Tel Avivis greet the New Year - Nir Keidar
Tel Avivis greet the New Year with festivities and mirth. Fine, but don’t ignore the sobering reality. Photo by Nir Keidar
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1 The year 2010 was a terrific one for Israel's business sector. Profits picked up at most of the big companies on the Tel Aviv Stock Exchange, as the year-end summaries will soon show.

First and foremost, we hope that everybody will grasp once and for all that businesses' performance today is based on decisions made by Israel's leaders and officialdom years ago.

For the economy to make another leap forward in the next 10 to 20 years, we need a revolution in the effectiveness of Israel's public sector: its management quality, achievement, sophistication and output.

Unless we demand a better, more effective public sector, our economic competitiveness will erode. Our ability as a nation to take advantage of economic opportunities will erode. Our ability to overcome threats will erode.

 

2 The year 2010 was marked by profligate raises in the public sector, spurred by a sense of prosperity after years of austerity.

We hope that in 2011, it will be openly stated that public-sector budget increases have to be linked to increased output, service and excellence. Blanket wage increases resulting from belligerence and extortion don't help improve public service at all.

Unless we introduce terms into the debate such as measurement of performance, quality of service, efficiency and organizational culture, the billions squeezed out of us by the powerful unions will just weaken the public sector even more.

 

3 The year 2010 was the second one in a row of budget crises in most of the West. In some countries public debt mushroomed to 100% of output. Their situation made Israel's financial balance look its best ever. The combined debt of the world's governments will soon reach the monstrous sum of $43 trillion, which makes Israel's debt look positively reasonable.

But we hope that in 2011, we keep in mind that Israel doesn't have the luxuries the rich, prosperous countries like the United States have, and we don't have European Union backing like Greece, Ireland and Spain. If we don't sustain brisk economic growth and learn to provide better education, security and welfare services, we expose ourselves to the same risks that the rest of the world has faced in the last two years. Unlike them, we can't afford it.

 

4 The year 2010 was a brilliant one for the Tel Aviv Stock Exchange. The TA-100 index climbed 13.5% while U.S. stock indexes gained between 8% and 11% (in shekel terms ) and European indexes went nowhere (again in shekel terms ). Emerging market indexes gained about 5.5% (yes, in shekel terms ).

Summing up the decade, Tel Aviv stocks rose 192%, well beyond most stock markets in the world.

But we hope that in 2011, we will learn to look at stock-market gains more soberly. We hope we will grasp just how much low interest rates contributed to stocks, and how much was due to activity by monopolies and cartels. We hope we gain a clearer understanding of what would benefit us more: an economy based on monopolies and cartels with rising profits and racing share prices, or one in which companies compete for customers and employees.

5 The year 2010 was the year the book "Start-up Nation" sold the story of Israel's amazing culture of startups and innovation, reshaping Brand Israel around the world.

We hope that in 2011, we tell ourselves the real story - that the startup culture becomes a disadvantage when it comes to more mundane activities such as managing the public sector or big enterprises and organizations, or when it comes to putting out fires and winning wars. Dazzled by our own wonderfulness, we don't notice the deterioration of our education system and don't ask if it can cultivate the next generation of innovators who can compete in world markets. We ignore the possibility of the world's multinationals shutting down their local R&D centers because of the deteriorating quality of Israeli manpower compared with India and China.

 

6 The year 2010 was a wonderful one for hundreds of thousands of homeowners as the value of their property soared for the third year in a row. They feel wealthier; in some cases, this is just another reflection of their narcissistic appearance of success. The tax authorities shared the joy as income from property taxes leaped.

But in 2011, I hope we tell ourselves the truth, that the surge in property prices wasn't a function of the Israeli economy's growing allure. It was mainly a figment of low interest rates, a result of changing priorities among the world's Jews, and a demonstration of the government's feebleness. An increase like that in housing prices mainly shows that more wealth is passing from the have-nots to the haves, widening social gaps. The rise in housing prices shatters solidarity and faith in government among the young.

 

7 The year 2010 was the year Ireland sought help from the European Union, its banks went broke, unemployment shot up to 13.9% and the tale of the Celtic Tiger suddenly looked pretty silly.

But I hope we keep in mind this year that even after the meltdown caused by Irish banks' giant gambles, that small country still generates a GDP per capita of $47,000, which is 60% above Israel's. Even in terms of purchasing power parity, the Irish product is 45% higher than Israel's.

We hope that in 2011, we keep in mind that the story of Israel's "economic miracle" is wearing thin.

 

8 The year 2010 was a terrific one for Tel Aviv, featuring a record number of new bars, excellent restaurants and compliments from leading international magazines for the city's "coolness." As Tel Aviv became an international brand, 2010 was also a great year for tourism.

But we hope that in 2011, we study how our infrastructure, hygiene and quality of life have developed over the last 20 years compared with other big cities around the world. Outside the Tel Aviv bubble, and inside its darker corners, social gaps have widened, and the neglect and dirt have reached levels that no advanced society would tolerate.

 

9 In 2010, to sum up, we told ourselves the same old story about our brilliant achievements in economics and society, even though we're a tiny country surrounded by enemies.

We can only hope that in 2011, we do some introspection and realize that basing our behavior on the survivalist instincts learned in the Diaspora is no way to run a country with 7.7 million residents and a GDP per capita of $30,000.

 

10 In 2010, Israel still had hundreds of thousands of people with values, integrity and talent who maintained their optimism and are convinced that things can be a lot better. Let's hope that as 2011 begins, we have more people like that.