What made Economists so Politically Influential? Governance-related Ideas and Institutional Entrepreneurship in the Economic Liberalisation of Israel and beyond

Abstract

Liberal economists are known to be one of the driving forces behind economic liberalisation in various countries, but how did they become so politically influential? Constructivists generally suggest that during economic crises liberal economists persuaded decision-makers to adopt pro-market policy ideas as solutions for economic turbulence. While this answer is true, it is also only partial because it disregards the role played by governance-related ideas and institutional entrepreneurship in the political actions of liberal economists. I argue that ideas regarding decision-making mechanisms provided liberal economists with the basis for creatively exploiting pre-liberalisation institutions, such as central banks and central budget offices, through which these economists enhanced their long-term political influence. An in-depth examination of a paradigmatic case of economic liberalisation driven by liberal economists -Israel's Stabilisation Plan -exemplifies that argument. The existence of like-minded economists and similar pre-liberalisation policy-making institutions in many other countries hints that the Israeli experience is not unique.

Translating social investment ideas in Israel: Economized social policy’s competing agendas

“…Israeli economists enjoy a broad and continuous government mandate, which is further enhanced by the country’s prolonged political instability and geopolitical circumstances. As prominent actors in sustaining neoliberal rules and arrangements during recent decades (Maman and Rosenhek, 2011; Mandelkern, 2015; Maron and Shalev, 2017), economists in the MoF and the BoI are positioned as ‘gatekeepers’ who are expected to have a marked effect on the translation of SI ideas.…”

Rise of the Regulatory Welfare State? Social Regulation in Utilities in Israel

“…First, because of the consistent and significant political support for this kind of liberalization and economic reform in Israel, at least since the mid‐1980s and the 1985 ‘stabilization pact’. Second, because of the support of the Treasury, which has been influential and instrumental in initiating and advancing an agenda of this kind of efficient economic reform (Ben Bassat and Dahan ; Mandelkern ). These factors can, in turn, account for the close implementation of Majone's model in practice in both sectors, liberalizing and regulating them in order to transform them from a state to a market‐based rationale.…”

Infusing Public Law into Privatized Welfare: Lawyers, Economists, and the Competing Logics of Administrative Reform

“…If legal professionals are the prototypical agents of the administrative state, then economic professionals are the main agents in the current shift toward an entrepreneurial neoliberal state. The rise of economic technocrats is intertwined with the rise of neoliberalism, its inherent critique of the administrative welfare state, and its economic and social policies (Dezalay and Garth ; Fourcade ; Fourcade‐Gourinchas and Babb ; Mandelkern ). The necessary know‐how to reform and manage the public sector has shifted toward bureaucrats with backgrounds in economics and business administration.…”

“…The necessary know‐how to reform and manage the public sector has shifted toward bureaucrats with backgrounds in economics and business administration. Their authority stems from mastering potent policy and governance ideas, as well as their occupation of central and powerful positions within the apparatus of the state (Mandelkern ).…”

“…The centrality of market‐like principles and mechanisms in the program design was driven by the institutional dominance of the Treasury in the policy process. Treasury dominance stemmed from the central role it played in devising Israeli economic policy since the economic liberalization in the mid‐1980s (see Ben‐Bassat and Dahan ; Maman and Rosenhek ; Mandelkern ), and the fact that MoF economists served as the central agents in importing the “welfare‐to‐work” model and translating it into local social policy (Maron and Helman ).…”