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Wednesday, August 03, 2011

I vote for a free market

YNet reports on Binyamin Netanyahu's reaction to the "tent protests."
"Populism is sweeping through the country. There is a serious expression of plight and not-so-serious suggestions for solutions," Netanyahu said.

Netanyahu said that while Israel enjoys great successes in some field, it also suffers from plights that must be addressed. However, "anyone can benefit from the economy," he said.

He stressed the solutions must be devised responsibly, "In a socially and economically founded and solid manner," which would maintain a free market.

Netanyahu mentioned European countries as a model for what should not be done, economy-wise. "If what happened in Europe happens to us, the consequences in our case will be direr in our case," he said.

The prime minister spoke at length about the importance of a competitive market, comparing it to a tree: "The tree bears fruit which are ripe for the picking, but if after three years of picking you haven't tendered to the tree, it will wither and give less and less fruit. We cannot cut down the tree if we want to enjoy its fruits," he said.

The prime minister added that his government had reduced unemployment, invested in higher education while Europe was imposing budget cuts in the field, and "made sure the periphery is connected to the center".

He added that the cries on the street were real, as Israel is currently ranked number 40 in global individual income while ranking number 20 in cost of living.

Netanyahu explained that the discrepancy is being caused by a lack of competition in markets. He added that indirect taxation is an important issue he plans to address.
Forgetting politics, all of this makes sense to me. I am no economist but it sure appears that Israel's economy has prospered in the past decade precisely because it has been abandoning socialist economic concepts and embraced the free market. While I am sympathetic to those who cannot afford housing, a free market would say that they should move to a more affordable area. The inconvenience is more than outweighed by the benefit to the entire nation. Governments do not always do a great job at regulating prices.

Housing is expensive because it is scarce. It appears to be scarce because of the ridiculous amounts of red tape one must go through before building. The root cause must be addressed, which will take time, but a quick fix would almost certainly cause more problems than solutions.

Obviously social programs need to exist - I am not advocating a perfectly free economy, and that model would fail as well. A safety net needs to exist for those who would otherwise be homeless. But given a choice, a free market is the direction to go. Now is probably a good time to investigate and invest in areas around Tel Aviv that are affordable, as those prices will go up.

Given Israel's socialist history, I can see the romantic appeal of socialism as hearkening back to "the good old days." However, I am not so sure that nostalgia is accurate.

Tzipi Livni's response to Netanyahu was pure politics:

In response to Netanyahu's statements, Opposition Leader Tzipi Livni turned to Netanyahu saying: "They are populists? You're a populist. The government is one big political lie. The seeds of mistrust sprouted from every seat Netanyahu gave out."

According to Livni, "The government is deceased even if the obituary has yet to be published. The public understands that this government represents everything that is ugly from day one, its ministers and deputy ministers are redundant.

"Sowing fear of external threats, muzzling, an impervious government - for all these reasons we went out to the streets with one message and different reasons, for social justice and against Benjamin Netanyahu."
I cannot imagine that this screed enamored her to the protesters at all, even though most aren't fond of Bibi.

There seems to be no doubt that the protests are ready-made for the hard left, who are already pushing socialism both politically and economically. I'm not following the story so closely, but there is evidence that they are trying to hijack the protests for their own political purposes. This doesn't mean that the protests are necessarily illegitimate, but it should give one pause before believing that this is completely a people-driven revolution. As the Knesset debate shows, no one is above politicizing everything.

More details on the Knesset debate - and the transparent attempts to politicize them - at JPost.