The international media, of course, is focusing on the implications of the election for the Israeli-Palestinian conflict, but there is bad news for those of us who believe that Israel’s inept and corrupt version of social democracy has been stifling economic growth there for years. The new “Pensioners Party” won 7 out of the 120 seats. I don’t know much about this party, but I’ve seen it described as “socialist.” Even if it’s not, the last thing Israel needs is a domestic equivalent of the AARP holding decisive votes in the Knesset. Meanwhile, the Labor Party, led by former union leader Amir Peretz, did better than expected with 20 seats, running largely on a “social justice” (i.e., big government) platform. The religious Separdic Shas Party, which made increased transfer payments from the government its major issue, won 13 seats. The Likud Party, meanwhile, garnered only around 11 seats, in part, analysts seem to agree, because voters chose to punish party leader Benjamin Netanyahu, who as finance minister pushed through free-market economic reforms and budget cuts that rescued the Israeli economy from a nasty Intifada and tech-collapse induced recession.
Israel has among the highest tax burdens and government spending of any “capitalist” nation in the world (even putting aside the defense burden), yet the education system stinks (Israeli kids must have the shortest school day in the developed world!), the infrastructure is awful, and corruption with regard to government contracts, permits, et al., is rampant. The average Israeli voter, though, has a solution to this mess (and I’ve heard it over and over again from Israelis): More government. Israelis elites, both left and right, have tried with some success to bring Israel out of its statist stupor, but the public has finally rebelled; large segments of the public want that old time Socialist religion, and that, apparently, is what they are going to get.
UPDATE: In my view, Israel’s economic situation is an important Israeli national security issue. To understand why, just wander around New York, Miami, Los Angeles, Rockville, Maryland, and even Ann Arbor, and notice all the smart, ambitious, and often technology-savvy Israelis who have chosen to make their homes in the U.S. The drain of human capital is enormous, and while not all of it is attributable to the relatively sorry state of Israel’s economy, a good part of it is.