Israeli economist Manuel Trajtenberg calls for a “conceptual revolution” in relationship between government, private sector
Dr. Manuel Trajtenberg, whose committee submitted recommendations on social and economic reforms to the Israeli government following the country’s 2011 social protests, participated in an animated panel discussion on the challenges of balancing economic principles – particularly the aims of capitalism – with social values. The panel, moderated by Guy Rolnick, Editor-in-Chief of leading Israeli economics publication, The Marker, also included Sir Ronald Cohen (UK), Chairman of Big Society Capital; Adrian Gore (South Africa), CEO of Discovery; Abby Joseph Cohen (USA), President of the Global Markets Institute; and Lord Professor Robert Skidelsky (UK), author of an award-winning, three-volume biography of British economist John Maynard Keynes.
Trajtenberg attacked the “trickle-down” economic theory that wealth spreads from the top sectors of society to the benefit of all members of society, but emphatically noted that government cannot be expected to solve society’s problems by itself. He cited the example of Israel, which followed the “manual” of market-based economics that, while creating great wealth among the few, left many in society facing continuous financial difficulties. He attributed this to policies that placed an undue focus on the arithmetic of economics coupled with an insufficient emphasis on social values. As a remedy, Trajtenberg called for a “conceptual revolution” in how government and the private sector interact.
Sir Richard Cohen noted the vital role that private financing can play in “social impact investments,” adding that we can be as successful in social issues as well as we have been in technology and innovation issues. He proposed the idea of a “social stock exchange,” and added that we are “on the threshold of a revolution of social impact investment.”
Adrian Gore underscored that “the message that capitalism is a dangerous message,” noting that only business creates prosperity, not government, adding that government has a critically important role to play in ensuring that a society has universal healthcare and universal daycare and whose investment is a necessity for a more productive and healthy society. While assessing that basic economic principles work, he acknowledged that they need be carefully re-worked to address social inequities.
Abby Joseph Cohen said that growth and prosperity for all members of society require the investment of education, infrastructure, and research/innovation. As an example, she noted pre-recession unemployment figures in the United States contrasting college graduates (4%) with those with a high school diploma or less (18%).
The most spirited aspect of the discussion occurred when panel moderator Guy Rolnik asked about the correlation between economics and incentive. Cohen accepted the basic premise that there is a strong correlation, suggesting the need to re-assess and improve the incentives. Lord Prof. Skidelsky rejected the correlation, surmising that on average, people make decisions not based on rational considerations. Trajtenberg proposed that economic policies reflect the factors that comprise human decision-making: incentives, morality, and complex psychological processes. Skidelsky responded that economics is unable to simultaneously manage these factors.
Facing Tomorrow 2013 takes place from June 18-20, 2013 at Jerusalem's International Convention Center. The conference is organized in partnership with Hebrew University.