ABSTRACT
This chapter focuses on the concept of policy-making by indirection by exploring three cases of Israeli economic policy-making. The Finance Ministry's avoidance of overt budget cuts did not persuade ministers to accept budget erosions in real terms. Indirection appears to be subsumed in many of the devices that policymakers use to cope with their adversities. The government's response to the threatening prospect of 1,000 percent inflation was to negotiate a three-month "package deal" of wage and price controls with the Labour Federation and Industrialists' Association. Israel's highly centralized economy provides a major barrier to increasing the salaries of wage earners. The limitations of policy-making by indirection described here may reflect the unrepresentative traits of these cases, or special problems in Israel's political economy. In the case of increasing incomes via fringe benefits, superficial success was a poor substitute for fundamental reform.
