It is the private sector that is our real power – Israeli entrepreneurism, Israeli genius, Israeli hi-tech.
First off, I would like to congratulate the Globes Conference for its foresight in inviting Alan Dershowitz, and I would like to say to Alan, Israel has no greater champion and the truth has no greater defender than Alan Dershowitz.
You know that I like to quote Churchill on occasion. Churchill once said that there are those who see the private sector as a predator tiger that must be shot, while others see it as a cow that must be milked, while too few see it as a healthy horse leading the cart. I say to you that the private sector is a market, or more to the point, a healthy horse leading the cart. By the way, there are many horses that lead and carry many carts, but one cannot discuss the economy and economic growth and social needs and social justice without there being someone who creates the bulk of the added value in the economy, and those that create it in the private sector are the race horses that propel the cart forward.
I say this because it often seems to me that there is a belief that the economy just happens on its own. I do not know how people can believe it just happens and they can harvest the fruits of the trees and continue to harvest those fruits without needing to water the tree or fertilize it – that the tree need not be encouraged, and the branches be pruned from time to time in order to let the sun shine through. But the main activity is growing the tree and our main growth occurs in the private sector.
Anyone who forgets that will end up with East Germany or North Korea, or they will end up with five-year plans in which everyone comes along and runs governmental factories and a just governmental distribution is carried out, and of course this leads to terrible poverty. If there was one experiment in the 20th century, the lab experiment that they conducted comparing free economies with concentrated economies, the main lesson we learned was that in free economies in which the private sector was given the ability to introduce ingenuity, entrepreneurism and innovation, and to create added value – those are the economies that provide for society’s needs, they provided the added value to all needs related to education, defense, health, the elderly, children, etc.
I say this because, in my opinion, it has been completely obscured. It is that same public discourse that you referred to, Hagai [Golan, Editor of Globes], that obscured it completely. This discourse is only about distribution: 99.9 percent of the public discourse with regard to the economy is about distribution. People talk about how to distribute the pie, not how to enlarge the pie. The reason we are in good shape relative to other countries is because we acted to enlarge the pie and were not occupied only with distributing it. If you are only occupied with distribution, you will very soon end up with only crumbs. Only crumbs will be left and they too will be gone soon.
So I say to you that I am trying during my tenure to also deal with the question of how to enlarge the pie. By the way, distribution is much better with a pie that is enlarged. It is much easier to distribute resources and give to those who are in need. It is the responsible thing to do. The responsible thing to do is to deal with more than just distribution and not just debate who is more of a populist, who allegedly cares more for the needs of the public. The responsible thing is to balance two things – better distribution and continuing to enlarge the pie.
Now we have a problem: the pie enlarges automatically if the global market grows. Let us assume that our market share is fixed – if the global market grows, we grow too. Then we have all the good things we have discussed. But clearly we understand that the global market, or at least the global market that interests us since we are an economy that leans towards exports, is not going to grow in the near future. I speak of our central markets, especially in Europe. Therefore our ability to continue to grow is questionable unless we do some new things.
We must do new things. What kind of new things? First and foremost, to reach new markets. If I am not mistaken, the Minister of Finance is leaving for India today, with my blessing. President Peres recently travelled to Vietnam with my blessing. We are currently talking about certain actions – travelling to China, at my instigation. Any minister who wants to travel to China, I tell him: go. By the way, you as well – go, go to China, travel to China. This is not normal. Why? Because it is a huge market, and one that has grown. If we even gain a small fraction of it, we could increase our exports by tens of percent, thereby creating that same growth which is so crucial to our social needs, education, health and so on. It must come from somewhere; the pie must be enlarge.
That is why our first target is to reach new markets in the East. I also say, in the West, because I think that we are not doing enough with regard to Brazil, for instance, and we will move into those markets as well, and even Africa which I will visit in the coming months. These are all new markets.
We have two new markets here inside Israel. We are laying out a network of roads and rail lines north and south. We are finally expanding out of the center of the country and making changes. We have introduced reforms with regard to the Israel Land Administration and real estate, and we are increasing the supply of apartments. However, we want to act on a much larger scale.
So now we can begin to build in the Galilee and the Negev, as well as in the center of the country, where we freed up land in desirable areas. We removed all kinds of restrictions that existed here – very strange, I would even say bizarre decisions that were made, we cancelled. We are creating growth because there is accrued demand. For years, there was no construction and there was demand on the part of young couples, young families to build homes. There is a dearth of apartments, and therefore this step not only creates growth, it also answers a social need. Seven central industries are involved in every wall that is built here, including the wall behind me – seven industries that break down into dozens of companies.
The second thing beyond opening new markets, primarily in the East, is opening new markets here in Israel by laying out a national transportation network of roads and rail lines and opening up real estate. It is starting to work, first at the interchanges, but it is beginning to spread very quickly to other places.
A third basis for growth is new industries – water, agriculture, space and cyber, for example. There are others. Cyber is a complex subject. I just appointed someone to be in charge of the matter as there are repercussions with our national security, but there are also economic repercussions. In addition, there is great interest in the water industry and the tremendous developments that are taking place here, as well as increasing interest by governments and companies in space and agricultural potential.
I understand that the head of McKinsey and Company was here yesterday. He came to me yesterday, and I told him: "Come on, you want to talk about something new. Give me a suggestion, but for free, yes? McKinsey gets a lot of money from us. Give me some free advice. How do you transform tremendous resource of the Vulcani Institute, which certainly conducts the best agricultural research and development in the world, into a global economic engine? How do we team up with other countries, other continents, which have large water sources to rear animals and grow crops?"
We can usher in a tremendous revolution here. We did it with the Weapons Development Authority, we did it with other companies. There is a third area for potential growth: markets, real estate and domestic infrastructure, and of course areas of research in the sciences and other fields. By the way, when I talk about construction in Israel, I want to address Sapir College in the south and Tel Hai College in the north. I was told that they are connected, and if they are not – why not? Because they are both relevant, and I will tell you why: because we are doing things at the governmental level to strengthen this momentum in markets and development.
Firstly, we are investing in infrastructure. This is a tremendous government investment in roads and rail lines that will stretch to the north. The Golani junction is becoming an interchange; the Movil junction has already become an interchange. Later on, we will have a four lane road from the Amiad junction through Safed, Kiryat Shmona and Hatzor. You will not see one traffic light.
We built a medical school in Safed. This is a revolution, not only for medicine in the Galilee, but for the biochemistry industry, all the life industries. The potential for development is there, and to those people who are listening to me now at Tel Hai College: don’t leave the Galilee. Stay there; it’s going to happen. It won’t be Tuscany in the Galilee; it will be the Galilee in the Galilee. It will be tremendous.
The same thing is happening in the Negev. We are finally moving the IDF bases to the Negev. We spoke of it and we are doing it. It was spoken of for years. It is also the basis for the development of industries, hi-tech and knowledge based. These are two very strong anchors, and together with the development in the north and south, we can really do extraordinary things here and we will.
All this has been conducted during a global crisis – one which is not simple. The global crisis resulted from, first and foremost, governments acting irresponsibly. We must act responsibly; we will act responsibly; we are acting responsibly; and we will continue to act responsibly. However, the global economic crisis first started with the recklessness of governments, especially on the continent nearest us. It was also caused by the regulation problem in the credit markets.
So the crisis is the result of these two things: the reckless squandering of money without there actually being money. In order to meet the needs of their society, they spent and spent and spent and created deficits and that created holes. So they take mortar from here to fill in the hole there, and then a new hole is created there, and then a new hole is created and they take from here to put there again. We did not do that, but too many did.
The second thing, money was lent without thought, and it was lent many times to bodies supported by the government without any oversight, or in some cases there was oversight and regulation that obligated the lending of cheap money for needs defined as social. Again, a hole was created and mortar was taken from one side to another, and the hole grew larger until the ship finally sank.
In comparison, we acted responsibly. I will act responsibly to survive this crisis. In order to act responsibly, we must understand that our first target is to continue growth as I described so that we will have resources. However, the second target is to control expenses, and that is difficult. Why? Because there are protests; there are demands; there is the media; there are politicians and Knesset members. Everyone says what he wants, and everyone has the right to say what they want – and oh boy! They say what they want. Our democracy is vibrant, as Alan Dershowitz can attest, and that is our strength and it is good, but in the end, the right decision needs to be made.
The right decision states that, alongside ensuring continued growth – by developing new markets, by the things we are doing in the real estate sector and in the south, by increasing access to the Negev and the Galilee and the development of new industries – we must control expenditures. However, in order to control expenditures, we must also provide for social needs. We have committed to doing so, and we will not stop with the Trajtenberg Report. We already passed tax benefits for young families. We will continue to add funds to educate children. We opened up the internet, we lowered taxes – this is just the beginning, but it is a lot.
We lowered the excise tax and we are going to do other things. There are three or four more chapters to come, and we will pass them in the coming weeks, and you will be able to report about these steps and form your own impressions.
When it comes to expenditure, there is a trio of challenges that must be overcome.
The first challenge is the global economy that pushes us. The shock of the crisis pushes us to control expenditure, certainly not to increase it. The two other vertices are: one, our commitment to social matters as defined in the Trajtenberg Report – if not all of them, then certainly most; and two, the tremendous geo-political shocks in the region which absolutely present us with challenges in the defense field, which we must confront responsibly. To be responsible means that we must not increase expenditure and atill balance these two needs.
The defense establishment undoubtedly has other needs, but it can also become more efficient, and part of that efficiency comes from transparency. This is an issue that is difficult. Nobody likes transparency – no one likes it and neither does the defense establishment. We must increase efficiency while still not harming the streamlining and efficiency of operations in this area. These are two different things. I think it is possible, and therefore in the coming weeks – I am in no rush, but neither am I dragging my feet – we must responsibly decide between these three things.
Even when I say we will not increase expenditure, we will take care of security problems; we will pass most of the recommendations in the Trajtenberg Report; but we will make a list of priorities. I want to give you an example of how the government works. We are facing a real threat that Israel will be flooded by the illegal work infiltrators we see everywhere and who are changing the character of the country. They create serious problems in welfare through jobs taken, problems of internal security and other problems.
Every country has the right to control its borders, so about a year ago, I presented the government with a plan to erect a fence. One hundred kilometers of the fence has been built, and now there is approximately half left in order to complete the fence. It must be completed, even if it adversely affects employers, in order to prevent the infiltration and arrival in Israel of hundreds of thousands of people. Even now there are 50,000 people. That is a small town, and I am talking about hundreds of thousands.
We are in a race against the clock. There was not enough money to complete the section to Eilat, which runs through a very hilly area around Ein-Netafim, thereby making it difficult to construct, if anyone is familiar with that area. There was also not enough money to complete the voluntary holding facility, because if you tell someone you cannot employ them, you must take care of them. You don’t want them to starve, so you need to house them, give them food and health care – the minimum – but they will not be able to earn money to send to their families. To live, yes, but not more than that, and that costs money.
This package cost NIS 630 million. We are a responsible government. We cannot play around and say: we will take care of people and give and give. You cannot just hand out money, as other governments did in other, very respectable countries. They just passed out money and said: there are needs, so we will give out more money, and the hell with the bill. We do not act that way. So what happened yesterday is an example, a microcosm of what we do and what I believe in.
I came to the government and told the ministers: "Look, this is a national need, but it cannot be paid for out of thin air. If we are going to spend NIS 630 million, we need to accept that." So I asked for a 2% cut in all government offices. Such a cut is not always the right thing to do, but in this case, the guiding principle is that if you give, you must take from somewhere and control the budget. We did that.
We will complete the fence within the year, as it is something that is essential to the future of the State of Israel as the nation-state of the Jewish people, the Jewish and democratic state. We will continue to act responsibly.
I believe that we have a glorious future. I do not underestimate the problems in the new Middle East as it reveals itself before us, and I do not underestimate the economic shocks that the world is experiencing and that we will also experience. We will face difficult obstacles. However, I think that we need responsible supervision that supports the private sector. It is the private sector that is our real power – Israeli entrepreneurism, Israeli genius (which we saw yesterday with Prof. Shectman’s Nobel Prize), Israeli hi-tech.
These all are part of the private sector, and I would like to believe that you all understand the power of these people – from the hi-tech employee to the journalist. Even the paperboy could one day work in hi-tech; he may even serve as the head of a hi-tech company. I myself started as a dishwasher at my high school in America and I became Prime Minister, although I’m not drawing a comparison between that and running a company. To work, innovate, act, develop independence and responsibility – all this ultimately is embodied in the private sector and we want to encourage that.
We also do not want, and I will say this with all honesty, monopolies and cartels to develop here. Sometimes there are natural monopolies, but it is quite rare. We need to find the middle road between free competition and regulation. In the absence of regulation, monopolies can be built, but with too much regulation, there is a lack of competition. We want the horses to compete amongst themselves.
For example, we want to ensure that not just some of the horses feed from the trough of credit. It is not worthwhile to prevent competition; it is worthwhile to ensure competition. Our hardest mission of all the missions I outlined may be to find the right balance in regulating competition, because if we’re off, we could be way off, like what happened in the West when it dealt with credit regulation. We want to do it in a measured and proper fashion.
There are two committees dealing with this now: the Trajtenberg Committee, which dealt with regulation to prevent centralization within branches of the economy; and the centralization committee that is debating how to prevent centralization between branches. Here too we need to act with caution and moderation, in order to ensure that this primary engine of the private sector will continue to work, continue to pull the cart, to continue to pull the cart that belongs to us all. We are all sitting in that cart: the government, our social needs, our security needs.
Therefore, we will encourage competition; we will enact responsible regulation; we will continue to develop the north and the south and even the center of the country through a system of roads and infrastructure; we will turn to markets in the East; we will develop new knowledge and business spheres in the field of science and water, milk and cyber and agriculture. We will maintain a responsible budgetary framework; we will maintain the budget.
I will bring these decisions to the government in the coming weeks, while we continue a serious debate and do serious preparation. I know that we do not always work at your pace, Hagai, but we are working at a good pace, and all signs so far indicate that the results will be good. If we use our brains with regard to our knowledge-based economy and if we nurture employment, creativity, entrepreneurism and responsibility – the sky is the limit.