Israel’s economy has been given a big “thumbs up” just recently. Matthew Michael, head of EMD and Commodities at Shroders Investment, one the UK’s largest investment houses, has paid a visit to the Holy Land. This was not his first trip here, as his team are trying to show a visible presence in the country.

Shroders operates in over 20 countries. And as Michael discussed in an interview with the Yediot Ahronot newspaper, Israel is considered the 4th least risk problematic country in Schroders index of 80. Some mighty compliment. What I found interesting was Michael’s assessment that Israel is well protected against unforeseen shocks to the world banking system.

That is all very encouraging. And the economy is still growing by over 3% a year, as unemployment remains at a record low. So where’s the proverbial “but”? And there is one, if not two or three.

Let us start with what interests Shroders, the banking system. Israel has been blessed with several strong and defining Governors of its central bank over the past two decades. None more so than the incumbent, Karnit Flug. Unfortunately, as her first term of office draws to an end, she has been forced to fall on her sword. Having neither the approval of the Minister of Finance nor the Prime Minister (for different reasons), she has asked that her contract not be renewed.

What is the concern? The role of the Governor of a central bank is to be an independent voice, protecting the money supply of a country. This calls for the political echelons to act with responsibility, and not just appoint a ‘silent mirror image of themselves’. Given the behavior of the aforementioned gentlemen, that is unlikely to happen with Flug’s departure. And in that case, if the new person is to be a “yes man” (or woman), a new large question mark will open up against Israel’s ability to raise money on the international markets.

Next is that ever worrying and constantly ignored issue of wealth distribution. With a huge amount of irony considering the religious nature of the country, Israel has the highest ratio in the OECD of salaries in the ninth decile (the 10% of salary earners below the top 10%) to salaries in the bottom decile (the bottom 10%). 

The country scored 7.22. The average for this ratio in the OECD was 3.22. In second place after Israel was the US, with 5.05, following by Costa Rica, with 5. In other words, the rich are getting richer more quickly, as the rest of us fight for the scraps on offer.

In my view, this is unacceptable as well as unsustainable. Further, it gives a much deeper perspective as to why so many government ministers and their associates are being investigated at this time for misuse of public funds and authority. And I deliberately include in that listing the files against the Prime Minister and also his wife.

If there is a message here, it is very clear. Wonderful stats and even a seemingly solid infrastructure takes years to create. However, they can be destroyed far, far more rapidly. They can only be retained and protected through continuous responsible measures. Flug and the OECD have delivered their warnings.