After raising
in my previous post the possibility of a military breakdown, I'll describe now
another possibility of economic collapse.
In my review
below, I don't include the hi-tech sector. Although often glorified and
mentioned as the crown of the Israeli economy, it is too small to influence the
debate. 100-150 thousand employees can not have an impact on the market forces.
Israel's
economy, following the processes that were reviewed before of inability to
govern and giving up power to aggressive elements, is composed of powerful
groups that managed to take control over some section and they dedicate their
activities ever since to stay in control and prevent any changes. Again, all
means are acceptable.
Recently the
tycoons were put in the focus of the social protests. They are people that
managed to gather companies that were privatized and with ties to the right
people in the administration they prevented competition. The Tycoons, however,
are a small part of the game. There is the banking system, which detached
itself from economic considerations and just milking the citizens and the small
companies by freely manipulating the commissions. Similarly, the insurance
companies and pension funds are milking the citizen with commissions and
management fees. They forget that their purpose is to achieve good return on their
clients' investment. The security and military system was described in the
previous post - it is today an economic power in its own right, cares primarily
to enrich its coffers. The Railway and the Electric Companies are known as "holding
the plug", but they are not much different from other institutions that are
controlled by strong unions - ports, education, and virtually all government
systems.
Bank of Israel
report has recently revealed the enormous salaries and pension benefits that
the permanent employees receive from the banks (it is true, by the way, also to
the employees of the Bank of Israel itself). I have no problem with strong
unions that achieve good wages for the workers. The problem is that these
unions set free their workers from the need to efficiently carry out their
duties. The common perception shared by all the groups in control - tycoons, capital
holders, government systems and strong unions, is: we control now a stream of
cash flowing into our pockets, so let's avoid any change. Thus, the economy system
cannot be innovated and made efficient and the gap between the wealth of the
few who managed to take over a share of the economy systems and the level of
services they provide to the citizens is growing.
Much has been said
about the vast gap between the wealthy Israel and the middle class and the
poor. This gap only grows deeper. About a year ago a protest movement of young
people was set off. They understood that in the existing rules of the game,
they are doomed to a life of slavery. Committees were set up and proposals were
thrown into the air, but no significant change happened. Once, the commotion has
settled down, experts began to reveal how limited the options for changes are in
the Israeli economic system:
• Entering
competition to the capital market and the banks may harm the stability of the
financial system. In the economic crisis of 2008, banks in Israel were hardly
touched when many other world banks collapsed. Even though the reason for this
is that the banks in Israel do not need to take any risks since they can milk
freely their customers, but still stable capital market is more important to
the Governor of the Bank and to the Treasury. Actually, it is very important to
the customers too. If a bank collapse, they lose their savings.
• Shaking the tycoons
pyramids, may lead to narrowing the labor market. Better to benefit the major
companies with tax exempts than causing an increase in unemployment. It was
recently posted that huge companies like Teva, Amdocs and Intel, paying almost
no taxes.
• A solution
to the problem of the big unions is not in sight and the government long ago gave
up. For decades they were trying to reform the electricity company and yet
there seems to be no way to reduce the power of the unions. In the railways,
ports and banks they have not even started to plan a reform.
The treasury
remains, then, with two options of how to finance the increasing welfare of the
citizens: raise taxes and increase the deficit. Since the global economy will
not allow us to increase the deficit for long time, you can increase it
temporarily (as does now the government before the elections) and reduce it by
raising taxes later.
It turns out, then, that the citizens that bear the
burden of taxes, will finance all the improvements in welfare - in fact we did
nothing.
It was shown,
therefore, in a little simplistic way, how the conflict is unresolved between
the desire to improve the "social justice" and the inability of the
government to change the distorted structure of the economy.
It is difficult
to predict, how many years would the middle classes agree (the poor generally
occupied only by their fight to survive) to carry on their backs, that is already
bent down to earth under the burden, the rich and the power groups.
The power of
the groups in control - tycoons, banks, insurance companies, security system
and the unions is too strong for the weak government to change anything. On top
of that join the religious leaders. Since they have managed to impose their nationalist-religious
agenda, they are not interested in changing the status quo. Even most of the
media resist fundamental change. The main source of income for them comes from advertising
those companies owned by the power groups.
When the
middle class people decide one day that they can no longer live a life of
slavery and deliver all their income to the power groups and when they see that
a neat and disciplined protest does not bring any relief, a civil disobedience will
break here and possibly a violent protest. The changes that they will bring,
can easily destroy the economy of Israel and make it insolvent. This
situation will lead to an explosion of the bubble called the "Jewish State."
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