Bernard Avishai (a dovish critic of Israel who supports the Geneva Initiative and a two-state solution) is a business professor and journalist with a difference: an expert on both the economy and the political history of Israel, he is an impressive writer and speaker on Zionism and the quest for peace. He is currently a visiting professor at Duke University, a former editor of the Harvard Business Review and the former director of the Zell Entrepreneurship Program at the Interdisciplinary Center in Herzliya, Israel. He has written for The New York Times, The New York Review of Books, The New Yorker, Fortune, Harper’s and many other publications. He is the author of The Tragedy of Zionism and is currently working on a new book about Israeli democracy.
His talk at Manhattan’s Village Temple, March 17 (co-sponsored by Brit Tzedek v’Shalom), was entitled “Netanyahu’s Folly: Why the Israeli Economy Really Does Need Peace.” It was inspired in part by his 1998 interview with Benjamin Netanyahu, then the prime minister.
Netanyahu is an advocate of a widely held view in Israel that peace would not be good for Israel’s economy because of the potential loss of jobs — as occurred when some factories relocated from Israel to Jordan after the 1994 peace treaty, to take advantage of Jordan’s cheaper labor market. But Prof. Avishai argued persuasively that the Oslo years of 1993 to 2000 brought tremendous economic growth to Israel (up about 73% in GDP), while the early Intifada years, from 2001 until the economic turnaround in 2004, were economically disastrous.
This may seem obvious to most of us, but Mr. Netanyahu — whom you’ll recall was finance minister during much of Ariel Sharon’s tenure as prime minister — argues to this day that the global dot-com bust in high tech alone caused Israel’s post-2000 recession. As Avishai explained, the evidence is to the contrary, that the Intifada — causing a dramatic exodus of international companies from Israel and a collapse of the tourist industry — is what happened. By way of an illustrative comparison, he looks at Ireland, a similarly small country (with a mere four million population) that likewise shined with a dramatic boom in high tech during the 1990s; but Ireland’s GDP soared after 2000 while Israel’s crashed.
Avishai contends that what makes Israel an attractive resource to the computer, pharmaceutical, aeronautics, telecommunications and other high-tech industries is its highly innovative, problem-solving skilled labor force — what he calls its “social capital.” He indicates that these are traits cultivated by military service in Israel.
What happened in the 1990s was that Israeli entrepreneurs learned how to gain access to international business, particularly as a source of solutions for the problems of major corporate enterprises. This knowledge eventually revived Israel’s economy, beginning in 2004, with Israel providing a valued function for international business, mostly in the form of Israeli start-up ventures.
But Israel’s growth and competitiveness in maintaining this niche depends upon stability and the country’s continued ability to invest in its human capital. Netanyahu’s budget-slashing policies undermined this resource by gutting public education. And a continued failure to create a stable peace would further damage Israel’s economic prospects by fostering an ongoing and increasingly serious brain-drain. Avishai also mentioned the poverty statistics that I have referred to in my previous posting.