I didn’t hear the “Re-Vo-Lu-Tion” chants that Gershom heard because I was unable to attend the demonstration Saturday night. Had I not been otherwise engaged, I would have attended, but I suspect that I would come home more meditative and less enthusiastic than my blog partner.

Like Gershom, I’m delighted to see Israel’s young people wake up to the fact that they can change the society they live in. And I’m even more delighted to see the citizenry in general growing mad as hell at the massive inequalities that have emerged in Israeli society since the market and profit motive became the new idols worshipped by nearly all Israeli politicians.

But Gershom and I have a long-running debate over economic policy. He harks back to the socialist economy of the 1960s and 1970s as a golden time, when the government (along with the Histadrut labor federation, virtually its alter ego) provided a comprehensive package of social services to the populace run by a huge and inefficient bureaucracy. The social services were adequate but offered poor and rude service, and the red tape and wastefulness caused many social ills. Huge amounts of time were wasted waiting in lines; inefficient and low-paying industries were heavily subsidized, strangling innovation; and there was little choice, neither in goods nor services. Furthermore, inflation was high, constituting a hidden tax on wage-earners and entrepreneurs. Perhaps our differences stem in part from the fact that, back then, Gershom was a salaried employee while I was self-employed.

So I welcomed many of the economic reforms of the 1980s and 1990s, those that made Israel’s economy freer, suppler, and more consumer-friendly. At the same time, I was dismayed by a worrying gap between free-market rhetoric and policies that, rather than encouraging true competition, in practice created a system that benefited a small coterie of plutocrats. Instead of using regulation to prevent monopolies and cartels from developing—and they are almost inevitable, if unchecked, in such a small country—leaders fell under the sway of money and, instead of regulating the rich and powerful, subsidized them.

It’s great that the public is finally waking up to the fact that it need not pay artificially high prices nor tolerate a system in which the tax burden falls disproportionately on the middle class. However, when people realize they are getting a raw deal, they do not necessarily push for wise policies. In fact, here in Israel we have a precedent for populist and justified demands for greater equality leading to economic disaster. In the early 1980s, after the Likud came to power, Menachem Begin wanted to give a better deal to the poor in the Mizrahi towns and neighborhoods that had supported him for so many years. The need was real but the free-money policies pursued by Begin’s third finance minister, Yoram Aridor, led to hyperinflation and a collapse in the stock market—precisely because Aridor packaged as good for the poor policies that were actually designed to help the rich. (One of the great ironies of that time was the Likud’s David Levy, the party’s senior representative of the downtrodden, vociferously opposing the imposition of a capital gains tax.)

The same thing can happen today. Yossi Sarid provided one important warning last week:

The first warning is to the environmentalists, many of whom are actively participating in the tent protest. The national housing committees Netanyahu is proposing will revoke the rules and principles that ensure responsible, sustainable development and cause irrevocable damage. Netanyahu’s supertanker will lay waste to every part of the country.
Israel will become a no-man’s land once it is flooded with real estate. Not even the Zionist leaders of yore, Hankin and Ruppin and Ussishkin, would be able to redeem this land, nor will the middle class, which is now fighting to make this status one that offers a dignified living.
The real estate sharks, in their insatiable greed, will gobble up more open areas. They will be the first to take over another juicy chunk of state lands. Thus they will steal even the poor man’s plot, and this bargain will cost us dearly.

And that’s just one example.

The current demonstrations are genuine and important. But they are not yet wise. The question is how to combine their enthusiasm with the wisdom needed to create the better society that we all want.

Think back to those good old days, when the country was making makework for everyone. Remember getting shunted from one bureaucrat to another in grossly overstaffed government offices where everyone always seemed to be on break? Remember standing in line endlessly at the bank only to finally reach a surly teller? Remember sales clerks who thought they were doing you a favor by deigning to speak to you? Remember having to take an entire day off of work to see a doctor, because there was only “sick call” and no way of making appointments?

Keeping uncompetitive factories open by government subsidy may provide short-term relief, but in the long run it’s destructive. Manufacturers who know they’ll be bailed out have no incentive to innovate or to work efficiently. So they become less and less competitive and need more and more financial support.

Furthermore, a society in which there’s a culture of government support for inefficiencies is a society in which there’s no incentive to offer better goods and services than the next factory or bank or store.

I don’t worship the idol of capitalism. Government must regulate business, and often short-term subsidies and tax incentives can encourage the kind of risk-taking and innovation that a vibrant economy needs. But in the larger picture, what the government needs to do is provide a safety net for workers, not keep old factories open.

I don’t want to live in a society where profit is the only value. But a society in which profit is no value is a society that will steadily regress, becoming sullen and selfish in the process. Yes, I also sometimes miss the communal spirit of thirty years ago. But if we turned the clock back, I’d sure miss getting smiled at when I walk into a store.

Polgat, according to the news reports, couldn’t match the low production costs of Far Eastern competitors – especially when energy prices were soaring and the value of the dollar was shrinking daily. Most of the company’s export contracts were in dollars. Old-timers here recall a time when the dollar was considered a strong world currency and when using it for international contracts made sense.

As for labor costs, the news items did not detail how the Far Eastern competitors keep them down. We are supposed to accept the idea of garments and fabric and everything else being produced more cheaply in far away places where there are no safety protections for workers, no environmental standards, no social benefits, where it is accepted for workers to live in dickensonian conditions.

In Israel, we are also expected to accept that a factory in an outlying town must be able to compete on the world market and make a profit. At a different time in Israeli history, the government regarded full employment as a top political and human priority. Many of the factories were owned by the government or other public bodies, like the Histadrut labor union. If they weren’t profitable, they were less costly than having towns full of unemployed people, and less costly than letting those towns die. Old-timers here remember this time, far back in another century, when “socialism” wasn’t a dirty word.

Now Israel is supposedly thriving as a high-tech country. But as I wrote in an earlier post , the growth is all in the Republic of Tel Aviv, where high-tech and the financial sectors are concentrated. Places like Kiryat Gat can only survive if some of the high-tech wealth is taxed and used to support them financially and to improve education drastically so that the children of the textile workers can move into the new economy.

Danziger’s death made the news because he was the manager of the company, and because he died young and suddenly and immediately after his company died. The crumbling of 300 workers’ families and of the town will not receive such coverage. Danziger, to judge by the news reports, did think about such things, and died of it.