Monday, March 26, 2012

Matzav Update: Boom Times?

When you hear the expression, “Israel is booming,” especially in the context of this month’s rocket barrage, it doesn’t usually have the same optimistic ring that it does other places.  If you keep up with the news, you know that Israel’s former ally, Turkey, decided to eschew its western orientation in exchange for fanatical Islam and has severed its Israel ties. Similarly Egypt, never an ally but for the last three decades at least a placated belligerent, experienced an American-supported coup d’etat that replaced a western-style secular dictator with a parliament of fundamentalists.  And Iran is, well, Iran.  All three formerly reliable states are now led by frothing-at-the-mouth anti-Semites, and everywhere in the neighborhood the population has decided to stampede off the cliff of Islamic fanaticism into an abyss of poverty and violence.

But on my recent visit, to Israel, I found that the main thing on people’s minds wasn’t the neighborhood going to hell, but the good times rolling. There are always problems, but when I read back to a post I wrote in December of 2001 titled, “Existential Threats,” outlining the nearly impossible problems faced by the country, the tables seem to be turning.

Terrorism: As long as the religious doctrine and cultural norms of Israel’s neighbors mandate the killing of non-believers to obtain spiritual fulfillment, there will be no end to attempted attacks.  However, since Israel reoccupied the territories, removed the leaders of the various terror gangs, built the security wall, and engaged in the occasional large-scale incursion, the bus bombings and shooting attacks as a part of daily life came to an end.  Some guards at the shopping mall gave me a bemused look when I emptied my pockets before passing through the metal detector.

Demography: The demographic bomb, the fear that a higher Arab birth rate will result in Arabs eventually outnumbering Jews, was once one of the threats used to shove the, “Peace Process,” forward.  Some fear that this future Arab majority would engage in a nonviolent movement gathering irresistible international sympathy for one-man-one vote, and they could then vote Israel into the grave.  It doesn’t seem to be in the cards, though, because over the last decade Arab birth rates have steadily declined, and Jewish birthrates have risen, to the point where they should reach parity in the next few years.  And the idea of a non-violent political movement in the Arab world is not realistic to those familiar with the culture.  The demographic bomb is a dud.

Secular-Religious Tension: The tensions between religious and secular society seem to be flaring up again, a sure sign that the country feels secure enough to begin fighting out its internal struggles.

Environmental Degradation: This is still a major problem, but it’s not existential.

Water Shortage: Israel is building a series of desalination plants to completely eliminate the need to tap into natural water resources.

Government Disorder: There are still a plethora of parties, but the country has been run by a stable Likud coalition for the last few years, and dominated by Likud for the past decade.  One no longer hears the concerns that Israel has become, “Ungovernable,” as one heard in 2000.

The real story, though, is that the economic crisis that has crippled the other developed economies of the world seems to have simply passed Israel by.  Unemployment is down to a historic record low of 5%, and one of my cousins put it, “Those 5% wouldn’t take a job if you made them.”  Meanwhile, while credit markets collapsed and GDP growth rates went negative the world over, Israel never experienced a recession, and annual GDP growth is now chugging away at 4%.  It has left everyone scratching their heads at this enormous stroke of good fortune.  People live in Israel because they are religiously inspired, want to be near their family, or want to be a part of a great national project.  Those who move here for economic reasons come from backwater economies like Ethiopia or Russia, not western countries.  It’s assumed that the economy will sputter along and hopefully cough up enough to cover the groceries.

I’m convinced that the reason for this sudden surge of growth is that Israel has avoided two silent catastrophes that are far more fatal to the western world, including America, than any “Existential Threat,” facing Israel.  The first is demographic.  Putting aside the 1960’s panic about overpopulation and just looking at the hard data shows that, in virtually every developed country, as well as many developing countries like China and Mexico, populations are rapidly shrinking.  This leads to a sharp decrease in consumption in the short term. Any parent will tell you how much it costs to raise a child.  In the longer term, for countries with social welfare systems, it seems to be leading inexorably toward societal collapse.  When these social safety nets were created, fertility rates were at four or five children per family, (i.e., two children per adult) so when these children grew to adulthood, each had to pitch in enough to cover half of an elderly person’s pension.  Today, with families in the other Mediterranean countries like Spain, Greece, and Italy having one child per family, it means that, in their old age, one child has to pitch in enough to cover two pensions.  It’s no coincidence that the countries with the lowest fertility rates are also those which are experiencing systemic financial collapse.  The United States seems to be heading in the same direction with ever-shrinking birth rates and ever-increasing medical costs and social programs.    Israel is the only OED country with a positive, and accelerating, fertility rate.

I believe that the second reason for Israel’s recent success is the, “Inverted Pyramid.”  The early Zionist visionaries noticed that, while most societies are constituted of a large pool of unskilled laborers at the bottom of the pyramid, and above them a smaller group of skilled laborers, above them a smaller still group of better educated, and on top a tiny group of elites, the demographics of the Jews in exile were the opposite.  One quarter of the Nobel prizes have gone to a population that constitutes one quarter of one percent of the world’s population.  Even amongst the heavily assimilated population in America 59% Jews have college educations, while only 27% of the general population does.  There was grave concern that forming a state from such an over-educated population would be impossible, with too many scientists and philosophers but nobody to hew the wood and haul the water.  Israel has always suffered from a brain drain as the economy could never fulfill the ambitions of its educated class.

Today, the game is changing.  The great systemic problem the other developed countries face today, beyond their insolvent social programs, is what to do with all of the unskilled or uneducated laborers who can’t compete with their low-wage counterparts abroad.  In Israel today, if you want to manufacture a high-tech product, you have a team of trained engineers design the part in Haifa, then send the plans to China to have it manufactured for sale in the West.  If you have an idea for a new software program, you start a company and flesh out the concept in Tel Aviv, then hire a team of software engineers in Bombay turn it into a completed product.  The curse of the, “Inverted Pyramid,” may gradually become a blessing.  Israel’s real challenge will be able to avoid the fate of America from 2000-2008, during which the economy grew by leaps and bounds but all of the new profits went to the upper crust while the standard of living declined for those who produced the wealth, the middle and working classes.

One topic of conversation which I never heard breached even once during my visit is the negotiations with the Palestinian Authority.  Reading the papers, with the constant visits from Secretaries of State, UN big-wigs, and professional peace processors, and with the routine statements of outrage at, “Israeli intransigence,” coming from the White House, one would expect negotiations to be at the forefront of Israelis’ minds, and fears, yet it’s completely absent.

The peace process was seen by most Israelis as a bargain with the devil.  Declarations from the defeated Arabs and their western sympathizers mourning the, “Plight of the Palestinians,” did affect a few of Israel’s elite.  Everyone else remembered when the tables were turned, and the Arabs were massing armies on Israel’s borders and publicly screaming out their dreams of genocide back in 1967.  Very few middle-of-the-road Israelis felt guilt at averting the massacre, and certainly not of re-inhabiting those areas from which Jews had been expelled 19 years before.

The promise that sold the average Israeli in the 90’s was one of a golden age of peace and prosperity that would result from a negotiated settlement.  Diplomatic relations with Muslim countries and their allies, countries which had shunned Israel previously, would result in a wave of trade and prosperity, and peace would mean a smaller army which would consume far less of the national economy.  But events in Egypt, the nation to which Israel surrendered 56% of its total land mass in 1982 in exchange for a treaty, are yet another nail in the coffin of this ideology.  After all, what’s the point of signing a treaty and surrendering tangible assets to an unstable dictator when the treaty will simply be abolished once the dictator is swinging from the gallows after the next coup d’etat?  It’s not as if Israel can ask for the land back.  The current American administration’s hostility toward Israel may be  more a byproduct of a world view thoroughly discredited by the last 20 years of real-world events than a realistic path forward.  Since nobody wants to be the one who told the emperor he has no clothes, the government’s job is to run interference, to keep the White House’s delusions placated with make-believe negotiations while the rest of Israel goes about its business.

The reality was that the left-wing politicians bequeathed a legacy of violent terror and economic ruin when they left office in 2001.  Politics in a democratic society comes down to giving people what they want.  With election season coming up, the right has provided the prosperity and the relative calm, if not peace, that Israelis crave.  The left is going to have to search long and hard to find something of value to offer the mainstream, or stay in the minority for as many election cycles as it takes to find it.

No comments: