Nowadays, Israel is touted as an example of how a small nation can achieve great economic success, while Greece makes headlines as an example of economic disaster. But 30 years ago, writes David Shamah, Israel stood poised to go down Greece’s path:
Over the past decade . . . Israel has been a model of fiscal stability, as it has cut its public sector, reduced debt, and—most importantly—encouraged foreign investments. . . . [But in] 1985 inflation was running at over 500 percent a year and Israel was mired in debt. By cutting the public sector, devaluating the shekel, and opening up the economy to foreign investors, policymakers laid the foundation for Israel’s current prosperity. . . .
According to World Bank data, GDP per capita in 2004 was higher in Greece—$25,837—than it was in Israel, at $21,796. However, the Greek GDP per capita has not grown in the past decade, while Israel’s GDP per capita has risen by approximately 50 percent to $32,691 (in 2015 dollars). . . . Most importantly, in terms of international credit—the lifeline that sustains economies in the modern world—Israel is also doing far better than Greece. . . .
Why has Greece fallen on such hard times? All one need do . . . is to examine the economic policies of Athens. Strong unions forced the government to provide all manner of social benefits, such as a full retirement pension at age fifty-seven. . . . Unable, or unwilling, to cut the budget, the government has consistently borrowed to fund its obligations—and that avenue has now been closed off. Foreign investment has, as a result, fallen to near-zero levels, and Greece has been shut out of bond markets since 2010.
Read more on Times of Israel: http://www.timesofisrael.com/top-economic-aide-with-right-policies-israel-beat-greeces-fate/