Economy

Israel Should Fear Domestic Corruption More Than Foreign Boycotts

In Jerusalem, in May 2015.
In Jerusalem, in May 2015.
Tal Shavit*

-OpEd-

JERUSALEM â€" The government regularly shares its fears about the politically motivated economic boycott of Israel, worried about the long-term damage to the country's economy and the specter of foreign investors running away.

Unfortunately, we don't see the same energy in battling the international boycott also put into fighting the rampant corruption in Israel, which poses no smaller threat for the Israeli economy.

The past years' corruption scandals have time and again rattled the country, breaking records with each passing month for the damage inflicted. Doing the accounting and calculating the money deprived of the public coffers, the public and the media mostly focus on the corrupt persons themselves and the economic damage to the country.

Surely, this money could have been put into more useful things such as additional hospital beds or reducing the number of students per classroom. But it is also necessary to consider the indirect long-term effects, which could ultimately be devastating for Israel's economy.

Far beyond the direct losses to the state coffers, corruption scandals cause a lasting damage to the country that with time becomes irreversible.

Corruption creates a culture that trickles into every corner and ultimately harms the economy's efficiency â€" from the job market to the capital market. One example of the lethal damage corruption can have for country can be found in Turkey. In 2013, a corruption scandal that involved, among others, the head of a governmental bank, led to the collapse of the stock exchange and the devaluation of the Turkish currency.

Measuring the impact of corruption on the economy thus requires deeper analysis. What's the cost of the public losing trust in a government that is supposed to determine economic policies? Trust is the basis for economic growth and the higher the trust, the lower the compensation investors demand for their investment (that is, a lower risk premium).

Nepotism trap

The more corruption grows in Israel the more domestic and foreign investors lose their trust in both the private and the public sector, and consequently shift their money elsewhere. Israel would gradually become an unattractive destination for investment, which would undercut the fundamentals of the economy. Foreign investors â€" an important ingredient for continued economic growth â€" would demand a very high return on their investments as a trade-off for the risk they take operating in a corrupt country.

One of the symptoms of corruption is the tendency for nepotism â€" that is, appointments guided by personal and familial contacts rather than skills â€" in the private sector and the public sector alike.

The higher the rate of nepotism, the lower the efficiency of the job market. Ultimately, instead of talented employees or executives leading the economy, it will be led by cronies without the required skills or capacities. Economic growth would plummet as a result.

Moreover, public corruption ultimately seeps into the broader culture, even beyond the business and public sector worlds. When people begin to believe that everything and everyone is corrupt, and others are getting rich at the expense of the state, each person starts to care only for themselves. The extent of tax evasion in Israel is but one example that the Israeli public has lost its trust in the state and its institutions, and deems tax evasion legitimate.

An economic boycott of Israel would be a very bad blow, which could severely harm many companies operating in Israel and employing hundreds of thousands of employees. Still, in the face of such big economic stakes, it's unlikely that so many foreign companies would rush to give up Israeli know-how and products. At the end of the day, when economic interests are involved politics is usually left behind.

But if we add in the corruption factor, the economic interests could begin to shift: companies that haven't boycotted Israel would start asking themselves whether their money is safe in a country that suffers such chronic corruption.

*Tal Shavit, Associate Dean at Israel's School of Business of the College of Management, is an expert on finance and investment psychology.

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Green

Ecological Angst In India, A Mining Dumpsite As Neighbor

Local villagers in western India have been forced to live with a mining waste site on the edge of town. What happens when you wake up one day and the giant mound of industrial waste has imploded?

The mining dumpsite is situated just outside of the Badi village in the coastal state of Gujarat

Sukanya Shantha

BADI — Last week, when the men and women from the Bharwad community in this small village in western India stepped out for their daily work to herd livestock, they were greeted with a strange sight.

The 20-meter-high small hill that had formed at the open-cast mining dumpsite had suddenly sunk. Unsure of the reason behind the sudden caving-in, they immediately informed other villagers. In no time, word had traveled far, even drawing the attention of environment specialists and activists from outside town.

This mining dumpsite situated less than 500 meters outside of the Badi village in the coastal state of Gujarat has been a matter of serious concern ever since the Gujarat Power Corporation Limited began lignite mining work here in early 2017. The power plant is run by the Power Gujarat State Electricity Corporation Limited, which was previously known as the Bhavnagar Energy Company Ltd.

Vasudev Gohil, a 43-year-old resident of Badi village says that though the dumping site is technically situated outside the village, locals must pass the area on a daily basis.


"We are constantly on tenterhooks and looking for danger signs," he says. Indeed, their state of alert is how the sudden change in the shape of the dumpsite was noticed in the first place.

Can you trust environmental officials?

For someone visiting the place for the first time, the changes may not stand out. "But we have lived all our lives here, we know every little detail of this village. And when a 150-meter-long stretch cave-in by over 25-30 feet, the change can't be overlooked," Gohil adds.

This is not the first time that the dumpsite has worried local residents. Last November, a large part of the flattened part of the dumpsite had developed deep cracks and several flat areas had suddenly got elevated. While the officials had attributed this significant elevation to the high pressure of water in the upper strata of soil in the region, environment experts had pointed to seismic activities. The change is evident even today, nearly a year since it happened.

It could have sunk because of the rain.

After the recent incident, when the villagers raised an alarm and sent a written complaint to the regional Gujarat Pollution Control Board, an official visit to the site was arranged, along with the district administration and the mining department.

The regional pollution board officer Bhavnagar, A.G. Oza, insists the changes "aren't worrisome" and attributes it to the weather.

"The area received heavy rain this time. It is possible that the soil could have sunk in because of the rain," he tells The Wire. The Board, he says, along with the mining department, is now trying to assess if the caving-in had any impact on the ground surface.

"We visited the site as soon as a complaint was made. Samples have already been sent to the laboratory and we will have a clear idea only once the reports are made available," Oza adds.

Women from the Surkha village have to travel several kilometers to find potable water

Sukanya Shantha/The Wire

A questionable claim

That the dumpsite had sunk in was noticeable for at least three days between October 1 and 3, but Rohit Prajapati of an environmental watchdog group Paryavaran Suraksha Samiti, noted that it was not the first time.

"This is the third time in four years that something so strange is happening. It is a disaster in the making and the authorities ought to examine the root cause of the problem," Prajapati says, adding that the department has repeatedly failed to properly address the issue.

He also contests the GPCB's claim that excess rain could lead to something so drastic. "Then why was similar impact not seen on other dumping sites in the region? One cannot arrive at conclusions for geological changes without a deeper study of them," he says. "It can have deadly implications."

Living in pollution

The villagers have also accused the GPCB of overlooking their complaint of water pollution which has rendered a large part of the land, most importantly, the gauchar or grazing land, useless.

"In the absence of a wall or a barrier, the pollutant has freely mixed with the water bodies here and has slowly started polluting both our soil and water," complains 23- year-old Nikul Kantharia.

He says ever since the mining project took off in the region, he, like most other villagers has been forced to take his livestock farther away to graze. "Nothing grows on the grazing land anymore and the grass closer to the dumpsite makes our cattle ill," Kantharia claims.

The mining work should have been stopped long ago

Prajapati and Bharat Jambucha, a well-known environmental activist and proponent of organic farming from the region, both point to blatant violations of environmental laws in the execution of mining work, with at least 12 violations cited by local officials. "But nothing happened after that. Mining work has continued without any hassles," Jambucha says. Among some glaring violations include the absence of a boundary wall around the dumping site and proper disposal of mining effluents.

The mining work has also continued without a most basic requirement – effluent treatment plant and sewage treatment plant at the mining site, Prajapati points out. "The mining work should have been stopped long ago. And the company should have been levied a heavy fine. But no such thing happened," he adds.

In some villages, the groundwater level has depleted over the past few years and villagers attribute it to the mining project. Women from Surkha village travel several kilometers outside for potable water. "This is new. Until five years ago, we had some water in the village and did not have to lug water every day," says Shilaben Kantharia.

The mine has affected the landscape around the villages

Sukanya Shantha/The Wire

Resisting lignite mining

The lignite mining project has a long history of resistance. Agricultural land, along with grazing land were acquired from the cluster of 12 adjoining villages in the coastal Ghogha taluka between 1994 and 1997. The locals estimate that villagers here lost anything between 40-100% of their land to the project. "We were paid a standard Rs 40,000 per bigha," Narendra, a local photographer, says.

The money, Narendra says, felt decent in 1994 but for those who had been dependent on this land, the years to come proved very challenging. "Several villagers have now taken a small patch of land in the neighboring villages on lease and are cultivating cotton and groundnut there," Narendra says.

They were dependent on others' land for work.

Bharat Jambucha says things get further complicated for the communities which were historically landless. "Most families belonging to the Dalit or other marginalized populations in the region never owned any land. They were dependent on others' land for work. Once villagers lost their land to the project, the landless were pushed out of the village," he adds. His organization, Prakrutik Kheti Juth, has been at the forefront, fighting for the rights of the villages affected in the lignite mining project.

In 2017, when the mining project finally took off, villagers from across 12 villages protested. The demonstration was disrupted after police used force and beat many protesters. More than 350 of them were booked for rioting.

The villagers, however, did not give up. Protests and hunger strikes have continued from time to time. A few villagers even sent a letter to the President of India threatening that they would commit suicide if the government did not return their land.

"We let them have our land for over 20 years," says Gohil.

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