Though the lack of security and ideological bankruptcy play their part in emigration, arguably the single most important behind the Jews’ leaving Israel is the economy. Jews made every country of their residence prosperous – and prospered there. Jewish socialists achieved the opposite, they bankrupted both the communist Russia and Israel.
Israel’s military expenses do not explain the failed economy. The IDF costs the state about 10% of the GDP, which is high but not critical. The indirect costs amount to another 10-12% of the GDP. Those include lost GDP from conscripting the youth and reservists, pensions and medical care for casualties, and the cost of land taken by the army bases. There is also an issue of structural distortions in the economy: for example, the army and some ineffective military support companies attract many of the brightest minds which could be better employed elsewhere. There are also incontrollable costs of running Mossad, and large part of the police budget is also military in nature. It is safe to assume that 25-30% of Israeli GDP applies to military sphere. Although this figure is large, it doesn’t explain the two to five times’ personal income difference between Israel and America.
The touted costs of aliyah are questionable. Israel got considerable foreign aid to that end, and new immigrants quickly joined the work force, paying back to the state with taxes and GDP growth.
Israel’s welfare expenses aren’t that high. The controversial subsidies to religious Jews are altogether pale compared to the amount of private donations to them and the government’s subsidies to Arabs.
In an export-oriented economy such as the Israel’s domestic supply and demand are irrelevant. American software developers which outsource much job to Israel have a demand for any realistic number of employees so long as they ask for somewhat lower wages and benefits than their US counterparts. Israelis are much more efficient than, say, Indians, and don’t need to peg their wage requirements to Bangalore. Why, then, the Israelis who work for American corporations receive so low wages? Because the traditional level of wages in Israel, depressed by the decades of socialist rule, is quite low.
Israel needs to break away from her socialist legacy, and develop a free market economy which would make it unfeasible for Jews to emigrate. A few measures are obvious.
The government’s regulatory powers and agencies need not be reformed, but abolished altogether. It is better that Israel goes through a short “Wild West” stage than continues fighting the bureaucracy indefinitely. Insurance companies and liability bonds should take the place of preemptive regulation. Anyone should be able to open a business without any permits as long as he purchases liability insurance.
In order to end the spiraling real estate prices, zoning must be abolished. Anyone should be able to build on his land whatever he wishes. That would legalize the massive Arab illegal construction, but Arabs are not prosecuted for it, anyway.
All the state enterprises except perhaps the military should be privatized. Monopoly and licensing have to be abolished. Trade unions must be recognized for whatever they are: illegal cartels, prosecuted, and dismantled. Nepotism in the few remaining state enterprises should be made a criminal offense.
Banking and corporate law should be streamlined along the Swiss model to make Israeli jurisdiction internationally competitive. Israel can withdraw from unnecessarily tough money-laundering pacts: we have no problem with Columbia’s drug kings or Russian corrupt oligarchs.
Military expenses must reduced by relying on nuclear deterrent. Female conscription should be abolished. Males should be conscripted for six months except in those army branches which require extensive training. Even those branches should try the most condensed courses and conduct training on weekends instead of draining the economy of hyper-productive young Jews.
The compound tax rate, which includes customs duties, should be capped at 30%, and gradually decreased to 15%. Currently, the government adjusts the tax rate to provide for all its desired expenses; on the contrary, the tax rate should be fixed, and the government has to decide which of the programs to abandon.
Welfare should be reduced to the biblical minimum: society provides food for those who positively cannot provide for themselves. The poor can also be offered campus housing and basic medicine. Needy cannot be choosy. Many Jewish charity organizations would add to the state’s basic welfare, but Arabs would be left to their own. Jewish state won’t take care of them except for the very basic aid; recently expired food would do.
All schools and universities should be privatized. First of all, that would reduce the spell of ultra-left Ministry of Education. The government should only set basic rules of education, such as learning math even in yeshivas, and let the schools set their own schedules and parents choose the appropriate schools. The current curriculum is wasteful, students waste their time in schools, most courses lack the real-life relevance. Instead of paying taxes which finance the school system, parents should get long-term tuition loans – here is the trick – repayable by their children. That way, parents would not hesitate to bring up more children, and the children will eventually pay for their own education. In the legal doctrine, parents are entitled to make decisions on their children’s behalf; taking out a tuition loan is just such a decision. The Jewish state now spends tremendously on educating the Arabs who constitute a third of Israel’s young; with tuition loans, that would no longer be the case.
Israel, on one hand, needs to increase family subsidies, but on the other hand, doesn’t want to subsidize Arab families. The solution is tax subsidies: perpetual income tax reductions for working parents. Most Arabs officially lack substantial employment and won’t be able to claim subsidies.
Social security should almost cease. Every person is responsible for saving for his own retirement. If he didn’t, the government can provide him with the minimum charity (food, campus shelter, basic medical aid). Israel can also enforce the biblical commandment that obligates children to provide for their parents. In such a scenario, Jews would love to bear more children, who will be their retirement security.
