The Fischer Gambit
Of all the political surprises in Jerusalem this week, none shocked Israelis more than the government’s choice of an American economist, Stanley Fischer, a vice president at Citigroup, as the next governor of the Bank of Israel. The job, equivalent to Federal Reserve chief, is the second-most powerful post in the Israel economy after finance minister, and the decision to “import” a foreigner, as commentators put it, set off howls of protest.
The government explained that in Fischer it had acquired one of the half-dozen most respected economists in the world. A much-published academic who once taught at the University of Chicago, he served for years as number-two at the International Monetary Fund and is best known for his role in stabilizing the Mexican and Asian financial crises of the 1990s. Moreover, they say, Fischer is a devoted Jew who has agreed to give up his multimillion-dollar salary and even waive his American citizenship, as Israeli law requires for such posts, to do his bit for Israel. Making him the Israeli economy’s front man will do wonders in opening up global markets. It might even inspire other Jews to follow him to Israel.
The explanations haven’t slowed the protests. Bureaucrats fret at the learning curve of an American with little knowledge of the language, let alone of the culture of the local marketplace. Economists sniff that Israel has its own, home-grown crop of world-class economists. Labor activists accuse the finance minister, Benjamin Netanyahu, of seeking an ally for his harsh Thatcherite economic theories by recruiting someone from the world headquarters of market discipline, the IMF. The civil service commission says it needs time to think about it.
Those who know Fischer say that Sharon and Netanyahu might have made the right choice, but at least partly for the wrong reasons. Fischer, 62, did teach briefly in Chicago, but that’s not where his worldview was shaped. Born to Latvian Jewish immigrants in the British colony of Northern Rhodesia, today’s Zambia, he acquired a taste for economics as a high school student in the then-thriving Jewish community of Southern Rhodesia, today’s Zimbabwe. At 19 he went off to study at the leftish London School of Economics during the swinging 1960s. He came to this country for a doctorate at the Massachusetts Institute of Technology, where he spent most of his academic career, broken up by his time in Chicago and by repeated stints as a visiting professor in Israel.
In the rarified world of global macroeconomics, Fischer’s reputation is as a progressive who worries about the impact of markets and globalization on poor nations. Together with his close friend Jacob Frenkel, a former Bank of Israel governor, he’s written extensively on the importance of peace to Israeli and Middle East economic growth. He was one of the architects of Israel’s economic miracle of 1984, helping then-prime minister Shimon Peres to craft a plan to lower Israeli inflation from the 400%-plus of the Begin years to just 16% in the space of a year without beggaring the poor, something that fellow economist George Schulz had termed “impossible.”
It was in 1994, during the Clinton administration’s early, populist period, that Fischer was brought to the IMF as its number two, the senior American spot. As Clinton policies moved toward fiscal conservatism, Fischer developed a reputation as an ally of European leaders, who have long frowned on America’s promiscuous tax-cutting and stinginess toward workers and the poor. In 2000, when the Americans and Europeans were deadlocked over a choice for a new IMF chief, Fischer’s name was put forward as a surprise candidate of the African bloc. The nomination speech, by the finance minister of Angola, speaks volumes about Fischer’s image as a champion of the world’s poor.
There’s no doubt that if he’s confirmed, Fischer will bring an international cachet to the Israel economy and help boost its image in the global marketplace. But he’ll bring something else that’s sorely needed: an understanding of the limits of America’s free-market fundamentalism. He can help provide leadership and expertise to those Israelis angered at the country’s growing inequality and yearning to find ways of tempering the marketplace with human values. One can only hope that others will know how to listen.