Thursday, December 31, 2009

Emmanuel Navon: A Sense of Purpose

To end the Year 2009 on an upbeat note, I would recommend the reading of two recently published books: One State, Two States by Benny Morris, and Start-Up Nation by Dan Senor and Saul Singer –provided you read them in that order.

Morris has gone a long way since his self-appointment as a "new historian" poised to question Israel's historical narrative and "myths." In January 2004, he surprised –and shocked- many by declaring to Ari Shavit that "when the choice is between destroying or being destroyed, it's better to destroy;" that "there are circumstances in history that justify ethnic cleansing;" that it was necessary to uproot the Palestinians in 1948; that Ben-Gurion "had carried out a full expulsion –rather than a partial one- he would have stabilized the State of Israel for generations;" that "the non-completion of the transfer was a mistake;" that in circumstances which "are liable to be realized in five or ten years … acts of expulsion will be entirely reasonable. They may even be essential;" that "there is not going to be peace in the present generation;" that "we are doomed to live by the sword;" that "something like a cage has to be built" for the Palestinians; that all Israelis can do at this point is "to be vigilant, to defend the country;" and that "the Arab world as it is today is barbarian" ("Survival of the Fittest," Haaretz, 9 January 2004).

In One State, Two States, Morris shows that the Zionist movement accepted the principle of partition out of political realism from the time it was first proposed by the Peel Commission in 1937. The Palestinians, on the other hand, have systematically rejected the idea, and Arafat only deceived Israel with the Oslo Agreements to implement the "phased strategy." With the steady radicalization and islamization of Palestinian society today, Morris argues, chances of implementing the two-state solution are null.

Morris also shows, no less convincingly, that the alternatives to the two-state solution (including an Arab-dominated bi-national state) are unrealistic and undesirable (as far as Israel is concerned, at least). So there is no alternative to a solution that doesn't work. Great.

Morris is a realist. He realizes that Israel is in a catch-22 type of situation. Probably because he didn't want to end his book on a bleak note, he does suggest a way out by proposing the revival of the "Jordanian option." Nice try, but it doesn't wash. Jordan doesn't want it and, as Morris himself explains at length, the Palestinians will never sign a deal that leaves a sovereign Jewish state in the equation.

Despite his unconvincing attempt to sound optimistic in the last two pages of his book, Morris makes a compelling case: There is no solution.

If you were about sink into despair, then read Start-Up Nation. It will make you realize that Israel is doing just fine without a solution to its protracted conflict with the Palestinians.

As Senor and Singer show, Israel is an unmatched success story despite the absence of peace.

Israel doubled the size of its economy while multiplying its population fivefold and fighting six wars. This phenomenon is unmatched in the economic history of the world.

Israel has the highest density of start-ups in the world, and there are more Israeli companies listed on the NASDAQ than European companies. After the United States, Israel has more companies listed on the NASDAQ than any other country in the world, including China and India. In 2008, per capita venture capital investments in Israel were 2.5 times greater than in the United States, more than 30 times greater than in Europe, and 80 times greater than in China.

Between 2000 and 2006, Israel fought the five-year Palestinian terrorist war and the second Lebanon War. And yet, during that same period, foreign direct investments (FDI) to Israel tripled, and Israel's share in the global venture capital market doubled from 15% to 31%. In the summer of 2006, just as the second Lebanon war broke out, Warren Buffet bought an Israeli company for $4.5 billion. This was the first time that Warren Buffet bought a company outside the United States. And right after the war, Bill Gates came to Israel saying that the "innovation going on in Israel is critical to the future of the technology business."

Why is that? The bottom line, Senor and Singer argue, is that technological innovation is the ultimate source of productivity and growth, and that Israel is the world leader in technological innovation. The fact that Israel is a country at war does not derail the link between innovation and growth. In fact, Israel has even turned its permanent involvement in warfare to its advantage.

Think about it: among first-world economies, only three (Israel, South Korea, and Singapore) face existential threats, have fought wars for survival, and have a lengthy compulsory military service. And all three countries are economic success stories. In the case of Israel, the army has produced a wealth of military research applied to civilian applications, as well as technology-savvy youngsters who know one or two things about taking risks and making tough decisions. It is no coincidence if many of Israel's most successful start-ups were founded by young Israelis who acquired their technological knowledge, courage, and social networks in the army.

Senor and Singer, of course, are not saying that war is actually good for economic growth. But they convincingly show that the peace=economic growth equation is wrong. In the case of Israel, adversity has generated creativity. Israel has proven its ability to turn problems into assets. It is the lack of water that has turned Israel into a world leader in the fields of desert agriculture, drip irrigation, and desalinization. And it is because France, our main military supplier at the time, decided to abandon us in 1967 that Israel developed its own military industry and became a world leader in that field as well.

Determination is central to Israel's success. During the first Gulf War in 1991, Israelis were instructed by their government to stay home in sealed rooms with their gas masks. The American chip-maker Intel feared that its Israel factory would be paralyzed. But this didn't happen. Intel's Israel engineers braved Saddam's missiles and ignored their government's instruction, and they came to work. It is Intel Israel that designed the chip in the first IBM personal computers, the first Pentium chips, as well as a new product that saved Intel from decline. War did not prevent Intel's Israel plant to become the company's critical manufacturing center.

So the Arab world's constant aggressions, embargos and boycotts have been unable to hurt Israel because Israel is resilient and creative. If anything, the Arab world is only hurting itself because it spends more energy trying to undermine Israel than trying to be productive. The results are devastating. The non-oil exports of the entire Arab world (with a population of nearly 300 million people) are less than the exports of Finland (with a population of 5 million). The Arab world produces almost one third of the world's oil and has benefited from a surge in demand from China and India in the past decade, but this is a mixed blessing. Indeed, it is even a curse –what economists call the "natural resources curse." Because they have oil, Arab economies don't feel the need to innovate, create, and produce. And so they don’t.

The number of world patents registered between 1980 and 2000 was 77 for Egypt, 20 for Syria, and 15 for Jordan. It was 7,652 for Israel. China, which is a main consumer of Arab oil, published in 2003 a list of the five hundred best universities in the world. The list did not include any of the two-hundred universities in the Arab world.

If Israeli technology could help wean the world from oil, the Arab world would lose its only and unreliable asset. Arab countries might then consider making peace with Israel and making their economies more productive –including through economic ties with Israel. And the world's leading economies would be freed from their geopolitical dependency upon unstable and unreliable countries. This only sounds far-fetched if you don't think about Israel's technological exploits. Just think of the electrical car project of Israeli entrepreneur Shai Agassi. His company, Better Place, is the fifth largest start-up in history. It is developing a revolutionary model to spread the use of electric cars. If Agassi succeeds, as I believe he will, the world's dependency on oil will be dealt a fatal blow.

Ultimately, Israel's success relies on its sense of purpose. Senor and Singer quote historian Barbara Tuchman, who wrote before Israel's high tech boom: "With all its problems, Israel has one commanding advantage: a sense of purpose. Israelis may not have affluence … or the quiet life. But they have what affluence tends to smother: a motive."

The fact that there is currently no solution to the Israeli-Palestinian conflict is unfortunate, but it is not life-threatening –provided that Israel's keeps its sense of purpose alive and well.