The transfer of the Government Companies Authority (GCA) from the Finance Ministry to the Regional Cooperation Ministry is not just one more example of the government’s misconduct and incompetence. It is a worrying example of the grievous harm done by the judicial upheaval. Other government actions, some no less damaging, pass almost unnoticed, when in a well-run country they would lead to a public outcry.
It is another step in damaging the economy by moving from professional unbiased management to a spoils system based on political connections and party influence. The inevitable result will be the poor performance of important companies, lower government income, diminished services – and poorer citizens.
Israeli government harms economy shifting to biased spoils system to reward party loyalists
The GCA is responsible for 70 companies with assets of NIS 222 b., 55,000 employees and revenues of NIS 75 b. It supervises companies that affect us all, such as the Israel Electric Company, Mekorot, the Haifa and Ashdod ports, as well as companies vital to Israel’s security, including Rafael and Israel Aerospace Industries.
The unnecessary transfer was another wasteful and ludicrous example of the government putting petty politics and ministerial egos ahead of the national interest. Its only purpose is to satisfy the demands of cabinet minister David Amsalem, for more power and influence. His power will stem from his authority to appoint hundreds of directors to the boards of government companies. It is obvious that the appointments will not be based on ability or merit, as the government has already made its intentions clear.
The government also wants to abolish the nivcheret directorim (pool of qualified candidates), the process by which directors of government corporations are selected in a non-partisan fashion according to professional criteria and competence. The system was developed to replace the previous situation in which directors were chosen on a partisan political basis.
Undoing this merit-based system is a clear attempt to give jobs to party loyalists, regardless of qualification. The result will be poorer management of important government corporations. But the damage would not stop there: once it becomes clear that advancement will no longer be on merit, but rather through political connections, talented men and women will no longer make careers in government companies, with their place being taken by flunkies.
Taken together, they put Israel on a slippery – and steep – slope that can lead to preferential treatment for the politically well-connected, discrimination against those lacking political connections, and a weaker economy. An independent and professional civil service characterizes successful economies such as the US, Singapore and Hong Kong. Its absence often leads to corruption, poor performance and sleaze.
They put Israel on a path to “crony capitalism” where political insiders reap enormous benefits while the population pays the price. The economy suffers and the country is weakened.
A successful economy depends on a complex interaction of human capital, social cohesiveness, stability, strong institutions and good governance. The current government appears to be leaving no stone unturned in weakening the basis of Israel’s economic success. Subjecting government companies to dubious political interference reduces vital human capital, weakens important institutions, destabilizes management and is the opposite of good governance.
So, while pork might be abhorrent to the current government, pork-barrel politics and patronage are on the menu.
The writer is an international macroeconomic consultant, formerly a member of the Bank of Israel Monetary Policy Committee, and a past adviser to the bank’s governor.