While I was studying at Ben-Gurion University of the Negev in Beersheva in the early 2000s, I once discussed the Israeli economy with Avi Bareli, a professor of mine. I commenced a lengthy oration on the virtues of the unfettered free market. Bareli listened for longer than I would have in his place, and then said, “You know, there are a lot of people in Israel whose economic situation is not good.” Leaning forward, he added in English, “that is your burden.”
George Orwell once said: “To see what is in front of one’s nose needs a constant struggle.”
Bareli’s comment prompted me to engage in that struggle. And I did see. I saw Israel’s prosperous high-tech sector. But I also saw poverty, inequality, homeless in the streets, cities divided between rich and poor, chronically low salaries, a skyrocketing cost of living and a housing market that shuts out all but the wealthy.
Bareli, in other words, was right. And I was wrong.
I recalled this conversation when I read American conservative activist Ben Shapiro’s July 20 speech at the International Conservatism Event in Tel Aviv. There was much in the speech I agreed with, but when Shapiro came to comment on the Israeli economy, I felt very strongly that he did not see what was in front of his nose.
Shapiro, not one to mince words, called Israel’s economic system “a dumpster fire.” He asserted that the “first thing that Israel can learn from America” is “free-market economics work. They work to strengthen the living standards of your people.”
“America’s dynamism is the result of a tax structure that benefits investment,” he asserted, “the reverse is true in Israel.” He presented various numbers in support of this, in particular, “in Israel, the top individual income tax rate is 50%; in America, it’s 37%.” He concluded that “there is a reason so many people from Israel leave Israel to do business in the United States.”
It is only fair to acknowledge that Shapiro’s argument has some merits. It is true, as I can testify, that Israel’s tax burden is heavy, and it likely does retard Israel’s capacity for economic growth to some extent.
Nonetheless, I believe that Shapiro is fundamentally wrong, and his recommendation that Israel adopt the American free-market model potentially disastrous.
First, it is worth asking whether the American free-market system works as well as Shapiro claims it does. It seems to me that, like all systems designed by human beings, it both works and doesn’t work. It is certainly an engine for generating enormous wealth and considerable abundance. But it also creates massive inequality and abysses of poverty to which, I am sad to say, Americans have become accustomed.
Israel has already experienced this to a certain extent. Most agree that our ongoing boom began with reforms instituted by Benjamin Netanyahu when he served as finance minister from 2003 to 2005. His reforms did cut taxes and bureaucracy, but the difference was made up by cutting benefits like social security and health care.
What this meant was a massive transfer of wealth. By creating Shapiro’s “tax structure that benefits investment,” billions of shekels were handed over to those with enough money to make investments. In practical terms, those billions were taken from those without.
Today, as a result, a minority of Israelis can afford prices the majority cannot, so the cost of living and housing prices rise, and inequality metastasizes. In some ways, Israel is creating the most bitterly ironic of all things: A Jewish state in which the Jews cannot afford to live. Thankfully, Israel is not there yet.
Most striking, however, is Shapiro’s relative ignorance of the many benefits of Israel’s social-market model.
I can testify to this from my own experience. I suffer from a chronic disease that requires several medications to allow me to live a normal life. Under Israel’s socialized health-care system, I rarely pay more than 150 shekels (about $44) a month for them. In America, just one of those medications would likely bankrupt me.
The same is true of my education. I grew up lower middle-class and had I pursued higher education in America, I would have been in debt for decades. I paid full price to attend Ben-Gurion University, yet it was still a relative pittance compared to its American counterparts. Moreover, from what I have seen of American institutions of higher learning—and I am sure Shapiro agrees—I believe I received a far superior education.
Yes, I pay my 50% in taxes. No, I don’t like it. Most Israelis don’t either. But none of us, I believe, would like to see our health care, education or other public services privatized. Yes, liberal reforms may be warranted in some areas, but the wholesale adoption of the American free-market model would likely be catastrophic.
Ironically, Shapiro himself inadvertently pointed out a good reason to think it would be. He asserted, “America must learn from Israel the necessity of common history, common culture and common destiny.”
Shapiro is unquestionably correct. Israel can only survive by the strength of its sense of solidarity. But Shapiro does not see the implications of this, one of which is economic, because things like inequality and poverty inevitably undermine that solidarity.
The preservation of Israel’s national spirit requires Israel’s social-market economy, and for all his love of Zion and his unquestionably good intentions, Shapiro’s rejection of it damages the very common destiny he extols. Were Shapiro to engage in Orwell’s constant struggle, I believe he would see that this is his burden.
{Written by Benjamin Kerstein and reposted from the JNS site}
