Most people who purchased apartments from Heftsiba
invested all their money in an apartment that was only there on paper and in most cases even took hundreds of thousands of shekel in loans, which they will have to pay back over the next two decades even if they don’t get their apartment.
Apartment buyers, who because of their innocence did not insist on their right to get a bank guarantee that would secure them against a case of bankruptcy, were punished by fate in the cruelest way possible.
Perhaps the perception that they were dealing with a large company that has been operating for a long time contributed to the decision to renounce the guarantee and save thousands of shekels. It is possible that the buyers, or at least some of them, simply fell into the trap laid by the company’s CEO. One way or another, for the average Israeli a financial loss of such scope is a disaster that he or she may not be able to recover from.
Well, isn’t it up to a welfare state to offer a safety net and help citizens who were subjected to the cruelty of fate? After all, the idea behind a welfare state is that of mutual support – the fortunate assist the ill-fated. High-income earners assist the low-income disabled, unemployed and elderly. Wouldn’t it be appropriate to also assist those who lost all their property?
In line with philosopher John Rawls’ doctrine, each citizen must place himself behind a veil of ignorance regarding his place in society and ask himself what kind of welfare state he would support had he found his place in society through a draw: He may belong to those who were fortunate, but he may also end up among the ill-fated, and particularly the group of home buyers hurt by Heftsiba who may lose their homes.
Standing behind the veil of ignorance, wouldn’t any reasonable person prefer that the government impose another tax on the general public in order to save the Heftsiba victims? A very small tax levied from every citizen, but holding great meaning to each victim?
Yet reality is a little more complex. After all, it’s unthinkable that Heftsiba victims deserve such compensation just because we’re talking about a large company that collapsed. After all, victims of bankruptcy by smaller contractors suffer no less even though they do not enjoy media coverage and Knesset committee discussions.
That is, the moment we separate the considerations of justice from considerations of popularity by Knesset and government members, it’s clear that assistance to victims of bankruptcy must be offered in a general manner and without discrimination. Those hurt by the bankruptcy of a small company should enjoy the same treatment as those hurt by a large company, or in other words, a country should be managed by policy and not through a random approach to each case of distress.
The relevant question is whether the Knesset should introduce a law that would see the State of Israel provide a guarantee to victims of bankruptcy? The answer to this question is negative. Such law would not only help victims, but also create additional ones, to a point where there are too many to fund.
Such legislation would not only encourage the shunning of responsibility, both by clients and contractors (as well as other manufacturers,) but also encourage schemes against the public. Customers will get large discounts, the contractor would steal the money, and the taxpayer would end up paying for the apartment. Once bankruptcy becomes an attractive option, regular economic activity would simply come to an end.
The writer is an economics professor at Jerusalem’s Hebrew University and a senior fellow at the Shalem Center
RSS
