The economics of Israel’s general election
It is an accepted fact that Israeli general elections are determined by who is seen as the best person to lead the country safely and courageously through a war, if so needed.
You can talk about the corruption charges launched at Prime Minister Netanyahu. You can argue that his main rival and former Chief of Staff, Benny Gantz, is a political novice. etc etc. These factors pale into insignificance. What counts – what matters – is the perception of future physical safety andwho can be seen to deliver on that.
The lead economics’ editor in the Ha’aretz newspaper – a journal that despises Netanyahu – believes that the man should be thrown out by the nation. He is corrupt, and that corruption is ruining the country, financially and socially and morally.
I was more interested in the economic presentation by Sever Plocker in the Yediot Ahronot paper. As he surmised, for much of the past two decades, when Netanyahu has been Finance Minister or Prime Minister for most of the period, the economy has soared along at around 3.5% annually, barring 2009 and a small matter of a global credit meltdown.
In her 2017, Dr Karnit Flug, then Governor of the Bank of Israel, observed in her annual report that there was too much reliance of revenue flows that may not come through, especially at a time when expenditure was set to rise. By November 2018, the lady was out of a job.
Was the warning warranted? As Plocker points out, the budget gap of 2018 is 3.8%, double that of 2016. It is one of the highest in the OECD. And 2019 is likely to see the difference widen.
In other words, whilst the economy may seem to be in good hands and unemployment is set at 4%, the grey clouds are building up. After the elections, “the government will have to trim the rise in spending and raise tax revenue”. Plocker wonders why Dr. Flug will not be offered an apology.
Plocker continues by pointing out that not only have housing prices not really fallen. It seems that they will rise again as the impact is felt of the lack of little new housing being built. Ouch again, and so on.
What has the economy of 2019 and 2020 got to offer Israelis, on the back of a decade of Netanyahu in government? As the Netanyahu approved new Governor assesses:
In order to maintain the economy’s robustness, the government will have to make fiscal adjustments, a mix of greater efficiency, trimming the rise in spending, and a rise in revenues from taxes.
That does not sound very nice, thank you very much! That can only be the fault of the present government.
The Globes financial newspaper surmised:
The challenges facing the next government are greater integration of Arab women and haredi men into the workforce…. Another challenge is the low efficiency of Israeli bureaucracy. The Bank of Israel recommends that the government should set qualitative and quantitative goals for government workers in the framework of new labor agreements.
Netanyahu has made arguably racist comments about Arabs. He is so tied to the haredi parties that he will help them keep their constituency off the streets. And his claims about reducing bureaucracy – a pet theme of his – remains just a pet theme.
So who to vote for, if it is the economic issues that determine how people will decide? Well, we now have a better understanding as to who not to back.