministers and lawmakers to do something else than what their conscience and their knowledge tells them to do. Why do they need to hire public relations companies and lobbyists who are sitting on the ministers and the MKs every day to sway them from what’s right and what they were elected to do? This smells of something that endangers our country, our democracy, our substance.”
Despite the might of the gas lobby, Melchior is optimistic about the chances of success.
“We know what we’re up against. Maybe it’s naiveté, but I believe in our political system. I believe that it’s going to be tough, but the politicians will make the right decision this time. One of the reasons I believe it is because the public is waking up. The public doesn’t give up on the decision-makers. We can’t afford to blow this. This is not just another campaign or not just doing something good; this is really a major historical opportunity.”