August 16, 2004


Liberating the Israeli economy from occupation (Ariel Natan Pasko, August 16, 2004, Enter Stage Right)

Finance Minister Netanyahu's reform program has slashed the government's budget, especially social welfare spending -- except for politicians and other fatcats -- but hasn't provided for a reasonable chance at job retraining or entrepreneuring. It was done too fast, without re-educating the Israeli masses -- long trained to expect "big brother government" to provide for them -- to be able to help themselves and take advantage of a freer economy. De-monopolization, capital and labor market reform, privatization of government owned companies, educational reform, have all lagged behind.

With the best of intensions, and generally the right idea that Israel needs serious structural reform, Netanyahu and the current Sharon-led Israeli government, have almost blown it. The proof is in the growing demand -- by Labor and others -- to reverse Netanyahu's "Thatcherite/Reaganite program". Even a mini-revolt started within the Likud itself. Trade and Industry Minister Ehud Olmert proposed his own alternative 2005 budget, claiming it would "soften" the reforms for the poorest sectors. Although minimizing the cuts to the social welfare budget and public sector (Israel has one of the most bloated public employment sectors in the democratic world), Olmert's proposed budget did little to help open the economy to growth.

It doesn't much matter what happens in their war with the Arabs if they don't ditch all the rotten ideas they brought with them from Europe.

Posted by Orrin Judd at August 16, 2004 11:10 AM

It would help if we stopped or at least slowed some of the massive support that we give to Israel. It helps support their "bloated public employment sectors."

Posted by: Brandon at August 16, 2004 3:48 PM

FYI, this is the opening paragraph of my March 2003 article entitled, "Israeli Capitalism With a Human Face," available at:

Where I wrote, "The first thing I want to state is, "No one should ever accuse me of being anything but a free-marketeer." For years I've called on Israel to 'get off the dole' of aid money from America. True, part of the money comes in military grants that also help American industry. True, that the Americans benefit from the research and development relationship with Israel. True, part of the money is in loan guarantees, and Israel has never defaulted. And, also true that Israel as a friend and ally on the front lines, in the Middle East; first against the Soviets and now in the War on Terror, devotes an undue amount of its government budget toward defense spending. But in the long run, prolonging a subsidization of poor economic policy -- even though it accounts for no more than 3% of the Gross National Product -- hurts Israel."

Posted by: Ariel at August 17, 2004 7:37 PM