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Israel's economic crisis is result
of years of misguided policy

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BY VICTOR BIENSTOCK
Special to The Jewish News

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Five years ago, two years after
Menachem Begin's Likud super-
seded Labor as the dominant force
in Israel, an American economic
writer sounded this alarm in the
quarterly Foreign Affairs:
"Plagued with the greatest
military burden per capita of any
country in the world, pushed by
its Zionist mission to perpetuate
an inefficient state presence in
the economy, and dependent upon
American assistance for its basic
needs, Israel is entering upon the
most difficult economic phase of
its history."
Developments since then have
confirmed the grim assessment by
Ann Critenden and have substan-
tiated her somber conclusion that
"the country's growing inability
to pay for its civilian as well as
military imports has driven Israel
further from its dream of eco-
nomic self-sufficiency than at al-
most any in its 30 years of exist-
ence. Assistance from the United
States, now at unprecedented
levels, is essential to the every-
day operations of the economy,
raising serious questions about
Israel's ultimate autonomy from
its American ally."

" C L e A T C1a . 4r1 )13 ; ;.; 1 ;1

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Like the Labor coalitions which
preceded it, the Likud coalition
failed to slash consumption in Is-
rael and curb government spend-
ing. From the outset, Prime
Minister Begin held defense ex-
penditures and welfare and social
services to be sacrosanct. Today,
as a result, Israel is caught in a
cycle of high debt and hyperinfla-
tion, the holder of the highest per
capita debt of any nation in the
world and one of the highest infla-
tion rates.
The country has a trade gap of
$5 billion; in recent months, even
after government moves to pro-
tect the nation's dwindling
foreign currency reserves, im-
ports still continued to amount to
70 percent of the gross national
product while exports amounted
to only 50 percent. In the period
preceding the July election, the
administration eased controls to
create a more favorable atmos-
phere. The result was that for the
first time in years, the foreign
currency, reserve fell below the
"red line" of $3 billion — the
equivalent of three months of im-
ports.
To cover recycling of local debt,
the government had recourse to
the printing press, adding 470 bil-
lion shekels to the money supply
in the first three months of the
year alone.
Although the inflation has ac-
tually reduced real wages by
about 15 percent, consumption
has not fallen off. "Israelis pre-
ferred to dip into their immense
savings rather than see them

eroded by inflation," explained
Daniel Doron, director of the Is-
rael Center for Social and EcQ,
nomic Progress, in the Wall St;-zet,
Journal.
In all fairness to the govern-
ment, it alone is not to blame for,
the situation although it has a
great deal to answer for. Most Ts-
raelis have been content to ignore
the conditions that have inevite N
bly led to the present crisis. They
were, by and large, insulated from
the ravenings of the vicious in-
flationary spiral by such devices
as the indexation which adjusted
wages and savings to prices. The
effect was the maintenance of a'
relatively high standard of
by mortgaging the future. That
future has now arrived to confront"
them.
The leaders of Histadrut, the Is-
raeli Federation of Labor, cannot
escape blame. They resolutely re-
fused to recognize the nation4
condition and to agree to the sac 7 - ,
rifices the austerity required to
correct the situation would im-
pose on their members. Most of
all, they refused to accept unem-,
ployment resulting from the clas-
ing down of unprofitable, unprod-
uctive government-owned or sub-
sidized enterprises. .
"Israelis are learning, pas
fully, that their political estab-
lishment is not only incapable of
resolving the economic crisis but
actually may be its primary
cause," Doron asserted in the
Journal. Noting that one out of
three civilian workers is em-
ployed in the public sector, Dolan
charged that "Israel's vast net
work of publicly owned industries
has led to a lack of accountability
because what is owned by all be-
longs to no one. As public bodis. , E
usually enjoy monopoly status or
can rely on government to cove -
losses, efficiency can be ignored
with impunity. Lack of competi'-
tion has resulted in inadequate
service, low productivity and poor
work morale."
But the Israeli public, says Meir
Merhav, economic editor of the
Jerusalem Post, has failed to rc.-.c-
ognize the situation for what it is.
"Apparently," he asserts, "the
only way to bring a realization of
the facts of life home to the public
is either an extremely unpopular
policy of economic stringency
with a sharp cut in personal in-
comes, recession and mass unem-
ployment, or an economic crisi3
that would have the same results,
but ,would be uncontrolled and
therefore of unpredictable dimen-
sions."

Israeli Ambassador
to Egypt will speak
at Herut meeting --

New York — Israel's first Am
bassador to Egypt, the Hon.
Eliahu Ben-Elissar, will deliver-a
major address in the United
States at the November conven-
tion of the Herut Zionists of
America. The convention,
scheduled for Nov. 10 and 11 in
New York, will mark the group's
59th anniversary since its found-
ing in 1925 at a meeting called by
Zionist founder Ze'ev Jabotinsky.

