Creating a socially just economy – the Israeli attempt

Israel was founded in 1948. For decades before and afterwards, the leading political elite came from the socialist side of the spectrum. Members of the kibbutz movements often figured in key positions in society and industry.

Those days have gone. As the economy was freed up from 1986 onwards and with the advent of globalisation, Israel’s economy has usually registered around 4% growth each year during the past 10 years. Jerusalem is now a full member of the OECD.

And yet?

The summer of 2011 saw hundreds of thousands take to the streets in protest at the lack of housing,the  limited availability of reasonably priced housing for first time buyers, inflated prices of basic goods like milk products, and a feeling that the well off were doing well on the backs of others.

To take this one stage further, 16 family groups now control around 50% of economic output. This concentration of economic resources is arguably having a negative impact on different sectors and restricting competition. It is not just a case of envy. The consumer suffers. 

So what has the Israeli government done about all this? Two academic committees are due to report over the next few days. The Trajtenberg subcommittee, looking at changes in the composition of the Israeli budget, is set to recommend diverting sources from the enormous defence expenditure to social or infrastructure  projects. In parallel, there are plans to prohibit the wealthy from controlling large corporations, even when they may barely hold 10% or 20% of the shares.

Many of these considerations have still to be debated before new laws are legislated. Interest groups will work hard behind the scenes. But for all this noise, one small fact has been near ignored.

Back to the OECD. As Sever Plocker pointed out in the Hebrew press, most developed European countries spend around 25% of their budget on social items. In Israel, that figure collpases to around 15%.

If politicians were to understand the implication of that difference, they might finally begin to understand why people are so unhappy with how resources are allocated in Israel. And, amzaingly, these decision-makers might begin to really change things for the better. Now there’s a dangerous thought!

 

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