Ideology and Privatization Policy in Israel

In this paper we explore the impact of economic ideologies on one important area of policy. We compare the periods of 1968–77 (Labor) and 1978–87 (Likud) to determine whether differences in the stated economic ideologies of the Likud and Labor parties are reflected in their privatization policy. Furthermore, we examine whether there are differences in the techniques used to privatize by the Labor and the Likud parties. Although Labor and Likud policymakers may both choose privatization as a policy, different political environments and political bases may affect such choices. We explore the impact of these differences on the design of the specific privatization techniques selected, assess whether differences in the techniques exist, and attempt to account for such differences. Our analysis reveals that both Labor and Likud parties undertook similar privatization policies. The empirical findings contradict the hypothesis that ideological differences between the two large parties in Israel will be reflected in significant variation in privatization policy. There arc no significant differences between the two parties in number, type, or implementation of privatization policy. We find evidence that an important factor for all Israeli governments is budgetary pressure, operationalized as a deficit variable. We also find some difference between parties in the implementation of privatization, with Labor demonstrating a greater propensity to sell complete enterprises, and Likud engaging in more partial sales of state assets. We argue that this difference results from the differing ability of each party to negotiate with Israel's largest labor union. The fact that there were no significant differences in the number of actions taken by Likud and Labor administrations suggests that there are other barriers to this process. Two explanations for this process are indicated.