Israeli Elections: Coalition Economics

Along with the political rejection of the hard right, the electorate also repudiated Thatcherite, or free market economics, along with the man most closely identified with it, Binyamin Netanyahu. Even within Netanyahu’s own Likud Party, there was much grumbling from party loyalists about the pinch of Netanyahu’s economic policies, despite the fact that they brought about rapid economic growth and job creation.

Labor Chairman Amir Peretz will almost certainly demand the Finance Ministry portfolio. If he receives it, as also seems likely, expect the Israeli economy to enter the doldrums. Peretz understands nothing of economics, and what he thinks he understands is all wrong. His nostrum for the socio-economic divide – an increase in the minimum wage – would do little for the poor other than cost many of them their jobs. As leader of the Histadrut, Peretz wreaked havoc on the economy through many strikes, almost all of which were called to protect the perquisites of higher-paid government workers.

Those parties most likely to join the government coalition – Labor, Shas, and the Pensioners — will all present Prime Minister Olmert with an expensive wish list. All three campaigned primarily on socio-economic issues. Where the money will come from to meet their demands is not immediately obvious. Settling with the Pensioners, who entered the Knesset for the first time with a bang (seven seats), means less money will be available to meet Shas’ demands for Torah education and the return of some of the cuts in child support.

After navigating through all of the above, Olmert has also proposed a massive West Bank evacuation. As already mentioned, it is far from clear where all this money will come from.

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3 Responses

  1. Hershel Brand says:

    I’d say it’s clear as day where the money will come from. Confiscatory taxes. Israel is headed for economic doom, I’m sorry to say, and it’s us – the shrinking middle class – who will literally pay for its demise. This is a sad day indeed.

  2. Henry Frisch says:

    Americans tend to believe the myth that a rising economic tide lifts all boats. Israelis, like French people, seem to believe that taking care of the economic needs of ordinary people, rather than just billionaires, is a primary governmental responsibility. Bibi cut out so much muscle as finance minister that he inflamed the electorate. The next government will have to spend much more on the old and the poor than American observers and the more prosperous among the Israeli populace expected.

  3. joel rich says:

    The study of economics is the study of the allocation of scarce resources to unlimited demands. Given that as far as I can tell, none of the parties ran on a platform focusing on economic growth for the entire State, the answer to your musing on where the money will come from is qui: most likely it will come out of some other segment of the publics pocket or other State’s will provide more aid. It’s unlikely that the latter will happen.

    The post election maneuvering makes it clear that the spoils system cointinues to thrive. I

    May HKB”H watch over a nation that, at least to the outside world, seems more interested in taking care of “unserer” than of the future of the entire people (yes, I know you can argue that it is the Yeshivot who actually protect the entire people etc.-and please note that my comment relates to all the parties-e.g. the pensioners who now find that they have to decide what their foreign policy position will be)


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