Seductive snake oil

Interesting commentary that goes to show you that the battle for free-markets is happening all over the world…including Israel. And the opponents of freedom are the same…


Seductive snake oil
Mar. 1, 2006

‘The challenge facing Israeli society is the acceleration of economic development and growth.” So begins, with great promise, Labor’s economic manifesto.

What immediately follows, however – the insistence that growth depends on “…the equitable distribution (by government, of course) of the fruits of growth among the public at large” – indicates that Labor has merely adopted a rhetoric of growth because everyone approves of growth.

But what Labor is offering as policies leading to growth, vague as they are, and its assignment of a redistributive role to government (namely, politicians) means it wants Israel to regress to its worst Mapai days. It wants Israel to adopt massive political intervention in the economy (how else to “redistribute” the “fruits of growth”?) with all the attendant inefficiency, waste and corruption that plagued our economy under past Labor regimes – and most of the Likud’s too, alas. It wants us to go back to the very policies that prevented a most able nation, with exceptional resources, from fulfilling its great potential.

ONE WONDERS how Avishay Braverman, the former president of Ben-Gurion University, who raised funds from exceedingly successful capitalists and always mentions that he was a World Bank “senior economist,” could sell such snake oil – suggesting that growth can be achieved by more government intervention in an economy that is already almost choked to death by excessive intervention and debilitating red tape.

But perhaps it’s not such a mystery when one considers the counterproductive, interventionist policies of the World Bank, its huge wasteful bureaucracy and its grand failures that cost hundreds of billions and caused such huge damage.

The Labor plan says nothing about the real causes of Israeli lack of growth, and how to overcome them. It says nothing about breaking monopolies that inhibit growth, cause unemployment and low wages and impoverish hundreds of thousands of families by inflating consumer prices by about 30 to 50 percent. And it says not one word about the Israeli banking monopoly that has stifled growth by squandering 20 years of savings on lost loans to cronies and robbed workers, paying them low rates on savings and charging usurious rates on overdrafts.

BUT WHY should there be? A bankrupt Histadrut labor federation is in hock to the banks, so it serves their interests, at the workers’ expense.

The Histadrut captured control of Labor by questionable means, acting as the instrument of powerful public-service monopoly unions – electricity, water, transportation, the government workers’ unions, teachers’ unions and such, and the unions of bank workers – all of whom exact inflated salaries and perks because they are monopolies who do not hesitate to declare a general strike, even when it badly harms other workers and the unemployed.

These unions are the ones that financed Amir Peretz’s campaign and registered his voters so that he would support their anti-growth, pro-monopoly policies. They are the ones who would call the shots in Labor and dictate a damaging economic policy, for which Prof. Braverman is apparently being used as a fig leaf.

WHAT LABOR’S manifesto does contain is false and empty promises coupled with dangerous anti-growth policies.

Who in his right mind believes that governments (politicians) could institute an “equitable” distribution of income, supposedly falling like manna from heaven and leaving us only with the task of how best to “distribute” it?

Can Prof. Braverman explain how it can be done? Who would decide what is “equitable,” and by what criteria? And how would the distribution be effected without great cost and a huge bureaucracy about as effective and equitable as our “social security” establishment, with its many strikes, waste and corruption?

And could the professor explain how, specifically, Labor intends to cut unemployment by raising the minimum wage, when most serious economists except Joseph Stiglitz believe that this prices low-productivity workers out of the market and leads to wider unemployment?

One would also like to know when, or where, governments ever succeeded in “creating employment opportunities,” as Labor promises to do. In France or Germany, perhaps, where, despite massive “third way” “social democratic” policies unemployment remains at historic highs?

How exactly does government “promote” small businesses, if not via the miracle of resurrection? For it will take just that to revive the thousands of small businesses government regulation and excessive taxes have combined to choke to death.

A PIECE by a young Finnish economist, Samuel Davidkin, posted on a Ben-Gurion University Internet forum, read: “…I was (astounded) when Ben-Gurion University president, economics professor Avishay Braverman… announced that Labor would follow the social and economic policies of Finland, Sweden and Ireland.”I wonder whether Braverman knows what he’s talking about… his statement is downright contradictory. The Scandinavian economic model is nearly the opposite to that of Ireland… having both is impossible… it appears that Braverman wants to emulate… the Scandinavian model despite its steady economic decline.”

The reaction of Braverman’s students was instructive. Some claimed Davidkin was a jokester or a hired gun, but many more refused to face the facts Davidkin marshaled to prove that the Scandinavian model is in serious trouble. Instead they engaged in a near-theological argument about its moral superiority.

This mind-set is common in all universities where leftist professors indoctrinate hapless students. It is also typical of the economic policies of Labor. Small wonder Prof. Braverman feels at home there.

The writer is director of The Israel Center for Social and Economic Progress.