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Last update - 02:19 03/04/2003

The rich and discriminated sector

By Ariel Rubinstein

In light of its success, there's no choice but to challenge the finance minister's rhetoric. Benjamin Netanyahu has some very impressive fables that he uses to explain the economy. At the press conference where he presented his plan he said, "Our economy is sick, very sick." So what should be done? "The first step ... is to stop the bleeding, the second step is to rehabilitate the patient."

It's not clear what can be learned from the treatment of a patient about the proper steps to take to heal the Israeli economy, but perhaps this was just an expression of the justifiable sense of emergency. But the fable has another stage: "And the third step is to strengthen the economy's competitiveness so it can compete with others in the world." What's the connection to the fable? There's a patient who must be treated but somehow you find yourself with the conclusion that the patient's competitive ability must be strengthened - meaning dismissing workers, selling government companies and reducing taxes.

The second fable, which has become famous, is the fat man and the thin man: Netanyahu compares the argument that the public sector is 55 percent of the GDP and the productive sector is 45 percent to a person weighing 45 kilograms forced to carry a man weighing 55 kilograms: the former gets progressively thinner and the latter gets progressively fatter, until the thin man collapses.

Netanyahu makes an original distinction between the public sector ("they don't produce money, they consume it") and the productive one ("those who produce the money are in the productive sector, the factories, the tens of thousands of small businesses, the commercial companies and the like"). But his intention is exposed as he goes on: "So, therefore, what we have to do is shrink the public sector and grow the private sector."

In other words, "productive" means "private." Teachers, doctors and the workers at Israel Military Industries are not productive. Bankers, stockbrokers and economists are productive. Thus the finance minister blurs his real intentions: the sell-off of government companies does not necessarily increase the productive part of the economy, but it does grow the private sector, and handing over state-funded well-baby clinics to the private sector doesn't "produce money."

In an interview to the daily Ma'ariv, Netanyahu said, "Ten percent of the public pays 90 percent of the taxes." People familiar with the relevant numbers did not have a clue where the source of that argument is to be found. And of course, that statement ignored the "marginal" fact that the uppermost decile in the economy also takes in 34 percent of the income.

Thus Netanyahu nurtures the image of the wealthy, successful, handsome - and oppressed. He turns things upside down. Teachers, soldiers, nurses and judges have become the hedonistic riders on the backs of the top 10 percent.

Nonetheless, one has to admit that Netanyahu did touch a central issue that should worry us all, aside from the problem of controlling the Palestinians. "I think this people is one of the most talented, if not the most talented people on earth," he said. And if so, he asks, "Why is there a crisis?"

Netanyahu says what most of us think; we are unique and this should be nurtured. But he ignores the fact that the uniqueness is the result of a cultural tradition and not our geographic proximity to the Tomb of the Patriarchs or the experience of patrolling the alleys of Gaza.

Netanyahu added a personal confession during his presentation of his plan: "[These steps} are painful to me personally and they certainly won't be pleasant for many among Israel's citizenry. ... I know how difficult it is for everyone, but I have to say that it was also difficult for me to accept the job of finance minister." For the unemployed, the elderly, the poor by no fault of their own, the steps will be "uncomfortable." For the finance minister, they are "painful." The difficulties of those who have been fired are equivalent to his own difficulty.

Ultimately, things depend on the ability of a leader to show empathy for the people he leads. Without empathy, even a wizard cannot create "economic" solutions.

The writer is the Israel Prize Laureate in Economics for 2002