Dan Caspi
The American dream shattered
Financial crisis proves that unrestrained free market policies may be wrong for Israel
The global financial crisis requires an Israeli process of self-examination. In recent years, we have seen an incisive debate take place around here between two different economic worldviews – a planned economy and a free market. For the time being, the latter has the upper hand.
The neo-liberal approach blossomed along with the political revolution that took place three decades ago when Likud came to power for the first time. What we saw was accelerated and uncontrolled Americanization of the Israeli society: whatever we see in America is good for us too! The Israeli followers of this worldview have been relaying on the American model of a free market – although at this time we can refer to it as “seemingly free.”
In the name of obsessive adoration of market forces, Israel’s economic leaders accelerated the privatization of public assets and vital services – welfare, health, education, etc. However, the gravest financial crisis since World War II, as former Fed Chairman Alan Greenspan characterized it, has in fact shattered the “American dream” of many Israelis.
To a large extent, the selective coverage of success stories and successful figures and almost complete disregard to the losers and failures allowed for almost ideal dreaming conditions. Journalists and editors were intoxicated by grandiose parties thrown by newly wealthy Israelis who realized the American dream. They have been glorified and characterized as the Israeli economy’s engine. Meanwhile, those who attempted to point to the maladies associated with the free market, and particularly the high social cost expected to be paid by Israeli society, have been condemned and expelled from the confines of the consensus and public discourse.
Government interference still essential
In fact, the weakness of “market forces” has been exposed, with the current crisis showing that they have no more wisdom than the public sector. What was perhaps known to a small number of people and hidden through a well-oiled public relations machine has been now exposed to all: Market forces are not free and are also not overly wise, and when they stumble they require the government’s help. Even financial whizzes are characterized by amateurism and clumsiness.
In fact, free trade and free market players enjoy public backing, and thanks to it they are able to speculate and distort the division of wealth in their favor. The estimation that financial losses are paid by them is no more than an optical illusion – the final bill is submitted to the public.
Government interference in the economy was and is essential, if only to prevent national disasters. And so, the Fed chairman is expected to intervene in the interest rate while his Israeli counterpart, the Bank of Israel governor, rushed to purchase millions of dollars a few days ago in order to moderate the strengthening shekel. Meanwhile, Knesset members approved generous assistance to victims of the Heftsiba affair who have been tempted to purchase apartments from a dubious contractor.
The continuing economic crisis is highly important mostly because of the lessons that accompany it: Market forces are not responsible enough to be entrusted with our economic fate without proper government supervision. This is an opportunity to reconsider what the “Israeli dream” is all about – a society that nurtures individualism and private wealth or a society that sanctifies solidarity and mutual responsibility.
Professor Dan Caspi chairs the Department of Communication Studies and heads the Burda Center for Innovative Communications at Ben Gurion University
