|
|
|
| Current Issue |
|
|
| Resources |
|
|
|
Rx for Israel's Economy
| Article
# : |
19063 |
|
|
Section : |
CURRENT ISSUES
|
| Issue
Date : |
1 / 1991 |
2,567 Words |
| Author
: |
Alvin Rabushka
Alvin Rabushka is a senior fellow at the Hoover Institution,
Stanford University. He is the author of several books on
U.S. tax policy. |
Israel's economy can be described as somewhere along a continuum between socialism and state capitalism. Either set of terms stands in sharp contrast to the "free market" economy, which rests on a system of private ownership and competitive markets.
The economic policies in Israel's 1990 budget effect at best marginal changes that do not cut to the heart of the country's state-directed, state-controlled economy. They make little headway in getting government out of the business of business, breaking Histadrut's labor monopoly and the chronic threat of strikes and work stoppages, getting costs in line with the country's main trading partners, permitting free entry, removing price controls, reducing or eliminating monopolies and cartels, reducing or eliminating the massive handout of a wide range of producer and consumer subsidies, injecting competition in the capital markets, reducing import costs, and facilitating a climate of entrepreneurship. The net result is that the policies set forth in the 1990 budget are likely to fail in bringing about multiyear, sustained growth.
The three chief objectives of budget policy are to
1. create conditions for sustained growth, largely by improving the business climate;
2. reduce government involvement in the economy; and
3. reduce inequalities in the distribution of income.
Bluntly put, the first and third objectives contradict each other, while policies to deal with large-scale immigration contradict the second objective. The probable outcome of budget policy is that the government will fail to create conditions for sustained growth, will increase its involvement in the economy, and will not reduce inequalities in the distribution of income. Budget policy should narrowly address creating conditions for sustained growth, which improves the prospects for successful immigrant absorption and reducing unemployment in the short run, while gradually improving the distribution of income in the long run through steadily rising real wages.
There are two ways to improve the distribution of income. One is to rely on rapid economic growth, which steadily increases the demand for labor, thereby allocating an increasing fraction of national income to wages and salaries while reducing the share going to owners of capital. This process reflects the post-World War II experience of the four Asian tigers of
...
Read Full Article
Look for this article in Ask.com
|
|
