Back in the 1980s Margaret Thatcher laid the foundation for what is arguably the strongest economy in the world. Indeed the British maintain Reaganism was based on Thatcherism and not vice versa.
However, there was a flipside: during her term in office some 16 million Brits, or more than one in every five people fell under the poverty line.
In 1985 with triple-figure inflation, Israel tried a mini-Thatcherite revolution. Pretty much all the country’s economists believed it was a stroke of genius. However, in retrospect many will tell you it did not go far enough.
And that is why the country is facing another crippling strike next week.
The Israeli Treasury-proposed, government-adopted economics-stringencies package could be exactly what the Israeli economy needs. After two years of recession, inflation is climbing, unemployment is showing no signs of reducing and the credit-rating companies are breathing hard down Israel’s financial neck.
Therefore, the Treasury believes Israel needs to undergo painful belt-tightening: a state budget cut, increasing the pensionable age and slashing the public sector.
These negatives would be offset by a tax reform benefiting the middle classes and some investment in GDP-improving national infrastructure schemes.
Yet again.
Each year the top civil servants pull the same-old plans out of a filing cabinet in the Finance Ministry, blow off the dust and present them as a new exciting program that could not only save the Israeli economy, but turn it into one of the world’s powerhouses.
But that leads to a tried and tested game of cat and mouse with both the employers and, more significantly, the workers.
The employers’ rejection of the overall package can be explained in a couple of sentences. Israel’s key-lending rate is high: currently some 8.7 percent. The industrialists want to see it cut, preferably in one fell swoop. However, the central Bank of Israel says it will not do so unless it sees clear signs of acceptance and implementation of the economics-stringencies package.
The workers, on the other hand, have far more to lose. Take the poorly-paid in the public sector, for example. They are now being asked to take pay cuts. The Histadrut labor federation says, if anything, they should receive pay hikes. But the Treasury maintains that would lead to wholesale firings. Its thinking: the larger the average pay packet, the fewer the number of workers.
Try telling that to the poorest-paid in the public sector who take home less than $1,000 a month. And if you think that is bad, in what is becoming an increasingly expensive country in which to live, try subsisting on a private-sector wage.
The poor in Israel, of whom there is an increasing number, live a hand-to-mouth existence, with credit being the order of the day.
To someone who can afford their weekly grocery bill it is worth standing in an Israeli shopping line to hear the standard conversation:
“Do you want to pay in installments?”
“Yes please.”
Installments on the food, the car, the apartment.
The Treasury-proposed economics-stringencies package makes perfect macroeconomic sense. But that is no solace to perhaps a third, or more, of Israel’s 6.5-million-strong population.
No wonder Mrs. Thatcher was called the Iron Lady.