Can Israel avoid a lost generation?

With more and more young people becoming unemployable, radical measures are needed on several fronts.

The current issue of "The Economist" has a cover picture of people being discharged into a trash dump, with the headline "Generation Jobless" and the subtitle "The Global Rise of Youth Unemployment". In the article inside the magazine it points out that youth unemployment, as reported by official statistical agencies, which undoubtedly miss many of the unemployed, even so totals more than the population of the United States.

Other recent articles were titled "Long-Term Joblessness is a National Emergency" (McClatchy newspapers) and "By Any Measure the Jobs Disaster Continues" (Wall Street Journal). It is obvious that this phenomenon is resulting in, and will continue to increasingly result in, a rising pool of jobless and rootless youth looking for a means of survival in a world which simply no longer needs them. A perfect recruiting pool for terrorist and guerrilla organizations and criminal syndicates. They will retaliate against a world that does not value them by destroying that which they perceive as preventing them from having a meaningful future, or to aiding the criminal bosses in stealing the results of the productivity revolution created by others.

With all due respect to the many economists, sociologists, other academics and journalists who have suggested multiple explanations for this extremely dangerous phenomenon, the basic reason is very simple: all the advances in technology and therefore productivity in recent years have been increasingly capital-intensive and therefore decreasingly labor-intensive. Advanced robotization and 3-D manufacturing; information and bio-technology wonders, even advanced medical devices and procedures all require greater investment in capital and in scientific and technical and managerial skills, and less and less real demand for labor.

This being the diagnosis, and the prognosis being starkly pessimistic, what does the prescription look like?

One possibility, remarkably recommended by many groups that claim to be favorable to the "working class", is an economy based more and more on government handouts, loans and assistance of all kinds, which will inevitably tend toward a social structure made up of an underclass, including immigrants, doing menial labor; a permanent and growing class of what may be called "serfs of the state", dependent on government income transfers (about sixty million in the US at this time), a class of well-remunerated knowledge workers and a small but extremely wealthy class of owners of productive capital. But this structure is unsustainable, because society cannot maintain its cost indefinitely, leading to the kinds of situations seen today in many of the European Union countries, where "austerity", demanded for bailouts, precisely affects most strongly those dependent on the state. It should be noted that for the first time in the history of the radical May-Day demonstrations, so prominent in Europe and elsewhere, such demonstrations were widespread this year in the US.

The only sustainable solution is investment in scientific and technical education to increase the pool of truly productive knowledge workers, and even more important, to adopt measures to encourage the spread within society of the ownership of productive capital, about which I have written several times previously in these columns--such things as employee stock ownership plans and community investment trusts.

Where does Israel stand in this melancholy picture? The education challenge has been to a large extent met in recent years, and Israeli scientific, mathematical and technological education is the envy of the world.

The other challenge, that of the spread of capital ownership in society, has scarcely been touched, although recent reports of pending legislation to break up the private economic monopolies, is encouraging. It would also be a perfect opportunity, along with the offshore gas bonanza, to adopt measures to expand capital ownership.

Will the opportunity be taken?

Norman A. Bailey, Ph.D., is Adjunct Professor of Economic Statecraft at The Institute of World Politics, Washington, DC, and a researcher at the Center for National Security Studies, University of Haifa.

Published by Globes [online], Israel business news - - on May 5, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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