Arlosoroff - Where the shekel stops ...

The tsunami is coming - and we're playing on the beach

Meirav Arlosoroff
Haaretz
08 August '11

http://www.haaretz.com/themarker/where-the-shekel-stops-the-tsunami-is-coming-and-we-re-playing-on-the-beach-1.377524

The protest movement must not endanger the enormous achievements of budgetary

'The hand of the Lord was on me, and he brought me out by the Spirit of the Lord and set me in the middle of a valley; it was full of bones - bones that were very dry. He asked me, "Son of man, can these bones live?" I said, "Sovereign Lord, you alone know." (Ezekiel 37:1 )

Are the people of Israel frolicking on the beach while a tsunami threatens and looms? We are: The danger is real. Some 300,000 people marched in the country on Saturday night, chanting slogans that were all variations of "Gimme" - at the very time that tidal waves of economic crisis are crashing down, threatening to engulf the unprepared.

The United States lost its perfect credit rating on Friday, for the first time in history. Beijing, unnerved at the thought of losses on its massive investment in U.S. government debt, has started bossing Washington around, ordering it to cut its defense and welfare budgets! That's also a first.

Spanish and Italian government bonds are now junk and need rescue. The European Central Bank said it would try to rescue them by buying their bonds.

This isn't the first time two big countries have stood at the brink of collapse. Much the same happened during the Great Depression of the 1930s, which is a thought of comfort to nobody. What ended that terrible time was World War II.

The collapse of Italy, Spain or both means exactly one thing - that the world will slide into its worst depression since the 1930s. Italy and Spain are too big to be bailed out, certainly with Uncle Sam on his knees because of the downgrade. No wonder Italy's perennially haughty Prime Minister, Silvio Berlusconi, had to accept an emergency plan for his country as a precondition for ECB support for bonds. The plan includes liberalization of the economy, selling government assets and amending the constitution to force the government to run a balanced budget.

Sound familiar? Those are, roughly, the rules that have been governing Israeli economic management for 25 years, and against which the tent movement is fighting - no more privatization, no liberalization of the economy (free economics / capitalism ), no to balanced budgets (witness their demands for government spending on the middle class, never mind the deficit ).

Global catastrophe

The world is quaking. Its strongest economies are crashing. The giants aren't sure they can pay their debts. Only in tiny Israel, which survived the crisis by the skin of its teeth, are people taking to the streets to demand it shatter its budget, increase debt and lavish money on all.

Make no mistake, the tents protest is critical to Israel's future. The middle class is arising for the first time and demanding that the national priorities be changed. But the changes aren't supposed to include abandoning budgetary discipline. Irresponsible nations won't make it. Pure and simple.

That's the lesson: Responsibility pays. The United States waxed fat and abandoned the economic principles that had made it great. It became accustomed to consuming more than it should and financing it by debt. Europeans, meanwhile, grew accustomed to working little and maintaining unsustainably generous welfare policies, assuming the empire of Europe would last forever. The United States and Europe forgot what responsibility is and are now paying the price.

Countries that continued to work hard, to live within their means and to avoid piling up debt weathered the crisis. Australia did. Israel did too.

The world applauded Israel's economic performance for good reason: Israel maintained budgetary discipline for 25 years, since its great economic crisis of the 1980s. For 25 years, the Finance Ministry and Bank of Israel warned successive prime ministers that abandoning discipline spelled doom. And over those 25 years, that tight Finance Ministry policy saved Israel from collapse thrice - the recession of the second intifada, the Second Lebanon War and the global crisis of 2008.

And that last one proved once and for all how crucial it is to maintain responsible policies. Spend less, save more, and in the future, you will survive.

This lesson was driven home terrifyingly on Friday.

Even hedonist Italy will be enacting a law to maintain a balanced budget. Only here in Israel, for some reason, in Israel that has done right for 25 years, do we not get it. Only here is the law that requires the government to reduce its deficit being presented as capitalist piggishness on the part of the Finance Ministry. Only here is everybody demanding more and more, without thought of who will pay.

Only here are the ungrateful people of Jeshurun getting greedy just as the vision of seared dry bones strikes worldwide.

The protesters want change in national priorities. All well and good; but they must not imperil Israel's achievements based on its responsible conduct. Budget discipline must stay on the table and it must be clear that for every upgrade in priority, something else must be downgraded. Otherwise, the tsunami rolling across the world's oceans will not spare us this time. It will engulf us, drown us and wash away the tents too. A country with no resources, such as Greece, Spain, Ireland, the United States or Italy, can't be sued for more.

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