Don't drop economic reforms

As higher-ups acknowledge inequity in our society, Hirchson explains why the issue is on a back burner.

hirchson budget 88 298 (photo credit: Ariel Jerozolimski)
hirchson budget 88 298
(photo credit: Ariel Jerozolimski)
Contradictions proliferated at last week's annual Prime Minister's Conference on Export and International Cooperation. Amid a palpably buoyant mood, underscored by upbeat forecasts for accelerated economic growth, came admissions from all higher-ups that the inequity in Israeli society must be addressed. In the same breath, however, Finance Minister Avraham Hirchson explained why he is relegating the war on poverty to the back burner. It was hard to avoid the impression that Israel's socioeconomic imbalance only received lip-service, with no real emphasis on how the festering problem would be tackled. This is a real shame. If all rosy predictions and satisfactory assessments are sound, then this is the best time to begin dealing with Israel's standards of living dichotomy. Last week's International Monetary Fund's annual World Economic Outlook Report heaps praise on Israel's economy and predicts a 4.4 percent growth for next year, up from this year's 4.1%. This, according to IMF analysts, will be accompanied by a low 2% inflation rate. But on the reverse side of the coin is a dark prognosis of 8.5% unemployment. What the IMF seems to be saying is that our economy is doing considerably better than expected but that beneath the surface of success, a great deal of work remains. A society which aspires to true prosperity cannot afford to let its ungainly underside go ignored. Prime Minister Ehud Olmert asserted so when promising "a genuine effort to reduce and close the income gap" and grapple with social issues, which he judged were at the root of the "poverty trap." Hirchson called the socioeconomic divide "a real threat" to continued economic well-being, but then he went on to make excuses, saying: "2007 was supposed to be devoted to dealing with social problems, but unfortunately the war in Lebanon altered our scale of priorities." Hirchson was even more outspoken at his Knesset speech following the budget's effortless jump over the first-reading hurdle. "Many billions are needed to replenish IDF stockpiles and rehabilitate the North. Rather than trim the defense budget, we must add NIS 8 billion to it...The fact that we cannot improve things for the country's have-nots pains, saddens and disturbs me. It keeps me awake at night." Which leads us to ask why greater defense spending (which with proper management of the war might have not swelled as it had, and with a more clear-eyed view of Israel's geopolitical situation might not have been as unexpected) must per force cut into efforts to ameliorate the lot of the needier segments of society. Where is it written that one must deterministically come at the other's expense? It shouldn't if, as Olmert proclaimed, Israel can in a decade nearly double its per capita income to $30,000 a year. Moreover, Israel ranks a very respectable, if not enviable, 15th slot on the World Economic Forum's Global Competitiveness Index for 2006-7. Israel is far from an economic basket case where every new priority must erase another. The Lebanese conflict, additionally, ended up far less costly in economic terms than initially feared. Its effect on the economy is already proving transitory and negligible. Odds are that with the national balance of payments in the black, this economy will stay quite robust. The bottom line is that Hirchson need not be losing sleep, and should not be asserting that he lacks the tools to address our economic inequalities. The imperative to reduce poverty is not a luxury, to be expended when other pressures come into play. It is as essential as any goal on the treasury's to-do list. The best way to achieve this objective is to persist in policies which generate growth because nothing alleviates poverty like greater opportunities. The wisdom is to focus on those opportunities of which the less skilled components of society can avail themselves at this time. A growing economy is the golden goose that can provide for defense and social needs while reducing unemployment. The key to spurring growth is to press ahead with an ambitious economic reform agenda, including reducing the tax burden, and tackling overconcentration of the economy through deregulation and privatization. The war is no reason to rest on our economic laurels; on the contrary, it should accelerate the pursuit of reforms that have brought us this far, and which hold the best prospect for increasing the income of the least fortunate over the long term.