At the recent Merage Foundation conference to help Israel’s hi-tech sector grow, calls were heard for more government “direction”.
This despite sixty years of massive government intervention and “development efforts” that have led mostly to massive failures and waste.
Filed under:
public policy
A recent Merage Foundation conference gathered some major industry and academic players with the goal of helping Israel’s hi-tech sector grow and enhancing “its contribution to increased economic opportunity for all Israelis.” The participants offered many important insights, but they mostly proposed improving government policies to help better hi-tech performance and the MBA programs that underpin it.
But an examination of the government’s record raises serious doubts about its ability to help. Of the government’s approximately NIS 300-billion budget, about a third is committed to paying off debt, another third to salaries and pensions and what remains to defense, education, health care and transfer payments.
This leaves government few free resources, especially since its existing programs and handouts are vigorously defended by powerful vested interests. But even if government had the means, and knew how to help, its track record does not augur well.
Since the conference also wanted to enable “Israel to compete successfully in an increasingly global market place,” perhaps a better approach would have been to focus on policy reforms that enhance competitiveness.
INFLATED COSTS make Israeli firms less able to compete internationally. The conference could have studied which costly government regulations could be dispensed with and also targeted the breakup of cost-inflating practices – especially in financial markets, where accessibility to credit is still a major problem for small and medium businesses, the engines of growth.
The participants could have used their business and organizational savvy to delineate a smaller, more efficient government that encourages economic growth rather than hinders it. They could have proposed tax reforms that would free resources for productive private investment.
The conference could have contributed to the effort to break up land, building material and construction monopolies that double the cost of construction in Israel. It could have pushed for deregulation which would enable small businesses to thrive rather than choke. It could have recommended the removal of trade barriers that make consumer goods and the cost of doing business so high.
Competitiveness could profit from lowering the inflated costs of water, electricity, credit, education and health. Lower costs would also help the poor more than income redistribution. Education could be bettered by the breakup of the degenerating government’s educational monopoly, and by the introduction of economic considerations and competition.
Instead, two decades after the notion of industrial policy had been discredited, calls were heard for more government “direction,” as if government could “assist” hi-tech by reducing risk.
YET RISK and its management are a vital component of healthy growth. Risk-adverse government bureaucrats do not deal best with risk. Only diffused private investment that enhances competition, accountability and better decision-making can help spread risk. Open financial markets also provide better access to capital for smaller firms.
Moreover, all government directions and subsidies result in state employees picking favorites and discriminating against those with less political pull.
Sixty years of massive government intervention and “development efforts” have led mostly to massive failures and waste. Yet, mysteriously, policy makers still insist on increased government spending and budget deficits, and on shifting resources to the less efficient public sector. In hi-tech specifically it is hard to find credible studies showing that government “encouragement” ever played a consistent positive role.
THE CONFERENCE’S concern with policies that could correct putative imbalances in growth was also problematic. Can anyone really define what balanced growth is? Even if we seem to discern imbalances during certain periods, does this mean that we understand them accurately or know how to correct them? The conference’s Overall Mission goal demanding that hi-tech “contribute to increased economic opportunity for all Israelis,” namely, “reduce current income disparities” was also questionable.
It is almost impossible to define what equality really is, unless one thinks of the long-discredited goal of strict equality in wages. Nor is it clear why hi-tech is particularly suited to attaining such a goal. Why would hi-tech people be more qualified to address the complex problems of poverty? Is not running a complex business profitably hard enough, and does it not contribute sufficiently to the general welfare?
Despite all the fashionable talk about the putative “social responsibility” of business, it is not clear at all how narrowing income disparities, rather than enhancing productivity, helps the poor; by reducing envy, perhaps?
TO HELP hi-tech, rather than promote the lost cause of better government “direction” we need to launch reforms that enhance competitiveness and reduce costs. We must also refrain from trying to solve the thorny problem of poverty by trendy but questionable means.
In the past, socialist policies that mutated into statist control of the economy made our industries non-competitive and unproductive, so that despite over $300 billion in foreign aid, our economy cannot provide most of our talented workforce more than a measly NIS 7,000 a month, making so many families unable to make ends meet. Our distributive system is also the reason our political system is so torn by constant strife over the division of government handouts, as well as explaining why growth has been stymied.
So let us give markets a chance to deliver the prosperity they have delivered everywhere, and let us promote more freedom from government rather than more or better government direction and aid.
Log in or Register
How to grow Israeli hi-tech
The Jerusalem Post
14 Aug ’07
At the recent Merage Foundation conference to help Israel’s hi-tech sector grow, calls were heard for more government “direction”.
This despite sixty years of massive government intervention and “development efforts” that have led mostly to massive failures and waste.
Filed under:
public policy
A recent Merage Foundation conference gathered some major industry and academic players with the goal of helping Israel’s hi-tech sector grow and enhancing “its contribution to increased economic opportunity for all Israelis.” The participants offered many important insights, but they mostly proposed improving government policies to help better hi-tech performance and the MBA programs that underpin it.
But an examination of the government’s record raises serious doubts about its ability to help. Of the government’s approximately NIS 300-billion budget, about a third is committed to paying off debt, another third to salaries and pensions and what remains to defense, education, health care and transfer payments.
This leaves government few free resources, especially since its existing programs and handouts are vigorously defended by powerful vested interests. But even if government had the means, and knew how to help, its track record does not augur well.
Since the conference also wanted to enable “Israel to compete successfully in an increasingly global market place,” perhaps a better approach would have been to focus on policy reforms that enhance competitiveness.
INFLATED COSTS make Israeli firms less able to compete internationally. The conference could have studied which costly government regulations could be dispensed with and also targeted the breakup of cost-inflating practices – especially in financial markets, where accessibility to credit is still a major problem for small and medium businesses, the engines of growth.
The participants could have used their business and organizational savvy to delineate a smaller, more efficient government that encourages economic growth rather than hinders it. They could have proposed tax reforms that would free resources for productive private investment.
The conference could have contributed to the effort to break up land, building material and construction monopolies that double the cost of construction in Israel. It could have pushed for deregulation which would enable small businesses to thrive rather than choke. It could have recommended the removal of trade barriers that make consumer goods and the cost of doing business so high.
Competitiveness could profit from lowering the inflated costs of water, electricity, credit, education and health. Lower costs would also help the poor more than income redistribution. Education could be bettered by the breakup of the degenerating government’s educational monopoly, and by the introduction of economic considerations and competition.
Instead, two decades after the notion of industrial policy had been discredited, calls were heard for more government “direction,” as if government could “assist” hi-tech by reducing risk.
YET RISK and its management are a vital component of healthy growth. Risk-adverse government bureaucrats do not deal best with risk. Only diffused private investment that enhances competition, accountability and better decision-making can help spread risk. Open financial markets also provide better access to capital for smaller firms.
Moreover, all government directions and subsidies result in state employees picking favorites and discriminating against those with less political pull.
Sixty years of massive government intervention and “development efforts” have led mostly to massive failures and waste. Yet, mysteriously, policy makers still insist on increased government spending and budget deficits, and on shifting resources to the less efficient public sector. In hi-tech specifically it is hard to find credible studies showing that government “encouragement” ever played a consistent positive role.
THE CONFERENCE’S concern with policies that could correct putative imbalances in growth was also problematic. Can anyone really define what balanced growth is? Even if we seem to discern imbalances during certain periods, does this mean that we understand them accurately or know how to correct them? The conference’s Overall Mission goal demanding that hi-tech “contribute to increased economic opportunity for all Israelis,” namely, “reduce current income disparities” was also questionable.
It is almost impossible to define what equality really is, unless one thinks of the long-discredited goal of strict equality in wages. Nor is it clear why hi-tech is particularly suited to attaining such a goal. Why would hi-tech people be more qualified to address the complex problems of poverty? Is not running a complex business profitably hard enough, and does it not contribute sufficiently to the general welfare?
Despite all the fashionable talk about the putative “social responsibility” of business, it is not clear at all how narrowing income disparities, rather than enhancing productivity, helps the poor; by reducing envy, perhaps?
TO HELP hi-tech, rather than promote the lost cause of better government “direction” we need to launch reforms that enhance competitiveness and reduce costs. We must also refrain from trying to solve the thorny problem of poverty by trendy but questionable means.
In the past, socialist policies that mutated into statist control of the economy made our industries non-competitive and unproductive, so that despite over $300 billion in foreign aid, our economy cannot provide most of our talented workforce more than a measly NIS 7,000 a month, making so many families unable to make ends meet. Our distributive system is also the reason our political system is so torn by constant strife over the division of government handouts, as well as explaining why growth has been stymied.
So let us give markets a chance to deliver the prosperity they have delivered everywhere, and let us promote more freedom from government rather than more or better government direction and aid.
More recent commentary
The New Republic
19 May ’11
Economic Miracle
A Middle East peace strategy that could actually work.
The Jerusalem Post
15 Mar ’11
The government-tycoons-media triangle
Israel needs to slash its state budget by as much as possible if it wants a chance at fighting waste and corruption.
The Jerusalem Post
9 Mar ’11
Welfare and rebellion: The economic factor in the Arab uprisings
Too little attention has been paid to how Egypt’s socialist past and welfare-state present shaped the current rebellion.
The Jerusalem Post
7 Feb ’11
Is all quiet on the economic front?
The Herzliya Conference has become an important international event, but one central issue is absent: Israel’s debilitating economic concentration.
The Jerusalem Post
22 Jan ’11
Teaching an elephant to dance
It’s highly unlikely that government can ever learn to make long-term plans and execute them efficiently.
The Jerusalem Post
23 Dec ’10
Hellenization and Enlightenment: Post-Hanukka ruminations
How can one dare compare narrow-minded religion with the all-embracing faith of universality and equality that is socialism?
The Jerusalem Post
1 Dec ’10
Would Milton Friedman have approved?
Many of the social and economic troubles we are experiencing are due to the public’s lack of understanding of the need for economic literacy.
The Jerusalem Post
17 Oct ’10
Perverting public discourse
The PM’s courageous decision to tackle economic concentration was misrepresented by several of our media publications—owned of course by tycoons.
The Wall Street Journal
8 Oct ’10
Breaking Israel’s monopolies
Economic concentration hurts the country’s viability and the chances for peace.
The Jerusalem Post
4 Oct ’10
Israel’s progress undermined
A damaging ethos of ‘welfarism’ and distributive politics has come to dominate not only academia but our cultural, military and even our business elites.
The Jerusalem Post
19 Aug ’10
Unable to decide
The reformers must know the importance of the reform’s success both for Israel and for their careers, and what damage they will incur if it fails.
The Jerusalem Post
13 Jul ’10
Elana Kagan, terrorism and the law
Kagan’s admiration for Justice Aharon Barak’s philosophy may have revealed her own predilection for radical judicial activism.
The Jerusalem Post
30 May ’10
Yes, break them up
We must dismantle the oligarch-owned monopolies that impoverish the Israeli consumer and choke our economy.
The Wall Street Journal
18 May ’10
Land of silicon and money
The OECD’s invitation to Israel is a “seal of approval” but the country still needs more reforms.
The Jerusalem Post
10 Feb ’10
The surprise of it all
The world’s astonishment at Israel’s response to the Haiti disaster is insulting. What we saw there was Israel’s true face.
The Jerusalem Post
10 Jan ’10
Hi-tech prospects and pitfalls
Individual initiative and freedom are essential for creativity—in hi-tech as in all other spheres.
The Jerusalem Post
14 Oct ’09
A woman who knew her worth
As far as Rose Friedman was concerned, public kudos did not matter that much. She persisted in being a rose, no matter what.
The Jerusalem Post
22 Sep ’09
Movies in Nablus, dramas in Bethlehem
Lasting peace must grow from the bottom up, from an “economic peace process” that proves what advantages peace has to offer on a daily basis. It cannot come from signing peace agreements with radical and corrupt entities propped up by corrupting Western handouts.
The Jerusalem Post
15 Aug ’09
Israel’s ‘scrambled’ economic system
A courageous recent film has exposes the strong connection between Israeli oligarchs and bureaucrats. Unfortunately however the film’s simplistic pseudo-Marxist treatment is more misleading than revealing.
The Jerusalem Post
24 May ’09
The economy: look to the future
Netanyahu paid heavily to pass a budget in time; his “partners”’ bargaining tactics, bordering on blackmail, reflect poorly on our politics.
The Jerusalem Post
4 May ’09
Reform: prospects and pitfalls
Binyamin Netanyahu’s recent economic plan has great promise but faces obstacles—such as the media and the Histadrut—that may undermine its success.
The Jerusalem Post
11 Apr ’09
Big government? Yes, but there’s a reason
Is Binyamin Netanyahu’s government too big? Yes. So why would Netanyahu create such an unwieldy beast?
The Jerusalem Post
30 Mar ’09
To bail or not to bail
Should the government bail out those of our tycoons who cannot redeem NIS 100 billion worth of bonds?
The Wall Street Journal
12 Mar ’09
Mideast peace can start with economic growth
Billions of dollars in foreign aid to the Palestinians has resulted in war not peace. There’s a better way.
The Jerusalem Post
22 Feb ’09
Warning cries from Herzliya
The government is dysfunctional. The question is why—and how to mend it.
The Jerusalem Post
2 Feb ’09
A lesser economic evil
All government deficit spending is bad. But sometimes deficits are unavoidable. And some deficits are better then others.
The Jerusalem Post
22 Dec ’08
Spinners and cheaters
Why not exploit the crisis to destroy what little freedom Netanyahu’s reforms brought to the economy? Why care if the country will lose its only hope of deliverance from the economic retardation caused by our statist heritage?
The Jerusalem Post
3 Dec ’08
Precipitating the next collapse
Focusing on a putative pension crisis distracts our attention from the real serious crisis that a worldwide recession is bound to create here.
The Jerusalem Post
22 Oct ’08
The panic-mongers’ one-note chorus
The country, the pundits conclude, must return to the good old days of “social democracy.”
The Jerusalem Post
15 Jul ’08
The banks are bamboozling us again
In the name of stability the comptroller has ignored many of the banks’ offenses.
The Jerusalem Post
29 Apr ’08
An Irish-style banana republic
It must be either naiveté or cynicism that allows “Israel 2028” to recommend a reform that will make government a larger and a more efficient instrument for economic growth.
The New York Sun
29 Apr ’08
Israel still doesn’t get economy
Israel’s elites—especially the chattering classes in the press and the academy—are hostile to capitalism because our universities’ social sciences and liberal arts departments are dominated by post-modernist and neo-Marxist professors.
Ideas matter. Hostility to capitalism exacts a great price from the Israeli economy and from its hapless workers.
inFocus
2 Apr ’08
US charity to Israel reconsidered
Jewish institutional efforts must now undergo a period of reform and greater accountability. Some charitable efforts should be privatized. Individuals or groups of donors must take personal responsibility for specific projects, to ensure that funds are dispensed in a responsible and cost effective manner.
The Wall Street Journal
8 Mar ’08
Israel’s no-win strategy
Israeli politicians are preoccupied with political machinations designed to buy support from powerful interest groups by distributing government largesse. This causes not only the factionalization of politics and growing corruption, but consumes time and energy that leadership should use to address life and death issues.
The Jerusalem Post
20 Feb ’08
Dangerous infatuation
Government can no more control powerful economic forces than it can the rise and fall of tides. To effectively fulfill its nightwatchman role—to protect us from internal and external violence and to enforce contracts—government must be kept limited.
The Jerusalem Post
22 Jan ’08
What’s ‘public’ about their broadcasting?
Our “public channel,” funded by a compulsive tax, does not need to be pluralistic or even-handed.
Like other public institutions that lack well-defined ownership, Channel 1 has consequently been taken over by bureaucrats and by undemocratic workers’ unions.
The Jerusalem Post
21 Nov ’07
A year without Milton Friedman
This man did more good for humanity than any other.
The Jerusalem Post
17 Oct ’07
Getting beyond the teachers’ strike
As long as education remains a government monopoly, it is bound to function like all other government monopolies, where union bosses fill the vacuum that lack of defined ownership creates, and monopoly power allows them to blackmail the public.
The Jerusalem Post
19 Sep ’07
A healthy dose of skepticism
In the wake of the Second Lebanon War, there is hope that the phenomenal performance of the economy will finally make Israelis realize the crucial role it plays in their lives.
The Jerusalem Post
18 Jul ’07
A president of visions
President Shimon Peres, we all know, is a man of visions. Some have been better than others. The less successful ones, that translated into costly, failing and even dangerous policies, were those that denied reality.