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1992-10-23
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<o>#clip
<des>
Too generous U.S. financial aid to Israel may be damaging
that nation's economy by discouraging needed reform to
"dinosaur socialist institutions." (Pipes Commentary 10/92)
<doctype>article
<author>Pipes, Daniel
<author>Peretz, Martin
<title>Bush, Clinton & the Jews: A Debate
<serial>Commentary
<date>October 1992
<vol>94
<num>4
<pages>15-19
<excerpt>
<loc>p16c2g7-p17c1g2
<quote>
[Daniel Pipes:]
The [Bush] administration can hardly be accused of
penny-pinching with respect to Israel, or of adding
unreasonable conditions. Every year, it unconditionally
supported $3 billion in aid to Israel, much the highest
per-capita aid to any country. In 1991 it also backed a
$400-million supplement for housing and $650 million in cash
for damages suffered during the Gulf War.
All this said, doing <it>without</it> the loan guarantee
probably would have served Israel's long-term interests. To
absorb immigrants, the country needs growth, not aid. Yet by
permitting Israeli politicians to defer the hard decisions,
American handouts permit Israel's dinosaur socialist
institutions to limp along. The prospect of no loan
guarantee compelled the Israeli government to get serious
about economic reforms, privatization in particular.
Conversely, its granting may have unfortunate consequences.
For example, those major corporations on the block for
privatization--the telephone exchange, the state chemical
manufacturer, the state shipping line--may now remain under
government control.
Israelis themselves, in a development with far-reaching
implications, increasingly doubt the value of aid. Just a
year ago this view was restricted to a small band of
believers in the free market; now it echoes from all parts
of the political spectrum. For example, David Boaz, a former
state budget director, has openly aired his fears that the
loan guarantee might foster an "easy money" atmosphere which
could result in an expansion of government funding and
subsidies. The economics editor of the daily paper,
<it>Yediot Achronot</it>, has worried that it might turn
into "a kind of opium"; feeling $10 billion richer, the
government could allow difficult reforms to go
unimplemented. An economic correspondent for another daily,
<it>Ha'aretz</it>, has suggested that "now that we have [the
funds], I don't think we should use them. It will cause more
harm than good to the Israeli economy."
</o>