The News Behind The News
January 30, 2000
Ran Cohen's Latest IdeaIn a January 30, 2000, story entitled, "Trade minister lobbies for Beit She'an and holds meetings with Volkswagen and Fiat execs," Ha'aretz details (without even realizing it, sadly enough) the beginnings of yet another government-led debacle. But we're getting ahead of ourselves. Let's put all of this in context.
As reported in Yossi Laster's recent NBN, "Ran Cohen and New Horizon", Minister of Industry and Trade Ran Cohen was running around trying to blame, threaten and bully the owners of a bankrupt textile factory that was left with no alternative but to fire all of its 110 employees. Cohen was purportedly livid that the factory had been granted millions of taxpayer dollars only to close its doors and fire its employees. What IASPS's Mr. Laster pointed out was that Cohen was adeptly playing the media and the masses by shifting responsibility from his ministry, the ministry that paid out all of those wasted millions, and pointing the finger at the owners, who themselves lost millions of their own hard-earned dollars.
Now it doesn't take more than a quick glance to know without any doubt that the schmattah (Yiddish for 'textile') business is no place for a good Israeli Jewish boy or girl (or for that matter Israeli Arab or even Palestinian). This conclusion is not the product of some wrong-headed elitism (or Jewish mother), but rather pure economics. Israeli Jewish, Israeli Arab, or even Palestinian laborers simply cannot compete against Jordanian or Egyptian poor. The difference in pay scale within Israel's borders simply makes production costs prohibitive and Israel's quotas for barrier-free entry to the EU or North America just don't make up the difference.
But textiles are not unique. Heavy industry, certainly the low-value added variety, is not profitable in Israel, plain and simple. The cost of labor is prohibitive. So, if that is the case, when is it profitable? According to the Ha'retz story, something must be going on in Israel to attract the manufacturing plants of Israel Chemicals Limited (ICL), Volkswagen (VW), the Israel Corporation (IC), and Fiat? What unique manufacturing assets in Israel would entice these industrialists to be talking to someone as hostile to big business as Minister Cohen? Do you really want to know?
If you do, and if you are a regular reader of IASPS's NBN column, then you know the true path to what drives big business (or for that matter, peace, politics and everything else) in this country. The Israeli mantra, as we know all too well, is: Show Me The MONEY! Now, one might be tempted to respond that this particular mantra is not so unusual for big business, in fact it is even healthy. But, of course, that response could only come from an absolute neophyte or government spokesman. Because in Israel, Show Me The Money does not refer to the bottom line of revenues generated from sales less costs.
In Israel, the bottom line is Show Me The Government Grants and Hand-outs! or as we call them, the Free Money. Thus, the high-powered talks going on in Davos, Switzerland between big business and Minister Cohen have little to do with business profits and everything to do with the wonders of Statism and the waste of taxpayer dollars. Let's examine the examples cited in the Ha'aretz story. ICL has no choice but to do business in Israel or lose its monopoly grant to extract magnesium here (not to mention the grants and tax incentives). VW, too, which wants access to the magnesium for its own purposes, is hog-tied to ICL. IC, for its part, is just salivating at the opportunity to extract more money for its Tower Semiconductor facility. You see, it already has a facility in Migdal Ha'emek, for which it received millions of taxpayer dollars, and it would prefer to expand near its existing facility, but the Government decided to "de-list" Migdal Ha'emek from its "Prime Location List" for government grants. Now the hot spots are Ofakim and Beit Shean. All according to the government's liking, today. Business considerations? Value-added? Not a chance.
Of course, one day in the not-too-distant future Tower Semiconductor and any other heavy industry Cohen seduces with our hard-earned tax dollars to locate in Beit Shean will have to shut down and move out of Israel, firing the working poor, all because it will simply be too expensive to produce low-value added semi-conductor chips or widgets or whatever else they come up with in Israel. When that day happens, Cohen, or his successor, will scream at the owners demanding "the government's millions" back only to bribe yet another big business to get on the same merry-go-round. You see, big business will exploit any system that allows it to profit at taxpayer expense. That's the nature of the beast. REAL free markets weed these weaklings out and promote real profits and real jobs not just for Cohen's headlines today, but for generations to come. Cohen's carnival ride is nothing more than a cruel joke. But, you won't read that in Ha'aretz. And around and around we go.