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Economic Conference Advocates Restructuring of Israel Economy

June 9, 1988
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Economists and business leaders attending a symposium on American-Israeli economic relations have called for the overhaul of the Israeli economic structure.

Panelists at the three-day conference, which began Sunday at the St. Regis Sheraton Hotel here, criticized a system that abounds in permit requirements, lack of competition and a failure to blend into the economic realities of other countries of the world.

Participants offered daring suggestions to help restructure the economy, yet the overall atmosphere was one of confusion, as those in attendance were split in their overall analysis as well as on basic facts.

The symposium was organized by Dr. Mordecai Hacohen, honorary chairman of the American Israel Economic Corporation and senior vice president of Bank Leumi Trust Company of New York.

It was held under the auspices of the Consulate General of Israel in New York; U.S. Department of Commerce; New York State Urban Development Corporation; American-Israel Chamber of Commerce; Conference of Presidents of Major American Jewish Organizations; the Jewish Community Relations Council of New York; Bank Leumi Trust Company of New York and El Al Israel Airlines.

Up to 100 people were in attendance at various sessions, as they listened to papers delivered by Israelis and Americans who included Professor Haim Barkai of the Hebrew University; Daniel Doron, the Israel Center of Social and Economic Progress, Tel Aviv; Dov Lautman, president of the Manufacturers Association of Israel, Tel Aviv; Professor Moshe Mandelbaum, former governor of the Bank of Israel; and Yaakov Neeman, former director general of the Israeli Ministry of Finance.


American participants included Nobel laureate Professor Lawrence Klein of the University of Pennsylvania and Rep. Jack Kemp (R-N.Y.)

Mandelbaum called the conclave “the most important conference of its kind since the establishment of the State of Israel.”

In his speech, Mandelbaum said, “I think that the most important thing for us is to stress that we need a change in Israel. Thousands of our children are going abroad because of the economic system…The system is unbelievable. Let’s say it openly.”

Some of the subjects addressed at the conference were free enterprise; industrial organization; high technology; international trade and the benefits of the free trade agreement for the American and Israeli economy; the tax burden and tax reform in Israel; financing military expenditure; problems of the magnitude of government expenditure; the cost of government intervention to the economy of Israel; and conditions necessary to make Israel an efficient industrial state.

Participants paid particular attention to American economist Milton Friedman, who spoke by television-telephone hookup Monday morning; and Dr. Edward Teller, the “father” of the hydrogen bomb.

Teller, who spoke twice, addressed the possibilities for research and development in Israel. As guest speaker at a dinner Monday night, he delivered a cost-specific blueprint for possible Israeli ventures that included development of a heart-assist device, a small nuclear reactor and anti-missile missiles developed as part of the SDI research program.

Israeli development of these techniques, Teller said, would endear and obligate people worldwide to Israel, to its own obvious benefit.

Dan Gillerman, president of the Federation of Israeli Chambers of Commerce in Tel Aviv, said, “I believe that socialism is dead. It simply did not deliver the goods.” He called for “perestroika” in the Israeli economy.

Gillerman recited a litany of major economic changes in country after country, including those in the Communist sphere, where the move has been toward blatant capitalistic restructuring.


In Great Britain, said Gillerman, it was not so much the victory of Margaret Thatcher’s conservatism as the disillusionment with Labor.

“They did not realize that their people wanted to live better lives. The only way people will produce better is if they can make a profit,” Gillerman said.

At the same time, “drastic tax reforms have taken place throughout the world,” he said. “My only sad and sorrowful conclusion is that Israel remains one of the few countries in the world that has not woken up to capitalism.

“It remains one of the few countries in the world where the government so tightly controls the economy.”

The establishment of Israel as a socialist society, he said, was an attempt to create an idealistic Zionist state, “by immigrants who were primarily rebels…against their bourgeois roots, to build a better society.”

Profit, he said, “was for a very long time considered a dirty word. Doing without, living a spartan existence was something you strove for.”

“Earlier Israel warranted this,” he said. “But their children deserve better.”

Adi Schnytzer, a senior professor of economics at Bar-Ilan, a specialist in the economic systems of the Eastern bloc and a consultant on Eastern European economic history to Oxford University, said it was first and foremost absolutely mandatory to determine the exact nature of the Israeli economic system.

“If the Israeli economy is going to be reformed, it is going to be a long and slow process,” he said.


He also pointed out that the Israeli government’s disproportionate ownership of land puts the government in a position to determine industry.

But “the market cannot operate in land,” he said. “My essential contention in regard to ownership of land is that the government has determined economic activity.

“The difference between the United States and Israel is that in the United States, the criteria for permits are spelled out for you. In Israel, it depends on the discretion of the authorities.”

Most credit, he said, “has been obtained by Israeli industry in the form of grants or at least in the form of negative interest rates. Israel does not have a free capital market…It has never had central planning investment.”

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