An opportunity to create a fairer Israel

Dr. Norman Bailey

The Alaskan Native Corporations are an example of how we should use gas revenues to give all Israelis a greater share in their country's wealth.

In recent days two spectacular events took place, both, for a change, positive. Iranian General Qassem Soleimani was assassinated by a US airstrike, which event elicited an enormous amount of comment and analysis, and the beginning of the production of natural gas from Israel's Leviathan gas field, which received a good deal less attention.

Nevertheless, the latter is likely to have a much longer positive impact on Israel than the former. Later this year, according to legislation passed years ago, the Israeli Sovereign Wealth Fund is supposed to begin operating. If it is managed like most of the other sovereign wealth funds around the world, it will act simply as an interest-gathering piggy-bank for the government during periods of economic retrenchment. Israel can do much better, addressing physical and social infrastructure deficiencies as well as addressing increasing wealth disparities.

In 2011 I was asked to participate in and to head the economic aspect of an overall plan for the economic and social development of the city of Akko. Akko, which has the largest percentage of Arab-Israeli inhabitants of any Israeli city not entirely Arab, suffered inter-ethnic strife between the Jewish and Muslim inhabitants leading to extensive rioting. The Jewish-Arab Center of the University of Haifa developed a program covering all aspects of urban life in Akko, designed to address the ethnic unrest through a development program which would better the lives of all groups in the city. The centerpiece of my part of the overall plan was the formation of a community investment trust, using the municipal lands as collateral for the initial funding, and with the shares of the trust distributed to all legal residents of the city. Thus every inhabitant would be able to participate in the earnings from property and commercial development in the city.

Community investment trusts (or corporations) are found in various countries, with the most famous being the native Alaskan corporations, which since their founding in the 1970s have turned the Alaskan natives (Indians, Eskimos and Aliuts) into the wealthiest native peoples on the planet. Commentators, journalists, social scientists and NGOs are constantly emphasizing the alleged fact that socially Israel is actually two countries: a high-tech sector which lives in the 21st century, and everyone else, who live in the fifteenth to twentieth centuries. They also lament the income and wealth disparities that this situation creates as well as the unacceptably high rates of poverty for a country as advanced as Israel.

This is not due to lack of jobs - Israeli has had a low unemployment rate for a long time and imports workers from near and far to make up for shortfalls. It is, rather, due to extreme wealth disparities (wealth defined as income-producing assets). And here is where we come to the new Sovereign Wealth Fund. After the fund has accumulated, say, 100 million dollars, all additions to the fund should be allocated fifty percent to improve physical and social infrastructure in the country (health, education, transportation and the like) and fifty percent to a National Investment Trust or Corporation (depending on the most advantageous structure in accordance with Israeli law), consciously inspired by the Alaskan Native Corporations, with the shares of the trust distributed equally among all the citizens of the country. The shares would be non-negotiable so as to avoid speculation in them, but inheritable. The trust would make investments in all aspects of the Israeli economy and distribute all income over administrative expenses as dividends to all shareholders.

In this way, without in any way affecting the rights of property or penalizing the wealthy for being wealthy, the rest of society would gradually acquire a substantial supplement to income from employment, and for the first time freedom from the fear of falling into indigent status as a result of illness, loss of employment or age. This use of the Sovereign Wealth Fund would also lessen resentment of that segment of the population that does not work because of religious belief and greatly lessen disparities between ethnic groups.

There is a wonderful opportunity that is opening up for all Israelis. Let's not let it be wasted on politicians or reinforce wealth disparities that are already bad enough. The start-up country can be transformed into one of economic justice for all.

Norman A. Bailey, Ph.D., is Professor of Economics and National Security, The National Security Studies Center, University of Haifa, and Adjunct Professor of Economic Statecraft, The Institute of World Politics, Washington DC. He was formerly with the US National Security Council and the Office of the Director of National Intelligence.

Published by Globes, Israel business news - - on January 16, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

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