What to do about the wealth gap
As widening disparities of wealth bring the prospect of Arab Spring-like political upheaval in the West, Israel has solutions to offer.
A recent issue of The Economist, in a long analytical article, emphasized the huge and growing place that government transfer payments represent in providing all or most of the income of about half of the American people; as well as pointing out the extreme complexity and openness to fraud of the system, as well as the disparities of such payments among the various states, with Hawaii the most generous and Mississippi the least so. Ironically, the same issue of the magazine highlighted developments in such areas as 3-D printing and advanced robotization, largely responsible for the income picture, due to the relentless surge of the importance of capital in the productive process and the ever-decreasing role of labor.
If these trends continue, and there is every reason to assume that they will, the American polity can expect to suffer the political and social developments that are taking place in the rest of the world. Already groups such as the Tea Party and Occupy Wall Street have emerged and the political system has become more and more dysfunctional. After the financial crisis of 2008, the public at large through its taxes, and future generations, through exponentially-increasing debt, bailed out the one percent. This fact is becoming better known with every passing year, and the public cannot be expected to ignore it, but rather to demand, through its elected representatives, that the holders of productive capital be punished by government action to expropriate their earnings to feed the government’s redistribution machinery, with all its very high processing costs. Already, public officials make more than those in the private sector in comparable positions. Populists of whatever political label will have ever-increasing success, as the new helot class votes for those who promise to maintain and increase their governmental handouts.
In future, claimants to privately-generated income will be increasingly limited to two groups, not mutually exclusive: those with high-level technical educations, and the holders of productive capital. In this regard, Israel is in a significantly better position than either the US or Europe. Technical education is excellent and its graduates are remunerated well. Many, if not most, hi-tech companies include among their employee benefits, shares in their companies, thus spreading the ownership of productive capital. The new, strengthened, anti-trust legislation, if vigorously enforced, will also help in this regard. However, much more can and should be done, through such mechanisms as employee stock ownership plans and community investment trusts. Ever-larger portions of the Israeli population of all religions and ethnic background would then have access to the ownership of productive capital.
Israel leads the world in many ways–the eight million showing the way to the billions outside. It can and should do even better.