The following article from today's Haaretz, show the role academic institutions can play as an arena for debate in deciding national direction, economics and the collective move into the future. The "blockbuster" video (in Hebrew) - not featured online at Ha'aretz can be viewed below here at TechnionLIVE.
Four years ago, then-Accountant General Yaron Zelekha was the government's punching bag, and accused of paranoia; today, Prof. Zelekha's theories on corruption and economic mismanagement are sweeping the protest movement.
By Sharon Shpurer
A video on economics has recently become an online blockbuster: a 2009 lecture by former Finance Ministry Accountant General Yaron Zelekha at the Technion - Israel Institute of Technology. It has been making the rounds on the social networks, and more than 58,000 people have viewed this one-hour-and-41-minute video on YouTube so far.
In the lecture, Zelekha says that "Israel is the poorest state in the West," that its "economic policy is distorted and should be systematically overturned," and that "Israel's government has created an oligarchy."
The number of people who have viewed this relatively long online video appears to reflect one of the main characteristics of the social protests: People want more than superficial slogans about economic policy. Articles in business sections about economic concentration and the cost of living, pasted up on posters at the tent camps, reinforce this trend.
"Had I known so many people would see the lecture, I would have made sure that all my lectures from that course were online," he told Haaretz. "This is only the first, introductory lecture in the course, which is on the Israeli economy's shift from labor to capital, and about ways of reversing this trend and making the economy just again, with fair and efficient resource distribution. Without a just distribution of resources, there's no efficiency or growth."
Many consider Zelekha to be Benjamin Netanyahu's protege. The two men have known one another since the 1990s, when Zelekha was head of economic affairs in the Prime Minister's Office. One Saturday in March 2003, Zelekha received a phone call from Netanyahu, a few hours after the latter had been appointed finance minister, in Ariel Sharon's government.
"I gave you a six-year vacation, but the holiday is over. I want you to come work for me," Netanyahu reportedly told Zelekha. Zelekha, then 33, had finished his doctorate and was not thrilled about returning to the public sector. Under heavy pressure from Netanyahu, though, he became accountant general in October 2003.
During his term, Zelekha received Netanyahu's full support, even when he took on the country's biggest businessmen, including the Ofer family and Eliezer Fishman. But then Netanyahu relinquished the portfolio and Ehud Olmert became finance minister. Zelekha had a new boss.
In 2006, Olmert became prime minister and Abraham Hirchson became finance minister. Neither supported Zelekha. In early 2007, Zelekha testified to the police's national fraud division about Olmert's efforts to help Australian shopping-mall magnate Frank Lowy win a tender for control of Bank Leumi. Olmert adjusted the tender's terms to help the Lowy group, which would cost the state hundreds of millions of shekels, Zelekha alleged. The police launched an investigation, and Olmert and Hirchson maneuvered to fire the accountant general. (This would have been the first time in Israel's history the accountant general was deposed in such circumstances .) In the end, Zelekha resigned.
Four years have gone by since he left the Finance Ministry. The Bank Leumi tender investigation was halted due to "insufficient evidence." Meanwhile, the political map has changed: Netanyahu is prime minister, Hirchson is behind bars for offenses including taking bribes, and Olmert is embroiled in multiple other corruption affairs. Prosecutors have already decided to indict Olmert in what is turning out to be the country's largest corruption scandal ever, the Holyland affair, pending a hearing.
Beyond corruption
Today, Zelekha is a 41-year-old professor. Unlike with many former accountant generals, the so-called tycoons made a point of offering Zelekha jobs when he left the public service. He established a consulting firm, but spends most of his time in academia. He is dean of the business management faculty at Ono Academic College, in Kiryat Ono, and a lecturer at other institutions.
"I don't like to use the term 'corruption,'" says Zelekha. "That minimizes the problem. Olmert and Hirchson's cash envelopes - that's corruption. Big businessmen can say, 'Take care of corruption, what's that got to do with us?' but the economy's main problem isn't cash envelopes, but rather fundamentally unsound economic policy, which ought to be overhauled. This government, like its predecessors, ran an economic policy of an oligarchy. This is not anti-poverty policy, but rather pro-poverty policy. It manufactures poverty."
Are you disappointed in Netanyahu?
"I have a lot of respect for Bibi, and the fact that I am very friendly with him on a personal level is no secret. But I have no response to your question. Aristotle once said that Plato was a good friend, but the truth was greater than them both."
Do you think Israel is a poor country?
"Israel suffers from the highest levels of poverty in the West. Some 24.7 percent of the population lives under the poverty line. The middle class is closer to poverty here than in other places. Some 70 percent of households - the bottom seven deciles - have an average monthly income of less than NIS 15,000."
What causes this?
"It comes from the unequal distribution of income, which makes the cake smaller for everyone. The inequality causes poverty. It's a vicious cycle - unequal distribution makes the cake smaller, which aggravates poverty, which increases inequality, which stops the economy from growing. Who is responsible for this - the government or the oligarchy? Economic policy is the main factor creating poverty.
"The problem includes very high indirect taxes [like customs and VAT], which, coupled with low incomes, mean people have high expenses. This also makes the country uncompetitive - Israel ranks 79th in terms of economic competitiveness, which is nowhere near the West. And if that's not enough, every few years we take a macro-economic blow due to a policy error, such as the decision to lower interest rates and create inflation two years ago."
Why was that a mistake?
"Inflation expresses itself in one of three spheres, or in all of them: in goods and services, in the capital markets and in the real estate market. The prices of goods and services rose 4 percent, but inflation was not really felt there. Why not? Because of the high poverty level. How much can prices be raised? So most of the inflation was felt in real estate and in the capital markets, where prices went up 50 percent. That is a bubble, and bubbles collapse in the end."
How is this connected to the oligarchy?
"The economic policy defends uncompetitiveness. It doesn't carry out reforms. Why not? Because that's how the oligarchy operates. That's the connection between money and political power. Money means large employers and manufacturers that demand government protection, and this protection takes the form of stifling competition.
"The government's job ought to be encouraging competition and pushing back monopolistic trends. The reforms would be simple to implement.
"I tried - unsuccessfully - to change how the government privatized things. I wanted to halt the use of tenders, which strengthen powerful groups and individuals. The tenders involve billions of shekels, and the privatization process means selling government companies' stock to the public. I tried to promote [reform] in the case of Bank Leumi, but then-Prime Minister Ariel Sharon stifled the [legislative] effort in the face of pressure."
Theories coming true
Since the Bank Leumi controversy, Zelekha's detractors allege he promotes paranoid theories about oligarchies. Yet as time passes, his conspiracy theories seem less outlandish. The legal proceedings against Olmert reinforce what Zelekha has been saying, and the economic theory he propounded two years ago in that Technion lecture has impressed thousands of people protesting the high cost of living.
"There are three levels of improper management," he explains in the lecture. "The highest one is when the state does not just take the fruit from the tree, but rather takes the entire farm. The state is rendering the public unable to influence economic policy.
"In professional literature, this is called appropriation. That is the primary damage to the economy. The reason for it is the connection between money and politics - and the media. No politician will talk about the issue, because if he opens his mouth, he won't be elected. He won't receive financing, and the media will attack him.
"How do I know this? I may not be a politician, but I addressed this subject. So what did Yedioth Ahronoth do to me? What did Globes do? Why is it that the newspapers with ties to money and politics attacked me? Why was Haaretz on my side, while the others were against me?"
Zelekha declares: "I'm not attacking the [newspaper owners], but rather the system."
These remarks were made a year and a half before Nochi Dankner purchased control of Maariv and joined the list of big businessmen who control Israeli media outlets.
Zelekha continues: "I'm not a politician, and I don't mind saying that I don't believe I have a political future. It doesn't matter who is elected; everyone does the same thing. Nobody will open up sectors to competition. Once again, they're talking about privatizing [the Israel Lands Administration], and how do they want to do it? They don't want to distribute assets among the public, but rather to give them to the controlling shareholders. Rather than distributing land to ordinary citizens, they've started to talk about tenders."
Zelekha says: "You could carry out at least 40 reforms in any sector you want: cellphones, banks, media, gas stations. We know how to carry out the reforms, but governments are doing everything to block this."
Brainwashed
"Once we agree that Israel is the poorest Western state in the world, you have to ask why, what's so unusual here? Most of us have been brainwashed for decades by the political culture and media culture," Zelekha continues in the lecture. "So we have several factors that seem unusual, but they're ultimately not that meaningful.
"I am not an expert on security matters, but we are not poor because of defense spending. True, our situation isn't the greatest. But if you look at the changes in GDP during Israel's wars and at other times, you'll see that during some wars, the economy grew, and in others it didn't. In general, the level of defense spending has been declining for 50 years. So it's not true that war is good for the economy, it's bad for the economy, but its economic influence is relatively marginal, it's not an explanation.
"What else do they tell us? That we are a young state. As it turns out, when Israel was established, the UN had 57 members, and now it has 200, and this means that three-quarters of the world's countries are a bit younger than we are, including Cyprus and Singapore. So that's apparently not the explanation.
"They tell us it's the settlements, the ultra-Orthodox, the Arabs and women. Recently the Finance Minister [Yuval Steinitz] came to the Kiryat Ono college and said what we've heard from other ministers, that the main cause of poverty is the fact that the ultra-Orthodox and Arabs don't work. There's no bigger error. What the minister said is that there are 600,000 potential workers who are idle. Anti-social behavior. Therefore we produce less and therefore we're poor.
"Now, let's suppose that these 600,000 persons were sitting at the Kiryat Ono college, listening to Dr. Steinitz's lecture, and they then said to themselves, 'Wow, he's right. We're anti-social and not working, and the whole country is poor because of us. We can't continue this way.' And then the 600,000 knock on the minister's door, and say, 'Dr. Steinitz, we listened and we're convinced, and now we've come to join the workforce. Where do we get involved?'"
Zelekha continues: "What, is anybody creating jobs here? Israel's economy lacks 600,000 jobs - and that's probably the most unusual aspect of our economy. With a workforce of 5.5 million, no Western economy created jobs for less than 60 percent. In Israeli terms, that means we should have 3.3 million jobs, but how many has the economy produced? Only 2.7 million. The economy produces fewer jobs than any other Western economy. Only 2.7 million people work here, because there are only 2.7 million jobs.
"If 600,000 Arabs, ultra-Orthodox and women were to join the workforce, meaning they were to start looking for work, unemployment wouldn't be only single digit. It would jump to 30 percent."
Almost two years have passed since Zelekha delivered that lecture. Now, as then, he still doesn't see a future in politics. Asked whether he would want to enter politics and influence the Knesset from within, he replies dryly, "No, thank you."
In another month, he will publish his second Hebrew-language book, "A New Socioeconomic Agenda for Israel" (Hakibbutz Hameuchad and Ono Academic College ). The timing assures this book more success than its predecessor, "The Black Guard" (Kinneret Zmora-Bitan), published in 2008. In that book, he accused politicians of corruption and other officials of turning a blind eye to the plundering of the public treasury.
