Israel: Social Justice or a market economy?

[Siege]

From http://www.jpost.com/Opinion/Op-Ed-Contributors/Social-Justice-or-a-market-economy

Social Justice or a market economy?

Choice is between: an efficient, growth-inducing market economy or a welfare state meaning a huge government that actually harms the poor, inhibits prosperity.


At the recent Herzliya Conference, the question was raised whether the Israeli  economy should be "managed" according to the principles of social justice or of  the market economy.

As a "vision," Social Justice – a codeword for the  welfare state, undoubtedly trumps capitalism.

Social Justice is  indefinable so it can mean anything: from free tuition to subsidized housing. In  contrast capitalism seems niggardly.

For Capitalism – the dirty word Karl  Marx, a brilliant propagandist, attached to the market economy – can make no  unlimited ideological promises. The market economy is merely a process of  production and distribution of goods and services, the best we know in a world  of imperfect people.

Yet capitalism created "values" when it freed  humanity from crushing poverty, from the need to labor hard just to keep body  and soul together, when it immensely improved human life in any parameter  imaginable from longevity and health to the status of women and  children.

Many are unmoved by the astounding freedoms that capitalism  created, the ability to pursue happiness and self realization, because they do  not guarantee absolute equality (an impossible task, really, since people so  differ in their abilities, circumstances and even needs). But they get excited  over Socialism's enticing vision: "from every person according to his abilities  and to each according to his needs."

They do not realize that it is  difficult to balance our capacity to produce with our needs, which will always  exceed our abilities. Even more intractable are the questions about who will  determine what our "abilities" are, and what are our "needs." Politicians?  Experts? Or perhaps the kibbutz's general assembly or Daphni Leef, Stav Shaffir  and their wise councilors?

The question of whether the principles of social  justice or of the market economy are best for "managing" our economy is really  meaningless. Economies cannot be managed from above. Furthermore, while the  achievements of a market economy can be measured, it is impossible to assess  "Social Justice." How do you compare a very complex reality with a nebulous  "vision"? So instead of debating vague abstractions, why not examine certain  concrete problems facing the Israeli economy and decide what offers a better  solution.

Let us first tackle the problem of excess political and  economic concentration in Israel. It is increasingly acknowledged as the  underlying reason for the failure of the Israeli economy to realize its immense  potential, to provide economic security to all its citizens, and become one of  the richest countries in the world.

That only a few family-owned  conglomerates control most assets in Israel, and use most of its credit, makes  the Israeli economy highly uncompetitive and consequently very inefficient. The  capable Israeli worker produces only two thirds of what an American worker does,  and his salary, therefore, is miserably low. Lack of competition is also the  reason Israeli consumers pay prices on everything often inflated by 100 percent  to 300% over world prices, and why about half their salaries are literally  plundered by our oligarchs who can charge such prices with impunity.

For  over 30 years, people have spoken up about how the weaker strata are most harmed  by our system.

But the self-proclaimed social lobby and champions of the  poor had nary a word to say about how the poor are exploited by our distributive  political system that enriches the politically powerful at the expense of the  weak, by self-seeking politicians, public sector bureaucrats, rapacious captains  of industry and commerce and their conglomerates and monopolies, by the  Histadrut labor federation and by the banks.

For decades they just  demanded more and more money to fund failing state systems, including the  government's educational monopoly that managed to make Jews nearly illiterate  and a judicial system that cannot deliver justice.

Until Itzhak Elrov and  his colleagues launched "the cottage cheese rebellion" last summer most  Israelis, especially our elites, lived in denial of the fact that hundreds of  thousands of Israeli families can hardly make ends meet while there are many who  live in great luxury by exploiting all the rest; those who Guy Rolnik called  "the connected," and I named our "Hevrocracy" (the "Hevre" being the "in"  group).

In the 2006 Herzliya Conference, our think tank, ICSEP, presented  a plan to radically reduce poverty in Israel.

First, competition must be  encouraged by breaking up monopolies and cartels and fully opening Israeli  markets to imports. Much lowered prices would enhance purchasing power,  especially of the low income strata that devotes much of its income to  consumption.

Low prices will generally boost demand, employment,  productivity and wages, as was the case when telephony was made  competitive.

Second, we suggested a gradual lowering of housing costs,  the biggest expense of Israeli families.

Housing costs are highly  inflated by the government's land monopoly (owning over 93% of all land) by  exorbitant taxes, by cumbersome regulation and by private (such as cement) and  labor monopolies. Reducing housing costs can ease the lifelong yoke of high  mortgages, and free resources for productive investment.

Last, but not  least, the inflated Israeli public sector (employing every third person) must be  cut and made efficient, leading to many billions in savings and possible  reduction in punitive taxes.

Powerful vested interests that exploit  poverty made sure the plan was not implemented.

So there is our choice:  an efficient, growth-inducing market economy or a welfare state meaning a huge  government that actually harms the poor and generally inhibits  prosperity.

Daniel Doron is the founder and director of the nonpartisan  Israel Center for Social and Economic Progress (www.icsep.org.il).                 

[DGuller]

Choice is between: an efficient, growth-inducing market economy or a welfare state meaning a huge government that actually harms the poor, inhibits prosperity. 

If that's the choice, then why all the debate?  It seems clear to me which approach is right.

[Capetan Mihali]

Choice is between: an efficient, growth-inducing market economy or a welfare state meaning a huge government that actually harms the poor, inhibits prosperity.

When you put it that way... Tough call. 

EDIT: Beaten by that blueberry-racketeer Brighton Beach gangster. 

[Valmy]

Choice is between: an efficient, growth-inducing market economy or a welfare state meaning a huge government that actually harms the poor, inhibits prosperity. 

If that's the choice, then why all the debate?  It seems clear to me which approach is right.

Yeah it seems all you need to do is dump the welfare state and slash the government down to a few post offices and prosperity automatically follows.  Stupid economics with all its outdated concepts like supply and demand and markets, it really all comes down to how big your welfare state is.

[Siege]

Valmy, the irony doesn't let me understand your point. Do you favor evil market economy or social justice/welfare state?

[crazy canuck]

Valmy, the irony doesn't let me understand your point. Do you favor evil market economy or social justice/welfare state?

At first I wondered why there was a need to choose from extremes, then I considered the full context of this thread.

[Siege]

I for one, support the eval capitalist pigs that want to force Jaronites out of their parents basement into the factory floor.

[Valmy]

Valmy, the irony doesn't let me understand your point. Do you favor evil market economy or social justice/welfare state?

I think it is rather pointless to oppose the market economy.  It is going to function naturally regardless and if you mess with it, it will mess with you.  Might as well make sure it treats you well.

As for social justice: um why would I need to oppose the market economy to be in favor of social justice?  What do we mean by social justice here?

The welfare state: well I just don't know...is it possible to get rid of it these days?  I doubt it.  But I would rather it was run well than poorly.

[The Brain]

There's a reason we call it social diseases. Socialism is horrible, even for Jews.

[MadImmortalMan]

It's not an either-or choice. They aren't mutually exclusive.

[Berkut]

It's not an either-or choice. They aren't mutually exclusive.

Indeed.

However, most people on the left simply do not understand that. I suspect it is due to the basic human nature of wanting to believe they can control everything, including the consequences of markets.

So they forget that social justice should be about how we allocate the fruits of the market economy, rather than trying ot crush the market economy in some misguided attempt to legislate more fruits.

[crazy canuck]

It's not an either-or choice. They aren't mutually exclusive.

Indeed.

However, most people on the left simply do not understand that. I suspect it is due to the basic human nature of wanting to believe they can control everything, including the consequences of markets.

Funny, in my experience it is the people on the right who do not understand that a strong market economy is grounded on the Rule of Law and the social justice that comes with that.

[The Brain]

"Social justice"? Vanilla justice will do just fine, thank you.

Social justice... that way lie camps.

[Berkut]

It's not an either-or choice. They aren't mutually exclusive.

Indeed.

However, most people on the left simply do not understand that. I suspect it is due to the basic human nature of wanting to believe they can control everything, including the consequences of markets.

Funny, in my experience it is the people on the right who do not understand that a strong market economy is grounded on the Rule of Law and the social justice that comes with that.

Certainly the case that both the extremes tend to not understand the basic principles involved. That is what happens when ideology trumps common sense.

You get the left arguing that we should legislate minimum wage to be a "living wage" as if just because we wish it to be so, it CAN be so, and you get the right arguing that the problem with the rich getting ever richer and leaving everyone else behind is that we have TOO MUCH control and restrictions (just as examples of course).

Both positions are totally divorced from reality and simple common sense.

[crazy canuck]

It's not an either-or choice. They aren't mutually exclusive.

Indeed.

However, most people on the left simply do not understand that. I suspect it is due to the basic human nature of wanting to believe they can control everything, including the consequences of markets.

Funny, in my experience it is the people on the right who do not understand that a strong market economy is grounded on the Rule of Law and the social justice that comes with that.

Certainly the case that both the extremes tend to not understand the basic principles involved. That is what happens when ideology trumps common sense.

Agreed