Behind the Headlines New Economic Policy Debated

Israelis who feared that a Likud-led government would dismantle Israel’s planned economy and replace it with unfettered laissez-faire capitalism–to the delight of businessmen and the detriment of workers–die learning that just the opposite may be true. The new government, in fact, is advocating tighter controls on the economy, at least for a year or two to get the country out of its severe fiscal crisis. To fight inflation it proposes freezes on prices, wages, profits and taxes.

Not all Likud members agree with this program. But the most vehement attacks to date have come not from the Labor opposition but from Israel’s Manufacturers Association, the group of industrialists and businessmen, who it was widely claimed, salivated at the prospect of a Likud election victory.

Addressing the Association’s annual meeting Tuesday night, its president Avraham Shavit, railed against freezes of any kind. Israel is on the verge of bankruptcy, he declared and our national leaders are calling for a freeze, the antithesis of change. Are we to mark time, to stand still at the point of economic collapse, or are we to face up to our problems and take steps to solve them, he asked.

Shavit warned that a freeze of profits would deter potential investors. In his opinion, the solution was to reduce taxes on industry so that it could accumulate capital for investment in expansion. Within two or three years, he said, Israel could double its industrial production and exports. He also called for subsidized credits to business and industry. Everything in this country is subsidized from birth to death and now the government proposes to make credit more expensive for business, Shavit complained. He said the manufacturers were the very basic and backbone of the country’s economy and, in fact, it is industry that provides the means to subsidize the rest of the country.

ADVANCES SERIES OF PROPOSALS

Shavit denounced the inflated bureaucracy and opposed planned unemployment as a means of fighting inflation, a course advocated by the conservative American economist Milton Friedman who Likud wants to invite as an economic advisor. Shavit contended that there was hidden unemployment, meaning workers in service areas who do not produce anything tangible.

He said industry could absorb another 28,000 workers and proposed that those in the service fields be retrained and sent to work in factories. It is the lack of manpower in industry that prevents Israel from responding to industrial demands on world markets, Shavit said.

Shavit also called on Histadrut industrial enterprises, which include some of the largest in Israel, to join the Manufactures Association. Industry belongs to no one but to the Jewish nation, he said. He decried the proposed five-day week (Israelis have always worked six days) and said that if it were possible he would prefer a 14-day week. He said he would seek a meeting with Histadrut Secretary General Yeruham Meshel to plan a new in fro-structure and possibly to fire workers to make them mobile and increase productivity.

HOPES FOR A FIVE-DAY WEEK

Finance Minister Simcha Ehrlich; Likud’s economic mentor, was far more moderate than Shavit and seemed to be on the defensive when he addressed the manufacturers yesterday. He called the five-day week a dream toward which Israel should strive but conceded that it was not practicable in the near future. Although it was Ehrlich who invited Friedman, he said Likud did not consider planned unemployment as a remedy for inflation.

Another speaker for the government, Minister of Commerce, Industry and Tourism Yigal Hurwitz, agreed with Shavit that a general freeze of the economy would hurt investments. He said that he and the Finance Minister would investigate the problem of incentives for tourism. He also said that the question of subsidies for foodstuffs and capital should be re-examined. According to Hurwitz, basic foodstuffs should receive government subsidies but there was no justification for artificially lowering the prices of expensive cheeses because they are made from milk which is subsidized. He said that subsidies for capital should be limited to export industries.