MEL FARR AUTOMOTIVE GROUP DRIVE YOUR DREAM CAR FOR LESS "The country will continue to face great difficulties," Rabushka said. "Things are not happening there. Israel can't get its political act together. The Labor party leaders are not likely to be leaders of a free market reform." For budget, Israel earned a poor to unsatisfactory rating because the government made little progress in using its spending authority to in- troduce growth-oriented reforms into the economy. For tax policy, Israel earn- ed a poor grade largely be- cause it made no attempt to cut taxes, Rabushka said. "If they would have cut taxes, even if the economy remained stagnate, I would have given a higher score on taxation," Rabushka said. "The low grade of D signifies the government's confusion over the concept of net taxation, which sub- tracts transfers from gross taxes to arrive at a peculiar measure of the tax burden that completely fails to take into account individual in- centives to work, save and invest," Rabushka wrote in the report. Money and capital markets received a C- grade largely on the basis of the Bank of Israel's success in carrying out further lib- eralization of the country's capital markets, he said. Its conduct of monetary policy —targeting interest rates to influence the level of econ- omic activity and preserve foreign exchange — was un- satisfactory, Rabushka said. "In the face of sharply ris- ing unemployment, the Bank of Israel failed to ar- rest the rate of inflation, which increased from 16.4 percent to 20 percent in 1989," he wrote. In addition, Rabushka said, currency was devalued, the banks charged borrowers rates of interest as high as 60 percent and depositors received negative interest on bank accounts. For business, Israel secured the highest mark — slightly above average. This mark comes from the success of privatization, the selling of government-owned prop- erties to the private sector. The relatively high grade also reflects partial deregulation of the gas and oil markets, Rabushka said. The grade would have been higher, he said, if the labor sector (Histradut) crisis hadn't deepened. The Histradut suffered enormous operating losses from its in- dustrial flagship, Koor In- dustries, which began the year in financial trouble and ended on the verge of foreclosure. "So long as the Histradut is both employer and employee at Koor, there seems little likelihood that Koor or any other part of its industrial empire will ever become profitable enter- prises, able to stand on their own feet without govern- ment subsidies, bailouts or protection from competi- tion." Price controls barely received a passing mark be- cause of the devaluation of the shekel, and the labor market received a failing grade because the country continues to be dominated by a single labor union, the Government Federation of Workers (Histradut). The grade for interna- tional trade was a bit better — slightly below average — due primarily to lower tax and tariff barriers and to the import of goods and services. However, Rabushka noted, the lower barriers were offset when non-tariff barriers were applied. Ideally, Rabushka said, the government should strive to maintain stable internal prices that would allow it to maintain a stable exchange rate. To do so, he said, the government must make an ironclad commit- ment to price and exchange- rate stability. Otherwise, he added, the government will be forced to periodically devalue the shekel to pre- vent overvaluation. The grade for the interna- tional trade category may have been higher, he said, if Israel had succeeded in at- tracting significant foreign direct investment. Highlights of the Israel economy's 1989 performance were: • Real gross domestic pro- duct grew 1.1 percent. • Private consumption per capita fell 3.5 percent. • Fixed investment declined 3 percent. • Industrial output fell 4.8 percent during the first three quarters. • Consumer prices in- creased from a rate of 16.4 percent in 1988 to 20 percent in 1989. • Unemployment rose from 6.5 percent in 1988 to over 9 percent in 1989. • Domestic defense spen- ding declined 2.6 percent, despite expenses stemming from the Intifada, the upris- ing in the West Bank and Gaza. ❑ To All of You From All of Us FORD Mel Farr Ford 24750 Greenfield Road Corner 10 Mile Oak Park (313) 967-3700 MERCURY LINCOLN Mel Farr Lincoln Mercury 4178 Highland Road M-59 Near Pontiac Lake Rd. Waterford (313) 683-9500/962-0354 (Detroit) TOYOTA Mel Farr Toyota 1951 S. Telegraph Road North of Square Lake Rd. Bloomfield Hills (313) 333-3300/964-4160 (Detroit) appy cliassovee "The Superstar Dealer" "The Bigger We Get . . . 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SOUTHFIELD: 24777 Telegraph 353-2500 Other locations: Wayne and Lincoln Park THE DETROIT JEWISH NEWS 47