(March 21, 2019 / JNS) Daniel Doron is an important economic personality in Israel, developing free market reforms behind the scenes, such as the financial markets reform in 2005 that broke the duopoly of the major banks Leumi and Hapoalim.
The reform introduced competition that resulted in five years of 5 percent growth and increased total Israeli savings from NIS 1.2 trillion to NIS 2.7 trillion, says Doron, now in his 80s, but who hasn’t lost a step. He still talks with senior Israeli political and economic officials on a regular basis.
“Israel has arguably the best human capital in the world and has attracted $350 billion of foreign investment, and potentially could be one of the wealthiest countries in the world, but it’s not,” he says.
“Every morning, I wake up and read the economic news, and get depressed. Another wasteful and inefficient government project, substandard education, half of the money made is based on the public sector, unions protecting bad workers or teachers, and so on,” he laments.
Since 1973, Doron has been involved in political and economic reform in the country. In 1983, he founded and still directs the independent think tank, The Israel Center for Social and Economic Progress, which has a video of Israeli Prime Minister Benjamin Netanyahu on its homepage praising the free market policies that the institute promotes.
The center’s agenda sees eye-to-eye with Netanyahu’s wish to liberalize the economy from problems rooted in its Socialist-rooted system. However, Netanyahu has been restrained in his goal because of the political opposition, entrenched interests and other priorities. In addition, he is spending much of his time fending off personal attacks and allegations of corruption.
“The Bolshevik ideology that was the foundation for the notorious Mapai [Workers’ Party of the Land of Israel] system politicized all areas of life and required huge bureaucracies to implement its policies. These bureaucracies are based on nepotism and connections,” explains Doron.
Core mission: To improve Israel’s economic situation
Doron just completed a book on the history of Zionism since 1906 and describes how Israel’s first prime minister David Ben-Gurion and second president of Israel Yitzhak Ben-Zvi, in addition to 24 other young pioneers, “wanted to establish a Communist underground to take over the Zionist project, and they basically succeeded in doing so by establishing the notorious Mapai system that survived even the takeover of the government by the Likud.”
Doron asserts that former Likud Party Prime Minister Menachem Begin “didn’t understand economics, and did nothing to free the Israeli economy from the Mapai system and its operatives.”
Asked about the next reforms needed to free up the Israeli economy, decrease regulation and taxes, and increase efficiency, the Israeli economist rattles off a list of various problems and necessary reforms. But he adds that the current focus is on lowering import tariffs in order to make food stuffs and clothing cheaper for Israeli consumers. “The tariffs on clothing and food should be cut; this would result in lowering the inflated prices held up by the monopolies,” he says.
Doron gets passionate when speaking about the core of his mission—to improve the Israel’s economic situation, where the country is sharply divided between the “haves” and the “have nots,” lamenting the dismally low salaries of many Israelis, especially the young. This phenomenon generates waves of Israelis leaving abroad to seek work because they simply cannot make ends meet.
While the real estate market in general does reflect the health of a nation’s economy, it also winds up increasing housing rates, making it pricier for young families to purchase a home.
High-tech saddled by bureaucracy
It also brings the discussion to the flourishing high-tech scene, which also presents some obstacles to Israeli productivity and development.
Doron says this is a distinct field because most of the investments are from abroad, with the products usually sold abroad as well. “This constitutes around 20 percent of Israel’s GDP and most of the country is not involved in the sector, especially in the periphery, outside of the main cities in the center of the country,” he notes.
In fact, Doron warns that the high-tech industry in Israel is “threatened by the encroachment of bureaucracy, and many obstacles that could be put in its way.”
The private sector is still run to some extent like in the old Socialist days where many get their jobs based on who they know, and not their skill sets, says Doron.
As he quips, “Did you know that Israelis don’t know how to build a big business? You always hear in the news about the latest ‘exit,’ where an Israeli startup is bought by a large Western company for millions of dollars,” he points out.
“Jews in Israel are great inventors, but their basic belief is that capitalism is based on exploitation,” he asserts. “Israelis believe that every transaction is zero-sum game, and no cooperation is needed or trust for a healthy economy.”