Despite more than 30 years of economic reforms that have helped transform Israel, its economy remains saddled with bureaucracy and regulation that make life difficult and expensive. The economic reform campaign developed by the Israel Center for Social and Economic Progress (ICSEP), based in Mevaseret Zion, has been named one of six finalists for this year’s prestigious $100,000 Templeton Freedom Award, which will be awarded at Freedom Dinner 2016. Through its campaign, ICSEP has designed and enacted an array of successful reforms that include reducing the tax and bureaucratic burden for small businesses, breaking the banking industry’s credit card duopoly, scaling back duty fees, and liberalizing import laws so that goods and services are less expensive for families.
“Since our main effort has been the total restructuring of Israel’s economy we could not have achieved what we did without getting help in changing government policies,” said Daniel Doron, founder and director of ICSEP. “The main yardstick by which we measure success is whether the reforms we initiated actually were accepted by government and implemented, and how much of our initial proposed policy changes survived the inevitable political grinding mill. We believe that considering the magnitude of the challenge we faced and the results achieved we can look at what was accomplished with great satisfaction.”
Founded in the late ’70s to free the Israeli economy from the shackles of a socialist and statist system, ICSEP has had an outsized influence on Israeli policy despite its small size, leading a series of major reforms that have transformed the Israeli economy. Still there remains much to accomplish, and ICSEP has worked closely with the Israeli government within the past two years to ensure a smooth implementation of its newest set of foundational reforms.
Reducing regulatory burdens, opening markets
ICSEP’s plan to reform the economic environment for small businesses “was launched recently after years of preparation,” Doron said. “It is designed to remove the many obstacles that make opening a new business in Israel and expanding it extremely difficult. Israel is listed in the 53rd place in a World Bank ranking of doing business in 189 countries. Specifically, these reforms will reduce the excessive regulatory and bureaucratic burden on small businesses, and cut their tax burden and costs of operation. It will also enable the emergence of new financial entities that will make possible small businesses access to credit that big banks at present deny. Increasing the number of small businesses will not only enhance competition and efficiency and lower prices, but will also create a wider constituency of entrepreneurs with a positive attitude toward markets than that of many Israelis. Considering that every third Israeli is presently employed in the public sector, such a change in attitudes will be of immense strategic significance.”
This year, ICSEP’s considerable long-term involvement in financial market reforms has culminated in breaking the credit card duopoly in Israeli banking. As a result of ICSEP’s efforts, the government created the Strum Committee to issue recommendations for banking reform and empowered it to open doors to new competitors in the credit card sector, which had previously been entirely owned and controlled by Israel’s two largest banks.
Economic protectionism has led to a highly inflated cost of living in Israel, and ICSEP’s 2015 cost-reduction reform will decrease duties and liberalize imports in order to put pressure on the inflated prices of all goods and services caused by Israeli monopolies. ICSEP has been closely involved for many years with reform efforts to reduce inflated monopoly driven costs, and many of the measures that it has proposed have been passed into law.
“The reform is designed to ease the import of dry foods such as breakfast cereals, pasta, cookies, rice, and packaged snacks,” Doron said. “It will take full effect in a few months. It already decreased some of the commodity prices. The act reduces delays and bureaucratic obstacles to importing foods in specified categories, including a simplification of import requirements. For example, it eliminates the need for importers to present certain original documentation from the food manufacturer. It also allows for parallel imports, in which multiple businesses can import the same goods from a foreign manufacturer, ideally creating price competition between the various importers. The easing of procedural requirements and documentation should cut shipping time and costs.”
Building diverse reform coalitions
Israeli politics can be highly contentious, Doron explained, so one of the keys to ICSEP’s success is its ability to identify areas of agreement that enabled the organization to form unlikely coalitions, particularly with people or groups that view markets with suspicion and even hostility. ICSEP’s innovative strategy allows cooperation to flourish between opposing parties on practical grounds, disregarding ideological differences.
“We begin our work by identifying strategic areas in the Israeli economy that are badly affected by excessive government interference, as well as political opportunities to reform them,” Doron said. “This way, we ensure that there is a realistic chance of actually implementing our reforms and that we are not wasting time and resources on lost causes. We then create a coherent plan and begin contacting leading figures — politicians, bureaucrats, economists, public figures, etc. to gain their support. When our attempt to navigate the reform through the political system begins, we create public support for the reform, as well as counter opposition efforts, by various means, such as mobilizing student groups to demonstrate, publishing opinion pieces in the economic and general press, working with some sympathetic politicians and leaders to create needed support for the reform. We hold seminars and conferences, use social media, websites, blogs, forums, talkbacks and other means to influence the progress of the debate.”
About the Templeton Freedom Award and the additional 2016 finalists
Awarded since 2004, the Templeton Freedom Award is named for the late investor and philanthropist Sir John Templeton. The award annually honors his legacy by identifying and recognizing the most exceptional and innovative contributions to the understanding of free enterprise, and the public policies that encourage prosperity, innovation, and human fulfillment via free competition. The award is generously supported by Templeton Religion Trust and will be presented during Atlas Network’s Freedom Dinner on Nov. 10 in New York City at the historic Capitale. The winning organization will receive a $100,000 prize, and five additional finalists will receive $25,000 prizes. In addition to ICSEP, other nominees for the 2016 Templeton Freedom Award include:
- Centre for Justice, based in Stockholm, Sweden, for its Litigating for Liberty project
- FIRE (Foundation for Individual Rights in Education), based in Philadelphia, Penn., for its Legislative and Policy Project
- The Foundation for Government Accountability, based in Naples, Fla., for its Restore the Working Class project
- Goldwater Institute, based in Phoenix, Ariz., for its Right to Try Initiative
- Lithuanian Free Market Institute, based in Vilnius, Lithuania, for its Economics in 31 Hours textbook
For media inquiries about the 2016 Templeton Freedom Award, contact Daniel Anthony at Daniel.Anthony@AtlasNetwork.org or (202) 449-8441.