According to recent IMF data, living standards in Israel - as reflected in GDP per capita - are expected to rise this year by 3.3 percent. This will be the fourth straight year with such high growth rates. However, these years reflect a recovery period that comes on the heels of a severe recession. As can be seen in the graph, the four consecutive years of fast growth since 2003 are indicative of nothing more than a return of Israel's economy to the problematic long-run growth path that has characterized it between the 1973 turning point and the outbreak of the intifada in 2000.
This slow-growth, long-run path reflects a relative decline in Israeli living standards, compared with the leading Western countries. For example, countries like the G7 nations, who were wealthier than us in the mid-1970s, have grown faster since then (2.1 percent per year in the G7 versus 1.7 percent in Israel) - despite the past four years. The further behind Israel's living standards fall, the more attractive life abroad becomes for many Israelis whose skills and training are in demand overseas.
This is not some abstract or distant theoretical issue, but a very real crisis already in full swing. The emigration rate from Israel by physicians is even greater than that of high-tech professionals. The high outbound rate of physicians is exceeded by the emigration rate of university professors, which is greater than that of every other group in the country.
How severe is the situation in Israeli academia? While the number of European professors in the United States falls between 1 percent and 4 percent of the total number of professors in their respective home countries, the number of Israeli professors in the U.S. is 25 percent of the number remaining in Israel. Nothing in the Western world remotely compares to this rate of emigration.
This problematic path results from very low employment rates and low labor productivity rates, despite a high-tech sector that is thriving on a global scale. Israel's education system, which has become the worst in the Western world, is one of the main reasons for the decline. In addition, there are large population groups that are increasingly disengaging from Israeli society. For example, the majority of the ultra-Orthodox and Israeli-Arab populations are not employed, nor do they participate in preserving or defending their way of life. If, just one generation ago, the children of these groups made up one-fourth of primary school pupils, today they comprise half of the children in the lower grades.
The State of Israel is on a growth path that is unsustainable in the long run - especially when taking into consideration poverty and inequality trends that have been steadily increasing since the 1970s. An unsustainable path means we can expect a clear and inevitable break in the path in the future, whether this results from intentional, well-informed government policies or a tremendous social explosion that may lead to the country's salvation the hard way - or to its demise.
In 1948 we attained independence. This coming year, 2008, Israel will celebrate its 60th birthday. The country has come full circle during its first six decades. Against all odds, extraordinarily strong foundations were built in defense, education, science and health during the first decade of the newly born country. These seedlings, planted and nurtured by our parents - who sacrificed so much to ensure their survival and growth - endowed Israel with a large amount of subsequent breathing space that allowed us to weather the dysfunctional leadership, the distorted national priorities and the cultural deterioration that has characterized so much of the past three decades.
We have squandered the degrees of freedom bestowed on us by our founding fathers. So next year - 2008, just like 1948 - marks the beginning of a decade in which our generation will or will not exhibit the wherewithal to implement the policies that determine if the country will reach its 120th birthday.
The writer teaches economics in the Department of Public Policy at Tel Aviv University.
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