The Shalem Center, a Jerusalem research institute founded in 1994 with vaguely libertarian tendencies, sponsored this impressive challenge to the conventional wisdom of Israelis about their economy, an economy that after a decade's worth of remarkable growth is slipping back towards its earlier morass. The salutory effect of the mid-1980s hyperinflation crisis have worn off, and politicians feel free to return to their bad old habits-political meddling, creative accounting, and deal-making to protect little empires.
Klein and Polisar document how the erosion from budget discipline and reforms began slowly in the mid-1990s, with the negative effects being at first too limited to offset the powerful impulse given by better policies of 1985-92. But like a rot that spreads until the timbers are too weak to hold, inappropriate policies are causing a sharp deceleration in growth and a ballooning budget deficit.
Klein and Polisar's detailed policy recommendations are radical by Israeli standards, requiring the abandonment of government micro-management and many old protectionist special deals. But they propose nothing like Thatcherism-more like the United States of the Great Society. For instance, they would allow any organization that meets professional standards set by the government to offer health care, a very limited reduction of the monopoly of existing providers. Even so, Klein and Polisar are at the fringe of Israeli economic policy analysis. The Netanyahu government has endorsed market forces with ringing words but has done little to slow the spreading rot; and the Labor party actively encourages those who resist change.