Thursday, November 8, 2012

Prepare for the Economic Storm

by Daniel Doron

Obama was elected to a second term, and Israel will likely face a tough diplomatic road due to disagreements over a fitting solution to the Israeli-Palestinian conflict. The American president has demanded in recent years that Israel immediately fix the historical injustice to the Palestinians — caused according to the president by the creation of Israel — by creating an independent Palestinian state.

Such a step, however, could lead to a Hamas takeover of the newly created state, attacks on cities in central Israel and harsh Israeli retaliations that could spiral the entire region into severe hostilities. Meanwhile, this concern hasn't prevented prominent officials in Israel (mostly on the Left), namely President Shimon Peres, from enthusiastically pushing the measure forward, which could prove to be destructive for both peoples. Unrestrained political ambition is capable of blinding some people.

Alongside the dangers on the diplomatic front, Israel must prepare for a global economic crisis during Obama's second term — a crisis that has already begun hindering Israeli exports. The crucial measures on the diplomatic front are obviously dependent on cooperation from outside factors that we can't control. However, we have a great deal of control in regards to dealing with our domestic problems, specifically the economy, which is the basis for Israel's power, including its military strength. 

But it seems that due to the immense pressures caused by external problems (of which the Likud-Yisrael Beytenu coalition is an indicator), the Israeli government cannot find the time or strength to implement essential reforms which have a proven ability to quickly improve our situation and which would help the country to withstand the difficult pressures it will soon face. The past has taught that delaying implementation of reforms can lead to missing them altogether. Much damage has already been done relating to the effectiveness of reforms in the concentration of wealth and market control, despite it being a measure initiated by Prime Minister Benjamin Netanyahu with the support of the Bank of Israel.

The time to prepare the reforms is now, so that after the Israeli elections, the prime minister can immediately devote part of his extremely busy schedule to moving them forward. This way, the economy will become more efficient and Israel will be able to successfully deal with the threatening global economic crisis. 

Economic reforms are vital because, to keep up with the increasing competition during a global crisis, Israel must become more efficient and lower its bloated production costs, which are affected by high concentration of wealth and market control, tax rates, cost of living, monopolistic labor unions, and cost of raw materials and services compared to abroad. A reduction in exports, which account for a third of the country's national revenue, could cause a severe economic crisis in Israel and mass unemployment.

Daniel Doron


Copyright - Original materials copyright (c) by the authors.

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