Or should it pursue a more or less laissez-
faire, Americanstyle, free-market system
that will enable its entrepreneurs to create
the industries and jobs that will unshackle
the economy and pull it out of the
doldrums?
The proposed economic reforms are quite
clearly the work of top-flight civil servants
who are convinced that a massive dose of
deregulation is the best medicine for what
ails Israel.
There has, according to one senior Israeli
economic commentator, been "a quiet rev-
olution" at the top of the Israeli civil
service.
After decades of domination by people
ideologically committed to government in-
tervention as the principal means of solv-
ing economic problems, a new breed of anti-
interventionists and free-marketeers has
now taken the helm.
And it is this new breed which has
declared an all-out war on Big Government
and Big Labor for control of Israel's
economic destiny.
Not surprisingly, the two elements most
bitterly critical of the proposed reforms —
because they have the most to lose — are
the large corporations owned by the gov-
ernment and the Histadrut trade union
federation.
The strength of the new economists in
the Finance Ministry, however, is that they
represent no single political party and are
drawn from the ranks of both of Israel's
major political powerhouses, Labor and
Likud.
Amnon Neubach, who was economic ad-
visor to Shimon Peres when he was Prime
Minister, is a good example of Labor's
younger generation.
Plucked from the private sector to serve
the Labor leader, Neubach believes that
the overweening bureaucracy and the
heavily centralized system that served the
fledgling state so well in its formative
decades has outlived its usefulness.
Even more radical and outspoken is Am-
non Rubin, the current economic advisor
to Likud's Prime Minister Yitzhak Shamir.
A former Bank of Israel researcher,
Rubin insists bluntly that the virtual dry-
ing up of immigrants from the West and
the Soviet Union, and the leap in emigra-
tion, is a result of wrongheaded, stultify-
ing government policy.
Israel, says Rubin, must compete with
other Western countries for bright, young,
hard-working Jews.
Zionist ideology alone will neither draw
new immigrants nor keep talented and am-
bitious Israelis at home if they cannot, at
the same time, earn a decent living in the
professions of their choice.
"If you could bring Jews to Israel by
force, and keep them here by force, you
could tax them as you please," says Rubin.
"But people are free to move, and if they
are overtaxed they move away.
"If we continue dunning anything over
$1,500 a month at 60 percent," he says,
"there will, in the course of time, be no
high-income earners to tax."
Rubin believes that the source of wealth
and employment in the modern world is no
longer to be found in the large government-
supported conglomerates, but rather in
"small undertakings springing up at the
initiative of people with bright ideas:'
Such innovative and sophisticated enter-
prises are ideally suited both to an increas-
ingly open and flexible global market and
to what Shimon Peres likes to call "Israel's
greatest natural resource" — its highly
educated and creative workforce.
lb this end, Rubin and his colleagues
want to see the capital market loosen up
to provide reasonable loans for people who
have the nerve and skill to go it alone.
That includes the Israeli arms-industry
engineer who would like to start his own
business, the South African businessman
who is looking for a new home (and will,
given current circumstances, probably opt
for the United States, Canada or Austral-
ia), or the American go-getter who could
choose to build a plant in Los Angeles —
or Haifa.
"Jews today," says Rubin, "have what
they did not have before — a real choice of
tempting destinations. Old-timers in Israel
do not realize the implications of this new
situation.
"The issue facing the would-be im-
migrant is not only how much he will earn
in his new homeland but whether he will
earn anything at all in his own particular
field. The jobs are not always available
because obstacles exist to the creation of
work opportunities in Israel."
Just offstage, but within hearing dis-
tance, are American voices urging Israel to
seize the moment and extract full advan-
tage from the remarkable success of the na-
tional unity government's austerity pro-
gram, the fall in world oil prices, the $1.5
billion emergency aid package from Wash-
ington and the decline in the value of the
dollar.
They are calling on Israel to go for
growth.
Professor Herbert Stein, economic con-
sultant to Secretary of State George
Shultz, recently reviewed Israel's achieve-
ment in reducing inflation from a high of
15 percent a month in 1985 to 1.5 percent
a month today, and declared it to be "im-
pressive and encouraging."
But he insisted that the government
must continue its austerity measures and
that it must continue to cut deeply into the
civilian budget, particularly in the areas of
health and welfare.
"Everything," he says, "depends on how
seriously the Israeli people regard their
economic problems, because if they don't
take them seriously they won't support the
kind of actions that are necessary."
Everything depends
on how seriously the
Israeli people regard
their economic
problems, because
if they don't take
them seriously they
won't support the
kind of actions that
are necessary.
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