"For three years now, the Israeli public has been sounding a strong and clear voice of dissatisfaction with the existing economic and social system in Israel," President Reuven Rivlin said yesterday evening at the opening of his speech at the Israel Democracy Institute's Eli Hurvitz Conference on Economy and Society (the Caesarea Conference).
"Citizens from all classes and sectors, report that they feel insecure. They feel they cannot raise their children as they would like; they are not free to develop their abilities. Since its inception, the main, the only real resource of the State of Israel has been its human capital. This human capital is the underlying strength of the economy, and the foundation of our national security. When so many citizens feel that in the current economic and social environment they are unable to grow and develop, it is no less than a strategic threat. This is a necessity we must address with the same seriousness and the same creativity, with which we are required to deal with threats to our security," Rivlin continued.
"I can say with satisfaction that, finally, we as a society have begun to address the social challenges. However, notwithstanding, I am concerned today with two common and distressing misconceptions in the public debate. The first is that our ability to respond to social challenges depends on deep budget cuts to the defense budget. I want to say clearly: The State of Israel is currently facing the most complex security challenges, which require huge investment. With or without a political resolution, this situation is not going to change in the coming decades. Israel will continue to invest significant portions of its GDP in defense, research, development and procurement, and no less importantly, human capital in the defense system. It is important for me to add that even if we could and should introduce efficiency measures, the citizens of Israel need to know that the security system serves them well.
"Making out that the security establishment is the enemy to prosperity is doubly hazardous. It fosters illusions about the possibility of a dramatic shift in resources from the security system to social-economic challenges, and it also validates the misconception that the socio-economic system is hostage to the security situation, and that as long as a satisfactory solution to the threats around us is not found, we cannot deal with the pressing economic issues at home.
"The second misconception that concerns me revolves around of the idea that the "large sum of money" we need is located within one or another group in Israeli society. The perception that the haredim (ultra-Orthodox) and the settlers are responsible for the social economic reality in Israel, is dangerous for two reasons. Firstly, and as Guy Rolnik wrote - because it is simply not true. And secondly, because this concept is not only wrong, but also harms efforts to integrate all the groups in Israeli society in the labor market. Moreover, turning an accusing finger irresponsibly on a certain group or another could plunge us into conflicts between the various tribes in Israeli society, when it is clear to all that the solution to the challenges before us depend on cooperation between them.
"These two notions are not only wrong in themselves but rather represent a way of thinking which we have to move away from, if we really want to deal with the economic challenges ahead. We used to think that the socio-economic debate is bi-polar: security or society; poor or middle class; yeshiva or universities; settlements or periphery. However, instead of the concept of "either-or", we must focus on the economic engines that will enable us, slowly and gradually, to do "both and". Today, we have no other choice.
"I am not much of an economist and I say this with humility, but I think that there is now a broad consensus about the three primary growth engines that we must focus on.
"The first growth engine is the full integration, and suitable employment, of all the sectors of Israeli society in the labor market, and in particular Arab women and haredi men. I do not think we really need the OECD economists to tell us that our economy's future depends on it.
"The second engine is the expansion of the knowledge and innovation revolution, to all industries. For too long now, economic growth has relied upon Israel's high-tech industry. The high-tech revolution that took place here in the last twenty years is one the biggest achievements of the State of Israel. But in recent years, the relative share of this industry in GDP and the labor market does not reflect the growth rates to which we have become accustomed. The Israeli economy cannot tolerate the existence of two parallel economies: the first, a high-tech economy, with productivity, research and development and exports at among the highest levels in the world, where employees also enjoy the highest salaries; and the other, an economy based on the traditional industries with low productivity, low wages, and the major problem of financially poor workers. We must ensure that the innovation capacity and technological know-how that is stored in the Israeli economy permeates the economy as a whole and is incorporated in all industries.
"The third engine has to do with structural changes that will ensure competition and efficiency on the one hand, and quality and stability on the other hand, within a number of key sectors of the economy. I am not among those who think the economy is divided into "good" and "bad". But, it is clear to all, that the financial industry; energy industry; food industry; housing sector and others need bold and responsible reforms today.
"And friends, to remove any doubt in your mind, until four months ago I was a member of the Knesset Economic Affairs Committee and Finance Committee. When I say bold reforms, I do not mean reforms such as the Knesset passed in the Economic Concentration Law and the Food Law. I am very concerned that these reforms are not bold enough; nor do they provide an answer to the problem. I'm afraid they anchor the status quo rather than change it.
"Our challenge now is to try to start those growth engines, which will enable us to create a world of "both and". We want, and are able, to foster a generation of great citizens here, that feel they deserve their country, and that their country deserves them," the president concluded.
Published by Globes [online], Israel business news - www.globes-online.com - on November 4, 2014
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