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War on Scarecrows: Steinitz at the Treasury
by Assaf Adiv
uval Steinitz, Israel's Minister of Finance, takes no rest. We have not yet recovered from his blatant attack on the High Court of Justice (he claims that its "populist" decisions waste public money) and already we hear that he's gearing up for a nationwide program to overcome unemployment. A worthy goal indeed! Who could oppose? Yet to judge from a report in Yediot Aharonot (Financial Supplement, Dec. 13, 2009), the new program misreads the problems and offers, therefore, wrong solutions.
Steinitz holds that Israel's unemployment problem boils down to two points: (1) the (supposed) presence of around half a million illegal foreign workers; and (2) the (supposed) laziness of the unemployed, who refuse to accept jobs in the various fields occupied by those foreign workers. Accordingly, a basic premise of the program is that if the police succeed in deporting the illegals, and if the government compels the jobless to replace them, the unemployment rate will drop from its current 8% to 4%.
Let's check the numbers. Steinitz claims that there are between 400 and 500 thousand foreign workers without licenses. This is speculation. According to the Israel Central Bureau of Statistics (ICBS), reporting at the end of 2008, the total is 222,000. Breaking this down, ICBS determined that 114,700 had entered legally but overstayed their permitted terms, while 107,000 came as tourists and did not leave on the appointed dates. (Source)
Secondly, Finance bears direct responsibility for the ongoing importation of foreign workers with permits. The government has adopted countless decisions for trimming such permits, but the phenomenon continues. In personal care there are more than 50,000 and in agriculture nearly 30,000.
There is a twofold absurdity here. On the one hand, Steinitz and his colleagues exaggerate the number of foreigners without permits, creating a distorted picture in order to produce hysteria, and on the other hand, they don't address the need to stop the importation of workers from China, Thailand, the Philippines and elsewhere, who are employed under semi-slavery conditions (Source). These people must pay exorbitant sums—sometimes tens of thousands of dollars, scraped up by mortgaging family land and other means—in order to get permits to work here; most of this money goes under the table to shadowy agents; the worker sometimes finds on arrival that the advertised job does not exist and the person he paid has become inaccessible. The agents have an interest in seeing these people deported, because for each they can bring in fresh prey. Far from contending with these agents and the manpower companies, the Steinitz plan gives them a green light to import more while it deports "illegals."
No job creation
The way to cope with unemployment is first of all to create jobs. The global economic crisis has led to a widespread reassessment of classic neoliberal thinking. Today the need for government intervention to save factories and even run them has become bon ton. Precisely on this point, however, Israel's Finance Ministry exudes impotence. Its director, Haim Shani, at the Globes Business Conference of Dec. 13, announced that the government will not invest any funds in saving industrial plants and avoiding dismissals: "The Finance Ministry will not pour money into saving Tefron [a major textile firm]. The government of Israel is no expert in saving factories, and we shall not invest in a specific one" (Source).
This announcement comes against the background of a crisis affecting plants like Tadiran (electrical appliances), Mulitan (textiles) and Tefron. What it means is thousands more jobless people in an area already hard hit. These plants are found in the periphery, where unemployment rates are much higher than the national average. In Arabeh and Sakhnin, Arab towns that supply the core of the workers at Tefron, the official rates have risen to over 20%. Add to this the low participation of Arab women in the workforce: 18.6%. We should note that the Bank of Israel mentioned this low participation as a reason why Israel has not been accepted into the OECD. That is, the country's unbalanced labor market is an impediment preventing its assimilation into the world's industrial nations.
Feast of fools
The Finance Ministry's neoliberal line seeks to base economic growth on private capital, forgoing public responsibility for creating jobs. The enthusiastic adoption of globalizing principles has led, in the last twenty years, to a massive transfer of industry to lands where cheap labor offers big profits—and to hell with workers in Israel.
Even an efficient, successful plant like Tadiran has fallen prey to a system that penalizes workers who have fair wages and social benefits. The tragedy in the globalization of capital lies in this "race to the bottom." The "winners" are the poor and unorganized who continue to work for a pittance.
As for firms that managed to survive the hurricane of globalization, they too, in the last twenty years, have passed from the hands of industrialists who had a relation with the plant and the production process. They have fallen instead into the hands of private equity firms lacking all such connection. At Pri Hagalil (Fruit of Galilee) in Hazor, mismanagement and fat bonuses led to bankruptcy. In the case of Tefron, the place of the founding managers, who were industrialists, has been taken by two equity firms whose main interest has been quick profits and big bonuses, while long-range planning, stability and jobs are shunted to the lowest priority (Source).
All this takes place with blessings from the government. When Warren Buffett bought Yiskar from Stef Wertheimer in 2006, the deal was signed in the presence of then prime minister, Ehud Olmert. What interest has Buffett in Israeli workers? Or when Tnuva, the main agricultural cooperative, passed into the hands of APAX in 2007, the deal was hailed as a brilliant success for the company, which had been a cornerstone of the old conservative economics. The prospect of stability for the farmers and workers of Tnuva does not count for this huge multinational private equity firm (Source).
Such firms move dollars by the tens of billions between continents, leaving scorched earth behind. They have no interest in jobs, and they acknowledge no social responsibility. Terms like efficient management, boldness, and leverage are nothing but euphemisms for speculative investments like those that have caused the current global crisis. In Israel, as elsewhere, as long as these firms make profits, their managers rake in million-dollar bonuses. When the plants fail, sending workers home, the government lifts its hands, saying it is not responsible.
The global crisis requires change
All this is happening in 2009, after the collapses of the American investment banks, in a situation where the global crisis threatens economies in Greece, Spain and Eastern Europe. But Israel's Finance Ministry lacks any inclination to rethinking. The dubious trickle-down theories of Netanyahu's years as Finance Minister continue to fill the stage.
The global crisis requires new thought. The government must take job creation as a goal. Wonder cures, such as hunting down illegal foreign workers, will do nothing to ensure stable jobs at decent pay.
These facts cry out when we see factories with a sound economic basis, such as Pri Hagalil, Tadiran and Tefron, get into difficulties because of abusive management. The government has an obligation here to enter into the thick of things and nationalize the plants, ensure that they have markets and providing support where needed, thus saving thousands of jobs. In Germany, for instance, the government subsidizes salaries for two years in order to ward off dismissals in time of crisis. (Source). Even in the US, Barack Obama took far-reaching measures to keep General Motors out of bankruptcy. (Source). But Steinitz has decided to be more Catholic than the Pope. A hands-off policy does not harm the mismanagers—they've already returned their investments. But it does harm the workers, sending them to the Unemployment Bureau or worse, the Wisconsin Project—yet another fabrication of private capital, designed to make a fortune on the backs of the jobless.