The American Interest
Analysis by Walter Russell Mead & Staff
Israel’s Other Enemy: The Blue Social Model

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Public employee unions have a new international villain to add to their growing list: Israeli Prime Minister Benjamin Netanyahu. Bibi’s government is embarking on a fight to break the monopolizing power of Israel’s formidable port unions, the “gatekeepers for Israel’s international commerce,” that would make Wisconsin Governor Scott Walker and Mexican President Enrique Nieto welcome him to their company. Reuters reports:

The port unions – possibly the most powerful in the country with just 2,400 workers earning double the average public sector salary – are likely to be severely weakened and may have to make concessions or face layoffs.

The unions will not budge, [head of the Ashdod union Alon Hassan] said: “I am protecting the workers’ agreements that have been signed for tens of years. Fanatically. I am not open to unilateral attempts to breach such agreements.”

Articulating the government’s position, Finance Minister Yair Lapid said simply: “Let there be war.”

The government wants to introduce private piers opposite the country’s two main, union-controlled ports at Ashdod and Haifa, hoping that service will improve and prices will drop. With a mandate from January’s elections to fix the economy and little sympathy for unionized public employees from Israel’s struggling middle class, Bibi’s government looks determined to crack the institutions keeping competition impossible and the quality of services very low. The port unions are only the beginning: Bibi also has the airlines, car importers, and television operators in his sights.

People often forget that most of Israel’s founders were socialists and that strong unions and state enterprises have deep roots in the Israeli economy. But these decades-old institutions are taking a toll. In Israel as in many other countries, the legacy policies and institutions of the blue era are increasingly expensive and get in the way of economic growth and necessary reforms.

Israel has less and less ability to maintain these old arrangements. But the country’s unions, cartels and monopolies won’t give up without a fight.

[Haifa port image courtesy of Shutterstock]

Published on May 19, 2013 1:00 pm
  • Lorenz Gude

    Well spotted WRM! I have been aware of Netanyahu’s understanding that the Blue model needing to be walked back ever since I saw him on Charlie Rose many years ago. He told a boot camp story that supposedly pitted a large soldier with a small comrade riding on his back racing against a small solder with a large soldier riding on his back and a third team consisting of an average sized soldier carrying another middle sized soldier. The point was that if you ask the private sector to carry too large a public sector you get slowed down and if you privilege the private sector too much you get destabilizing inequality where the ordinary person has no chance, but if you find the sweet spot in the middle then things proceed best. Netanyahu, was the PM that first moved away from Israel’s very socialist past. Their Thatcher, as it were. He is still characterized as far right wing by the left for those efforts, but it now appears there is further work to be done clearing out some of the more costly enclaves of the Blue model. All of which leads me to say that it may be useful to notice how well Israel has been doing economically since the crash. For me the implication is that Israel is getting economics right where much of the West is still bitterly clinging to the inefficiencies of the Blue model. I would add that Australia is also doing well and that our center right Treasurer Peter Costello under the Howard government pursued very similar policies and we have done well. Of course Australia is the ‘lucky country’ full of natural resources. Then again so is Argentina in about equal measure, which shows that getting the balance right and administering it well is extremely important. Hmmm – just noticed. Big poorly run entities like the US and the EU not doing so well. Small countries like Israel and Australia doing well.