Rich State, Poor Citizens – Israel’s Economy, where to?

Over  100 people attended a weekend seminar dealing with Israel’s economic challenges, conducted by The Forum for Liberal Thinking in cooperation with the Jerusalem office of the Friedrich Naumann Foundation for Liberty in mid of November 2015, in Nachsholim.

Among the seminar lecturers were renowned economic analysts and journalists, Sever Plotzker from Yedioth Achronot and Nehemia Shtrasler from Haaretz.

Approaches of lecturers were different with Sever Plotzker concentrating rather on the positive sides of Israel’s economic situation, mentioning the good average income, the low unemployment rate, rather low deficit and the fact that Israel’s economy managed to recover very quickly after the big crises of 2008. He sees problems in health and education sectors and in the fact that the Arab and Ultraorthodox sector are not sufficiently integrated in the labor market, but all in all he sees Israel’s economy on the right track. Also regarding the housing problem, he sees that the supply and demand relation starts to get in the right balance with recent increased building efforts. His bottom line was the seminar title reversed: “rich citizens, poor country”, underlining the economic achievements of Israel despite the fact that Israel is lacking significant natural resources.

Nehemia Shtrasler’s emphasis fell more on the weak spots of Israel’s economy, among them the problem of a high rate of undeclared and illicit work, which leads to the estimation that 23 % of the GNP that is not taxed. He criticized the enlarging of the deficit frame in recent years, which he sees as a dangerous development. One reason why Israel did that well during the big financial crises was, according to Shtrasler, that in the period preceding the crises it invested considerable efforts in keeping the deficit low. Like Plotzker also Shtrasler holds the opinion that the government needs to adopt new policies in order to higher the employment rate in the Arab and the Ultraorthodox sector. The low employment rate in these sectors is a serious obstacle for Israel’s economy to strive further. In addition Shtrasler criticized the high monopolization in Israel’s economy, which undermines a fair and healthy competition. Especially, he criticized the un-proportional power some working councils of governmental or semi-governmental companies have accumulated like in the case of the electricity company, which lead in many cases to nepotism, maladministration and corruption. The high living costs in Israel can be attributed to a large extent to monopolies of the latter kind.