Lapid’s Un-innovative Budget

Up until he presented his budget, I admired Yair Lapid and was impressed by his entry into the Ministry of Finance. He built a great management team starting with Yael Andoran. Hiring the right team is always the first step to success. I still admire his ability to make tough choices and stand up like a man and tell the public this is going to be tough. Tough choices are necessary and Yair was going to make them.

So you can imagine my surprise when I saw that not only did he not make tough choices but he reverted to the spineless budget cutting of old, the horizontal cut. This is essentially a budget with no decisions on what is important. Spineless. The press has focused on Lapid’s tough decrees that will hit families and and the “Middle Class.” Guy Rolnick correctly focused on Lapid’s decision not take on the “connected few” such as the Histadrut unions and the conglomerates. However,what I cannot get over is that Lapid’s budget has no vision for what we need to do to grow our economy and this lack of vision and action will turn us into Greece.

Any company, and national economies are no different, knows that you cannot cut your way to growth. You certainly can’t do it by cutting every division. Lapid’s key target needs to be growing the economy. Economies grow through innovation. That is a fact. And this budget and its attendant press offensive did not mention investment in innovation even once.

Economies do not grow because of unions; they do not grow because of services, they do not grow because of welfare and they do not grow because of government bureaucrats and port workers. They grow through innovation. Therefore, what Lapid should have done was slash un-innovative parts of the budget and invest the savings into innovation drivers. He needed to rotate capital away from spending and into investment in human capital. Unfortunately for us, Lapid’s budget had none of that. He slashed everything horizontally, effectively not making a decision on slashing non-growth sectors. Like all the horizontal cuts before, he meekly and fecklessly did not make a decision on what was important yo our economy He taxed horizontally and did nothing to INVEST in creating innovation opportunities for more people in Israel’s economy.

The Innovation sector in Israel’s economy has not grown for well over a decade. I outlined this years ago in theHummus Manifesto and again recently. This is because innovation requires human and technology infrastructure and Israel has invested in neither. We have not increased the % of the population involved in the innovation economy because we have not invested in their skills. This is why unemployment is growing and will continue to grow. If you do not enhance the populations basic skills to compete in the 21st century economy they will be on the unemployment merry-go-round. We have not attracted new kinds of small businesses because the communications infrastructure and service infrastructure that powers so much of that emerging global economy is stillborn in Israel.

Lapid did not tell us he was slashing the government and investing in training masses of people to join the innovation economy. He issued slashing decrees without a commensurate investment in human capital for the future. How come when he slashed child allowances (debt) he did not offer vouchers to retrain people as software engineers at Checkpoint or pharmocologists at Teva? Shelly Yechimovich sees Checkpoint, Teva, Intel and the like as fat cows that need to be milked by the government bureaucracy. I see them as the best training ground to help Israel’s population up-skill to the 21st century. I am not sure what Lapid believes because his budget does nothing about this. I believe in the people of Israel to up-skill through education, join the innovative class and grow our economy. Anyone can do it if you dedicate yourself to it and provide opportunity to finance it. Lapid raised taxes without saying that it would be invested in communications infrastructure to enable people to open their own small businesses and service a global market with their talents. Yair, where is the investment for the future? you know, the Atid!!

This budget is all blunt cost cutting that did not stake out growth priorities for our growing population and it did not rotate capital to investment in the future. It did not cut hard into Ofer Eini to invest in the skills of Massuda fromYerucham or Shlomi from Shchunat Hatikva. You know what that means? We will see Yair’s blunt knife again in two years when the economy does not grow because we have not changed its makeup and underlying human and physical infrastructure. Did someone say Greece and Spain?

[Originally published on 10th May 2013 by MIchael Eisenberg]