Summary
The plan adopted by Israel’s National Unity Government on July 1, 1985, which in Grinberg’s account cut annual inflation from 466% in July 1985 to 25% in March 1986 as the counter-mo(ve)ment to the powerful workers’ resistance: a 20% devaluation (18.8% formally, 25% in effect), a $750 million budget cut, subsidy cuts and a freeze of wages, prices, and exchange and interest rates, with real wages planned to erode by 10% (Moments of Resistance, PDF p.206-209).
Details
- It was prepared from mid-May 1985 — the day of the Histadrut elections — by a team headed by Treasury Director General Immanuel Sharon with Professors Michael Bruno and Ethan Berglas (as printed), Amnon Neubach and Mordechai Frenkel, and imposed over the Histadrut’s opposition by the threat of emergency decrees (PDF p.206-208).
- Implementation followed a ten-month delay after the National Unity Government formed in September 1984, spent on package deals freezing prices and wages, because only a reelected and legitimized Histadrut leadership could restrain the expected worker resistance (PDF p.205).
- The July 2, 1985 general strike — the largest in Israel’s history, forced on the Histadrut from below — and the Histadrut’s subsequent open cooperation with the powerful committees, including the IEC slowdown and the shutdown of public television as Prime Minister Peres was to present the plan, contained resistance and, through negotiated revisions, legitimized the plan (PDF p.210-211).
- State autonomy for the plan rested on the professional planning team, broad bipartisan backing, and US support: a one-time 3 billion a year (PDF p.211-212).
- Its costs fell hardest on the entities formerly dependent on the WS Financial Plan’s non-indexed loans — Solel Bone (as printed), Koor, Hasne, the Kibbutz Movement, the Moshavim and the Histadrut HMO — forced since 1980 to refinance at high interest, whose woes were revealed only when inflation halted (PDF p.212).
Related pages
Moments of Resistance, Histadrut, Forum/13, Michael Bruno, Washington Consensus