INTRODUCTION
Alvin Rabushka
Scorecard on the Israeli
Economy: A Review of 1998 is the tenth annual volume
in the series. During the previous nine
years, I tried, as author, to highlight the main policy changes and important economic
events of the year. I presented what I
saw as the underlying themes of Israeli economic policy, especially the
country’s heavy dependence on “free money,” which exceeds $10 billion a year
and long ago surpassed a hundred billion dollars in foreign aid, loans, bonds,
grants, reparations, and unilateral transfers.
“Free money” is the financial glue that holds together one of the few
remaining socialist economies on earth.
This year, the Scorecard
has a new look. The Institute for
Advanced Strategic and Political Studies has turned to its Knesset Interns, its
well-informed, highly-qualified staff, and one of its trustees for their
reviews of specific economic policy measures that they have researched in
recent years. I want to call special
attention to Zev Golan’s masterful survey of Prime Minister Benjamin
Netanyahu’s government, whose steadfast perpetuation of socialism betrayed its
capitalist rhetoric, thus earning itself a failing grade. Other topics include the lack of progress in
breaking up the cement monopoly and the auto insurance cartel, and failing to
reform the destructive property tax.
David Yerushalmi has put the finishing touches on the debacle
surrounding the unlawful bureaucratic destruction of Israel’s first real
free-market reform, the Free Processing Zones Law. Finally, Yossi Laster, associate editor of the Institute’s Policy Studies,
describes the lack of professionalism in the Knesset, whose members voted to
spend more than a billion shekels of hard-earned taxpayers’ funds on nursery
schools and public housing without any research, statistical data, or economic
analysis.
Every year, at Passover, we
ask “Why is this night different from all other nights.” You already know why
Israel is different from all other countries! It’s because it gets much of its
livelihood from others. This past year
was consumed, as in recent years, by the peace process, with the Wye River
Accord being the latest in a line of signed agreements. Buried at the end of the Wye River Accord was
President Clinton’s promise to ask the Congress for an additional $1.2 billion
in U.S. aid for Israel and $400 million
for the Palestinians, which he did in his January 19, 1999, State of the Union
message, and organize international conferences for still further aid. The European Union chimed in with a pledge
of $480 million, some for Israel, some for the Palestinians.
Picture someone throwing
bushels of hundred dollar bills from a window on Fifth Avenue in New York
during the noontime rush. As
pedestrians scramble for bank notes, biting, scratching, kicking, clawing,
punching, and stepping on one another, we have a picture of Israeli “free
money” politics.
Alvin Rabushka is director
of the Division for Economic Policy Research at the Institute for Advanced
Strategic and Political Studies and senior fellow at the Hoover Institution of
Stanford University.