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[David Bernstein, March 28, 2006 at 9:01pm] Trackbacks

Bad News from Israel's Elections--The Revival of Israeli Socialism:

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.

Related Posts (on one page):

For an Ethnic Group That Likes To Think of Itself as Smart,
The Return of Israeli Socialism?
Bad News from Israel's Elections--The Revival of Israeli Socialism:

Comments

[Ilya Somin (guest-blogging), March 28, 2006 at 10:14pm] Trackbacks

The Return of Israeli Socialism?

I largely agree with co-blogger David Bernstein that today's Israeli elections were a setback for free markets. However, the magnitude of the setback may not be as great as David and others suggest. Yes, the relatively pro-free market Likud lost seats, while various socialistic parties did better than expected. However, much of the former Likud vote went to Avigdor Lieberman's right-wing Yisrael Beitenu Party (which won 12 Knesset seats compared to Likud's 11), and Lieberman is a strong supporter of free market "Thatcherism."

Overall, Jewish parties to the economic right of Prime Minister Ehud Olmert's centrist Kadima Party (28 seats), won 32 seats (12 YB, 11 Likud, 9 NU/NRP), while those to the left won 31 (20 Labor, 7 Pensioners, 4 Meretz). It is true that the Shas Party's (13 seats) main goal is to increase transfer payments to its constituency (highly religious Sephardic Jews), but they do not usually take strong positions on broader social and economic policy issues, and have in the past joined coalition governments that promoted privatization. Obviously election results do not perfectly reflect voters' policy preferences, and many voters are in fact ignorant of the details of party platforms. But, in and of themselves, I'm not sure these results really do reflect a tidal wave of Israeli sentiment for socialism, though they certainly don't bode well for free markets.

Much will depend on which other parties Olmert decides to invite into his coalition government. He needs 61 seats to form a government, which means that he will have to round up enough coalition partners to add at least 33 seats to Kadima's 28.

UPDATE: I may have been too quick to describe the NU/NRP party as "to the right" of Kadima on economic policy. Their platform, available in English here, places little emphasis on economic issues, but supports mostly statist policies (complete with left-wing code words such as "social justice" and "exploitation") where it does mention them. It's not clear whether NU/NRP's policies on these issues are much different from Kadima's and it is still possible that NU/NRP would support a less statist policy than Kadima would in the highly unlikely event that they get to join a coalition government. But they are certainly not pro-free market in the way that Likud and YB are.