Totem and Taboo 

Ha’aretz on May 15 provided an in-depth account of the IMF’s new report on the Israeli economy. The IMF report covers inflation, growth, Israeli banks, the deficit, security matters, tourism, agriculture. What is missing? The final taboo. 

Reporter Motti Basok informs us that IMF experts say Israeli effective interest rates (6%) are too high. Interesting. We are told how inflation-expectations affect interest rates. The IMF then explains Israeli monetary policy. Ahhh. Then addresses the effects of the “security situation” (i.e., the current ongoing war); and how Israel has weathered the high-tech slump. Hmmm. Then discusses possible currency depreciations. Fascinating. Deficit-GDP ratios; government receipts from taxes; balance of trade deficits; unemployment; the construction industry; the exchange rate; productivity; a new Bank of Israel Law; fiscal policy; public expenditure (53% of GDP); external debt (95% of GDP); defense budget; Maastricht; state infrastructure investment as a means of reducing “inequality” in society; high income-tax rates; minimum wage policy; bond markets (undeveloped); and ad infinitum. Wow…seems comprehensive…but still…what is missing?  

The A word. 

Aid. 

Unilateral transfers of huge unearned sums. Billions of dollars that flow into the coffers of the Israeli government from abroad, mostly from the US, and that create the distortions that characterize the local economy. These billions bloat the public sector. They distort wages. They allow the government to prop up failing and anachronistic industries and favored companies, and fund inefficient state monopolies that compete with and crowd out the private sector. These billions create the real “inequality gap” in Israel – between those who work honestly for a living and those who lord it over those who do work, between people who would be part of a private sector if a real one existed and those who are either employed by the government or who know someone who is who can funnel them never-ending funds to reinforce their unproductivity. These billions forestall any plans to privatize land, to deregulate business, to privatize SOEs. The glare of these billions blinds Israeli leaders, who devote all their energies to gaining more aid rather than reforming their economy, and who spend pointless and infinite hours pursuing foreign policy “processes” that lead nowhere except to more aid, instead of pursuing independence and nationhood, and instead of spending their time dismantling the governmental structure that holds Israel back and prevents the human capital in Israel from turning her into an economic powerhouse.   

Motti Basok goes into great detail in Ha’aretz about the IMF report. One assumes he included in his journalistic report everything that appears in the actual IMF report, presented yesterday to Sharon and Silvan Shalom and David Klein and others. It is of course possible that Basok, or the Ha’aretz editor who ran Basok’s story, left or cut something out. If this is the case, then it is the newspaper and not the IMF that is bound by the final taboo, that is afraid to mention the A word.. Actually, given the glaring nature of what the IMF apparently deleted, Ha’aretz is in any case guilty of not pointing out this glaring deletion and the absurdity of issuing a report that is so misdirected.

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