This week, former US Congressman Jack Kemp will arrive in an improved Israel, as far as he's concerned. An Israeli free of the socialist yoke that has burdened the country since its founding, refreshed and revitalized after a cold shower of economic reform and privatization that now enables it to cast off confining regulations and weighty government properties. It's as if Kemp himself had written the script for Israel's economy.
Not that he invented the formula, but the supply side economics that increasingly shapes the Israeli economy is an important part of Kemp's world view. More than any other US politician, the thickly coiffed Kemp is perceived as "Mr. Supply Side." For American Jews on the right end of the political spectrum, he is also a "Zionist goy," as he himself enjoys putting it.
The Israeli visitor entering Kemp's office suite at Kemp Partners, a lobbying organization and strategic advisory service located on Washington DC's Pennsylvania Avenue, only a few minutes walk from the White House, gets the full routine of Kemp shticks and tics. He pulls out two knitted skullcaps from "Yerushalayim," announces "I'm mishpocheh (family in Yiddish/Hebrew), and -- even before sitting down -- explains that El Al Israel Airlines (TASE: ELAL) is the only airline he flies with to Israel.
This time he will arrive at Ben Gurion International Airport as the head of a delegation of senior US financial executives selected because of their lack of familiarity with the Israeli economic scene. "We looked for people who don't know Israel's economy," says Minister for Economic Affairs to North America Zohar Pery. "We didn't want Goldman Sachs (NYSE: GS) or Lehman Brothers (NYSE: LEH), but rather, banks that haven't heard that much about us. This is a way of expanding the pool of investors in Israel."
Kemp got on the Israel bandwagon due to the star qualities attributed to him. He is no less a politician than a celebrity (at least in political-economic circles), a sort of Bill Clinton of the right-wing. He was also a professional football quarterback, the Republican representative of Buffalo, New York to the US House of Representatives, as well as Secretary of Housing and Urban Development (1989-1993) under President George H. W. Bush. This impressive resume opened doors for him as a lobbyist, particularly among the Republican majority of legislators.
"It's no secret that to make Israel delegations attractive, you need someone with charisma," Pery says. "It's all very well to announce a delegation headed by Zohar Pery, but who's going to come for that? With Jack, it's a different story."
However, the timing of Kemp's visit is interesting, as it comes just at the moment when the Israeli election campaign shifts into high gear. Kemp is expected to speak, at an event in Tel Aviv that will be open to the general public, about Israel-US relations as reflected in economics and politics. No doubt, he will sing the praises of supply side economics, and its proven and potential contribution to the Israeli economy. The question is whether he will also sing the praises of Likud party chairman and former Minister of Finance Benjamin Netanyahu, whose economic ideology derives from the same source.
Were Kemp an Israeli citizen, intuition tells us, he would be a Netanyahu voter. Netanyahu is an old friend who shares his opinions about economics, but Kemp denies vehemently that he has any intention of intervening in the Israeli election campaign. "I wouldn't want someone from Jerusalem coming and telling me how to vote in Washington, and it doesn't seem right to me that a Christian from Washington should tell the Israelis who to vote for," he said with practiced professionalism.
He then launches into a monologue. "True, Bibi [Netanyahu] is a friend of mine, but so is Shimon Peres, and I really have to meet Minister of Foreign Affairs Tzipi Livni. I hear she's a rising star. Perez... Perez... [Labor Party chairman Amir Perez] remind me what his first name is -- I definitely have to meet with him. I would convince him that he, and Israel, could gain a lot more from a flourishing economy, which can only be achieved through the proven track of reducing tax rates, privatization, reducing the regulatory burden, and especially by easing labor laws. If you can't fire workers, you can't hire workers. It's a recipe for a standstill. There's no two ways about it. I may be a capitalist from the Jabotinskyite side of the Israeli economy, but I'm also the founder of a labor union: the American Football League Players Association. We'll have something to talk about, even if the Labor Party does belong to the socialist side."
Labor and capitalism going hand in hand?
Labor and capitalism aren't enemies. They need one another. I come from a blue-collar background. My father was a truck driver. I want to see an economy in which a truck driver can buy the truck, like my father did. An economy in which a waiter can become a restaurant owner. When that happens in Israel, you won't see trickle-down economics. You'll see Niagara Falls."
Would you be prepared to outline a possible scenario for the Israeli economy, in the event of a hypothetical Labor Party election victory?
Jack Kemp: "You won't get even one word from me about that. The citizens of Israel are the ones who'll decide, and a Christian from Washington should not interfere."
Kemp then presents his visitor with a newspaper clipping, an article by "Newsweek International" editor and "Washington Post" columnist Fareed Zakaria, bewailing Europe's gradual decline because of its refusal to adhere to correct economic principles. "Europe is in deep trouble," Zakaria writes. "These days we all talk about the rise of Asia and the challenge to America, but it might well turn out that the most consequential trend of the next decade will be the economic decline of Europe."
Does this prophecy hold true for Israel under a Labor Party government?
Kemp shudders at the thought. "Who said that? When?" He stresses that he just thought it was an important article.
Kemp has a long-standing involvement in the Israeli economy. He first came to Israel a year after the Entebbe Operation to participate in a ceremony in memory of operation ground force commander Yonatan "Yoni" Netanyahu. Since that time, he has been a friend of the Netanyahu family. Later on, after Benjamin Netanyahu was elected Prime Minister, Kemp spearheaded the campaign to wean Israel off its reliance on foreign aid.
"One clear fact was that the slowdown in the Israeli economy began in 1974, together with the major increase in US foreign aid," Kemp wrote in a July 4, 1996 editorial for the "Forward." "This aid, which was given with the best of intentions, inadvertently contained a problem. Instead of aid being channeled into the economy, these funds were used to fuel government expenses. And although government is not evil incarnate, as it grows, it takes more and more resources and monitoring abilities, and becomes inefficient."
At that same time, by chance or by design, then-Prime Minister Netanyahu spoke before Congress and announced his intention to gradually reduce Israel's dependence on foreign aid. This process is due for completion at the end of fiscal 2008.
Kemp now says that he isn't sure whether his ideology was the inspiration for Netanyahu's declaration. You needed the money, he says. But, he also says, in the end the best sort of aid is the free market. What's good for Jordan is good for Africa, for the US and Israel. At this stage, he says, Israel's biggest problem isn't foreign aid, it's the tax burden on its citizens. Reducing the marginal tax rate is always the best way to spur economic growth.
Like the legendary Roman senator Cato, who ended every speech of his in the Senate with the cry, "Carthage must be destroyed," Kemp is always direct. He has no love for any regulatory body, and there is no tax initiative that he could ever take to heart. For him, economics encompasses everything; even politics derives from it.
"Economics is the most important driver for the human race," he says. "Everyone needs a house to live in, food to eat, clothes to wear."
Apparently, this doesn't apply to the Palestinians. They give the impression that they're willing to commit economic suicide, and give up billions on foreign aid, all for the sake of adhering to the principle of destroying Israel.
"The Palestinians aren't any different. They have the same needs as any other people. Their time will come, too."
Published by Globes [online], Israel business news - www.globes.co.il - on Monday, February 20, 2006