Just Get Yourself Free
“You can slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free.
Fifty Ways to Leave Your Lover
Stanley Fischer’s announcement that he was quitting as Governor of the Bank of Israel has made waves around the world. Anyone who follows the Israeli economy, or is even remotely involved in Israel-connected matters, has pricked up their ears. Most of them, perhaps inevitably, have asked why he is quitting, and more especially why now?
The suspicion that Fischer has some deep-seated reason is amplified by the timing of the announcement, after the elections and before the next government is formed. In an exquisite twist on reality, it has even been suggested that Fischer is angling for the post of foreign minister in the next government, or of President of Israel when Shimon Peres’ current term expires next year. The former idea is weird, given the huge gulf between Fischer’s political views which have remained under wraps during his governorship and those of Netanyahu and most of his likely coalition partners. True, nothing is impossible, as Fischer’s agreement to accept Netanyahu’s offer of the Governorship in 2005 illustrated so clearly but some possibilities are nonetheless extremely remote. As for the presidency, if he is interested in that, Fischer does not need to quit his current job a year ahead, creating some bad feeling as he does so.
Despite the fact that Fischer has always indicated that he would not serve a full. second term, the idea that he might be telling the truth, although perhaps not the whole truth that at his age (in his late sixties) and after eight years on the job he wants to do something less stressful and maybe even do less generally is not given much credence.
We shall see, as they say. But since the announcement of his retirement has triggered a round of responses stretching from eulogies to settling old scores, it might be useful to remind people of the decisions that made Fischer so important in the Israeli economic context, and why his impending absence is likely to be so sorely misseed. Interestingly, each of these decisions came around this time of year, making his resignation announcement apposite and even timely.
The first was in March 2008, when he began what soon became a systematic intervention in the foreign exchange market, to prevent the rapid rise in the value of the shekel. This was an act of rebellion, indeed rank heresy, against the set of ‘policy prescriptions’ known as ‘the Washington Consensus’, which Fischer had been a prominent figure in formulating and imposing on other countries, in his period at the IMF. However, as the global economy spun out of control in 2008, and form his new vantage point as the governor of a central bank in a small, open economy buffeted by financial winds entirely out of its control, Fischer adjusted to a new reality, first giving excuses for his seemingly outrageous behaviour, but eventually ‘coming out’ and overtly distancing himself from the old, and now outmoded, verities that he had formerly championed.
A year later, having successfully steered the Israeli economy through the uphheaval that followed the collapse of Lehman Brothers and AIG, Fischer found himself handing over command to a newly elected government, in which his ‘patron’, Netanyahu, was prime minister and had made cutting direct taxes a cornerstone of his economic program. Fischer expressed open opposition to this approach, urging instead that the higher tax revenues being generated by Israel’s rapid growth should be used first and foremost to pay down debt and reduce the country’s debt burden. Within two years, after the wave of social protests in the summer of 2011, Neetanyahu had backed down, reversed course and effectively admitted that Fischer had been right all along.
The following year, Fischer fought a tough, lonely, but critical battle against the most senior echelons in Bank Hapoalim, in an intervention that not only rewrote the rule book for how central banks should relate to problems at major commercial banks, but may well have saved the wider Israeli economy from a major disaster.
Softly spoken, but not coy, Fischer has chosen not to slip out the back, as one of his predecessors disgustingly did on two weeks notice. Maybe Stan does indeed have a new plan, but for the moment his aim seems just to be to get himself free.