Israel's Economy May Doom Soviet Aliyah
BAINERMAN, JOEL
Israel's Economy May Doom Soviet Aliyah Will Soviet Jews End Up Emigrating From Israel? JOEL BAINERMAN One of the benefits—indirect though it may be— of the massive influx of Soviet Jews to...
...Large and small companies do it all the time, successfully...
...Instead this money would be spent...
...These changes will, of course, take time— years...
...A small, basic apartment of 750 square feet costs about $75,000 in Israel—far too much for an immigrant's budget...
...Israel now has the potential to become a technological service center for the world while transforming itself into a skilled, manpower-oriented economy...
...The government's response to creating jobs is to build new factories with no reason to exist other than to employ new immigrants...
...it would circulate in the economy and stimulate the private sector...
...To date, the answer is clear...
...Apartments cost so much because prices of building materials are set by a single seller or a small cartel and land is extremely expensive...
...Soviet science is highly advanced in mechanical engineering, power electronics, metallurgy, computer languages, mathematics, petrochemicals, materials science and inorganic chemistry, but Soviet technology never got a chance to prove itself for lack of an efficient, market-oriented environment...
...A neat fit exists between the technological capabilities of Russian scientists and their Israeli counterparts: Because the Soviet Union is so immense, Russian technologists are large-project oriented, trained in a grand-vision perspective, an approach alien to native Israelis...
...Let this create demand, then we can sit back and watch how quickly a budding entrepreneur—Israeli or Soviet immigrant—will provide the supply...
...Only the private sector can do this based on increased demand from the local or export market or by producing a desirable service...
...Israel must invest in machinery and sophisticated manufacturing technologies in order to produce more efficiendy rather than increase labor on current production lines...
...You should be more aware of the dangers of Israel's current economic policy...
...Instead of $75,000 apartments in development towns, Israel should be building prefab homes that cost about $30,000 each and can be erected in a few weeks...
...Israel should not be deluded into thinking that, because it can easily acquire foreign loans, the bureaucracy can provide jobs and housing to the new immigrants...
...Soviet Jewish engineers and scientists could turn Israel into a supermarket of East-West technologies...
...Less than 2 percent of Israelis have graduate degrees...
...Israel must open its economy and transform its provincial, self-protected shlell economy into a participant on the international scene with a free flow of capital, labor and technology...
...These newcomers are more inclined to go into business than the more ideologically motivated Soviet immigrants who arrived in "the early 1970s...
...Israel's problems are too great to be solved quickly...
...Take housing: The government planned to build 45,000 new housing units in 1990...
...In the meantime, Israel should provide the immigrants with a livable stipend...
...The Soviet aliyah represents a potential gold mine if utilized properly...
...To unleash this vast source of entrepreneurial activity, however, we must reform Israel's economy to encourage small businesses...
...To put the matter differently, will bureaucratic, centralized, government planning or private, market-driven decisions determine how the job of restructuring Israel's economy is to be done...
...they are prepared for this...
...JOEL BAINERMAN One of the benefits—indirect though it may be— of the massive influx of Soviet Jews to Israel is that it will highlight Israel's deep-rooted economic problems and, perhaps, lead us toward dealing with them...
...Instead, Israeli contractors relied on cheap, unskilled Arab labor from the territories...
...Three to five years down the line Israel may have an increased foreign debt with billions of dollars spent on homes that no one wants to inhabit and on companies that build unsaleable products whose balance sheets have no future economic viability...
...Immigrant musicians, artists and actors could revolutionize the arts in Israel by establishing schools for gifted children...
...They could provide services to bridge the technological gap between East and West...
...The Soviet aliyah creates dangers as well as opportunities...
...Over 60 percent of those of working age have more than 13 years of schooling, compared to only 26 percent of Israelis...
...Currendy Israel's government apparatus consumes 57 percent of the gross national product, one-third of Israel's work force is employed in the public sector, and output per employee is half what it is in other Western countries...
...With immigrants spending their stipend the local economy will be stimulated...
...The Ministry of Industry and Trade is currently offering financial incentives to industrialists who employ Soviet olim (immigrants), such as subsidizing up to 30 percent of the salaries of olim for one year...
...In the late 1950s through the mid-1960s Israel helped Third World countries in Africa and Asia grow food...
...Lower the cost and hassles of establishing a small business...
...What Israel did for Third World agriculture, Soviet Jewish immigrants could do for the developing world in exploitation of energy sources, mechanical engineering, chemistry and computer languages...
...Learn what the olim themselves need and want, not what the bureaucrats think they need and want to give them...
...Soviet entrepreneurs could renovate homes or create moving, landscaping, catering and delivery services...
...What we need is flexibility...
...The estimated cost of creating one job according to the government's plan is $60,000...
...By taking the "you spend it approach," all options would be left open...
...The successful absorption of this wave of aliyah is an economic, not a Zionist issue...
...Soviet aliyah could be the major turning point in Israel's social-economic system, as it will eventually demonstrate the need to remove restrictions that strangle the country's economic life...
...Instead they must be part of a completely new structure—a more dynamic and economically free Israel...
...It will be terrible if Israel burdens itself with billions of dollars in new loans, used unwisely by a large, wasteful central-planning bureaucracy...
...The government should supply ^only the land and infrastructure—sewers, electricity lines, water and roads...
...In the end, this will be cheaper than providing new immigrants with jobs in government-created factories that have no economic justification...
...Who will buy the immigrant's apartment so he or she can make the move...
...Ninety-three percent of Israel's land is owned by the government and controlled by the Ministry of Agriculture, which in turn is controlled by farmers...
...But, as Israel's economy exists, it cannot absorb this quantity of technical and professional skill...
...This policy gives contractors financial incentives to build apartments in development towns, hoping to encourage immigrants to live there...
...This will only look like solving the problem...
...Rather than municipalities carrying out such functions as waste disposal and city maintenance, work contracts could be open to public tender...
...Israeli industry needs to shed workers to remain competitive in world markets, not take on additional ones...
...This would create entirely new industries...
...This new perspective could be tremendously useful in energy development and planning...
...But there are no jobs in development towns...
...Unless changes are made, these Soviet immigrants may never have a chance to build satisfying, prosperous lives in Israel...
...No government, Zionist or otherwise, can create productive jobs...
...The deficiencies inherent in the economy before this wave of immigration must be attended to first...
...But this may be better than building apartments following the existing government policy that clings to the antiquated notion of population dispersal...
...Diaspora Jews, instead of making a donation, could make a sound investment in Israel...
...Because Israel really doesn't know what the demand will be, five-year housing plans allocating and committing tens of billions of shekels are more dangerous than simply playing the game as we go along...
...Only 7 percent of the Soviet olim from the 1970s went into business for themselves, compared to 16 percent of the rest of Israelis who were in private business...
...Provide short-term credit through neighborhood banks instead of the Ministry of Industry and Trade...
...With all this will come new jobs and financial activity that will stimulate the economy...
...Russian Jews in Israel might be employed by Israeli and other Western companies as advisors to firms that want to export to the Soviet Union...
...Where will the rest of the money come from for the family to buy an apartment that costs $75,000...
...These prefab homes should be built where the immigrants choose to live...
...They have yet to ask how these donations will be used...
...every fourth Russian oleh has a graduate degree...
...I urge you to distribute the money raised by Operation Exodus to the immigrants themselves in the form of an annual stipend of, say, $10,000 per family"—more than the average Israeli salary...
...The proportion of academics and scientists among the new immigrants is four times that of the general Israeli population...
...Diaspora Jews are being asked to give, give, give...
...Then the emigration of Soviet Jews from Israel will begin, and the fruits of Operation Exodus will turn sour...
...Soviet scientists coming to Israel have had top-level experience on the Soviet space program, and they are experts in developing artificial foods, refrigeration and aerodynamics...
...Economic laws, however, simply will not bend to accommodate Zionism...
...Without industrial or commercial back-up, Soviet technological innovations rarely came to fruition...
...Less than one-tenth of this number were started...
...The tragedy will be if the most technologically advanced and educated wave of immigrants in Israel's history is forced to join the ranks of unemployed in dying development towns...
...Moreover, 60 percent of these olim are between 30 and 40 years of age, in their prime working years...
...Eventually this investment will be returned through local municipal taxes...
...Our leaders say that, because of the unprecedented size of the Russian aliyah (immigration), Israel is in a crisis and the country must accept their solutions regardless of how unsound they are economically...
...In Israel it takes an average of 27 months to build an apartment building, three times longer than in Western countries...
...They could be sold or leased for about $300 per month, and newcomers could pay the rent out of their $9,000 first-year government stipend...
...Israel is good at imparting technology to others...
...your job is to raise money...
...otherwise, the greatest aliyah since Israel's maturity will end in disaster...
...To administer these portfolios for investors, management companies will spring up...
...But today in Israel, borrowing is used to oil a machine that is in desperate need of a complete overhaul...
...The quality of the new Soviet aliyah is extraordinary...
...A sick government will decide, and the result is likely to be tragic...
...Discover how the new immigrants feel about the government forcing them to take on the financial and emotional burden of a mortgage and of the prospect of never being able to find a job in a development town like Dimona or Arad...
...Russian immigrants to Palestine in the 1930s developed Israel Chemicals and laid the foundations for what is now the Israel Electric Corporation...
...If an immigrant does move to one of these towns, what will happen when that person with an apartment and a long-term mortgage in Dimona finds a job in Haifa...
...The successful absorption of the new immigrants is essentially an economic, not an emotive issue: Can enough jobs be created and can enough homes be built...
...Where should jobs come from...
...No great economic disaster will occur if they don't find full-time employment for a few years...
...Israel's government is doing no better on the job front than on the housing front...
...The best way for Israel to help the immigrants would be to throw open the economy...
...Many of these Soviet Jews would also become entrepreneurs and small business people if permitted to operate in an open economy...
...The key to allowing literally thousands of Soviet Jews to build for the future is a free market economy that creates opportunities for the individual...
...Naturally, land is expensive when only 7 percent of it is on the private market...
...If we will it, we can make it so...
...When the incentives end, so will the jobs...
...We should not even try to fit the new immigrants into the existing structure...
...The bureaucrats must stop thinking that the way to economic independence is through local manufacturing and export...
...Fundamentally, there's nothing wrong with borrowing today to fund the future...
...that amount—without creating a viable job—will only add to Israel's debt burden (unless the money comes from an American donation...
...When a home can be built in Israel for $30,000 and rented for $300 a month, private investors will be there because they can earn a respectable 10 percent on their investment...
...Only in Albania and Cuba is so high a percentage of land owned by the government...
...Israeli building contractors don't know, so they have responded simply by not building...
...After finding a job, the immigrant can then decide whether or not to take on the burden of a long-term mortgage...
...Diaspora Jewry must exert its influence to change Israel's destiny...
...Zionism must find a way to survive within the world of sound economics...
...We cannot afford to pour cosdy borrowed funds into an economy that is neither efficient nor productive...
...A Soviet immigrant family is given a government-subsidized mortgage of $38,000...
...This would at least ensure that the money was spent in the open market to satisfy the immigrants' real needs...
...Come to Israel and spend time talking—especially to the new immigrants...
...Because Israel has neglected to make the necessary investments in technology, new building methods and capital equipment...
...Israel could offer that chance to Soviet Jewish scientists...
...Like the Soviet Union and Eastern Europe, Israel's future, as well as the success of the Soviet aliyah, boils down to whether the country has a productive and efficient economy...
...Located where the market is, prefab homes could be financed by the private sector...
...None of this money would be wasted on bad planning or operating the bureaucracy...
...Don't be put off by some Israeli government official who says, That's our business...
Vol. 16 • April 1991 • No. 2
