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Super-capitalism at work

Ruth Schuster's review of "Start-up Nation" (Books, November), and the book itself, would have been perfect, had they also discussed the real vectors that created the start-up nation. I shall briefly mention them chronologically:

Early on, 25 years of wars of survival created a vast defense industry. The U.S. and, after 1967, French, embargoes accelerated the establishment of high-tech industries like Rafael and Elbit, and they and others spawned more entrepreneurs. The capitalistic state of mind of some socialists like Pinchas Sapir, and, from the Defense Ministry, Moshe Kashti, Yeshayahu "Ishi" Lavie and the young Shimon Peres, led to the introduction of a system by which the government would take from the poor, as it were -- via taxes, foreign loans and charity -- and give to the "rich" -- young entrepreneurs who provided 50 percent of start-up expenses from their own funds.

From a national point of view, the risk of failure was relatively small. Many successful high-tech companies grew on the ruins of a failed first R&D project. This is the way more than 1,000 high-tech start-ups were born. Substantial change was introduced by the committee led by Prof. Ephraim Katzir (later president of Israel ), which recommended the appointment of a chief scientist for the Industry and Trade Ministry. Initially the position enjoyed an unlimited budget for R&D, which enabled it to give entrepreneurs 50-80 percent of the start-up costs of innovative products. Additionally, the BIRD Foundation was formed, which financed cooperative U.S.-Israeli projects. In the last years of the 1970s, the number of high-tech start-ups grew more than tenfold.

This was unprecedented super-capitalism: The Israeli government gave money to entrepreneurs with no conditions, no shareholding, no participation in management. Elscint, Scitex and Ormat are just a few of the firms that received funds this way (after the World Bank allocated $10 million to the chief scientist in the mid-1970s ), and the hardware they produced was then exported for hundreds of millions of dollars.

By the beginning of the 1980s, Control Data Corporation, then already a partner in Elron, supported an effort to raise capital in America. The company it formed was the first foreign venture capital firm in Israel. It invested $40 million, whose recipients included Comverse and Tecnomatix, both of which today trade on the Nasdaq exchange for several billions of dollars.

During the course of that decade, several other venture capital companies also set up shop in Israel.

The 1990s brought with it two revolutionary financial innovations. To encourage venture capital companies to operate in Israel, the chief scientist created Yozma, a government company that financed VC firms operating here to the tune of up to 40 percent of their investments. The results were astonishing. Today, by any measure, there are more VC companies in Israel then anywhere else in the world. Now, however, Yozma negotiates for itself a share in ownership and management in the investees.

The second step in encouraging high-tech start-ups was the establishment of the technological incubators, which provide 50-100 percent of start-up investment and infrastructure, in return for which the government could acquire up to some 20 percent equity. Between 1993 and 2008, VC firms invested more than $2.5 billion in incubator start-ups, and exports from some 1,175 of the start-up graduates of this program reached $1.8 billion by 2008.

Almost all high-tech start-up entrepreneurs mentioned both in this and in another recent book, by George Gilder, enjoyed government financial support. Truly, the experience gained during military service makes Israeli ex-officers better leaders, and Schuster is right by asking about Arabs, who don't serve, but still form start-ups and venture capital companies. They too benefit from government largesse. And besides, to paraphrase J.D. Bernal, in his masterpiece "Science in History": Wealth nourishes and produces science, not the other way around. The Israeli government policy of financing, even with small strings attached, was the most efficient motivator for the creation of the "start-up nation."

Brig. Gen. (ret. ) Itzhak (Yatza ) YaakovTel Aviv (The author was chief of research and development at the Defense Ministry for 11 years, and the first active chief scientist of the Industry and Trade Ministry. )

Just who's reactionary?

I enjoyed the first half of David B. Green's review of Norman Podhoretz's "Why Are Jews Liberals?" (Books, November). But I was shocked by the second half, when he seemed to assume a whole new persona. Surely he cannot believe that Podhoretz's political views are "reactionary," in the sense that they take Jewish ethics to be entirely selfish. Had he really wanted to check that notion, Green might have phoned Podhoretz, who I'm sure would have given an articulate denial of the charge.

Green must have heard of one Adam Smith, who demonstrated 200 years ago that trade is beneficial to both the seller and the buyer, under circumstances of adequate competition. Many Americans admire Israel's amazing economic vigor these days, which owes much to liberalization of economic restrictions due to Benjamin Netanyahu's stint as finance minister. And many wealthy and poor Israelis, both Arabs and Jews, continue to benefit from an expanding economic pie. The poverty in Gaza today is entirely self-inflicted; it is certainly not due to an excess of economic liberty.

The whole charge of economic "selfishness" in a Thee-versus-Me fashion is hugely simplistic. We do not live in a Hobbesian economic world. If you eat well today, you are not snatching your meals from the mouths of starving widows and orphans. That is a truly reactionary view of economic reality -- a view that Israel's good friends in the Tehran regime would warmly endorse. If anyone is reactionary today, it is the Shi'ite and Sunni world, much to their own pain and rage. The word "reactionary" applies very accurately to people who are living in the seventh century, or the 16th, or even the 19th century of Karl Marx and Charles Dickens. I don't really think it is anything but a term of abuse when applied to someone like Mr. Podhoretz.

Bernard J. Baars, Ph.D. La Jolla, CA

Thanks to David B. Green for his thoughtful review. I represent (not officially, of course ) the shrinking population of liberal, Democratic, modern-Orthodox Jews in Manhattan (you can imagine how small the group is outside of Manhattan ). What's interesting is what a political pariah I have become in my synagogue since voting for President Obama.

I take issue with Norman Podhoretz when he writes that liberalism is incompatible with Orthodoxy because many liberal positions violate Torah law. My response is, So what? The First Amendment codifies separation of church and state. Since when is the U.S. constitution part of the Oral Law? Doesn't Podhoretz know that civil liberties legislation over the past 40 years has helped ensure the religious freedoms that Jews (including Orthodox rights to Shabbat observance, etc. ) now enjoy? These laws were not passed by conservative Republicans.

Since when is social justice, helping the unemployed, welfare or charity not Jewish values? The Talmud recognizes abortion in certain circumstances, taking it out of the realm of "killing the unborn." It also relates how rarely capital punishment was ever carried out. Does Podhoretz know that under Jewish law, an individual cannot confess to a crime, that the court must prove it? Where did innocent until proven guilty come from?

I could go on, but you get the point. As the review mentioned, I believe it is the focus on absolute self-interest that is leading Jews to conservatism, a set of hypocritical positions that I believe is incompatible with Judaism.

David PineNew York, NY

Gore Vidal is anti-Semitic? The same Gore Vidal who lived with a Jewish guy, Howard Austen, for almost 4 decades, and nursed and took care of Austen when he was dying of cancer, and recently told an interviewer that he remains sad at the loss of this close Jewish friend?

The only thing I have heard over the years that makes some yutzim say Vidal is anti-Semitic is Vidal's article in the late 1980s in The Nation, in which he recounted an argument he'd had with "Poddy" and his wife, Midge Decter. Vidal's argument was that some Jews in America, like Podhoretz and Decter, were for Israel above all else. And that is an accurate, truthful statement. I can point to any number of people, starting in my own synagogue, whom that describes. I have heard such folks say they decide whom to vote for in U.S. elections based solely on their position on Israel. Some years ago, one told me, "I supported the Iraq War because it was good for Israel." How wrong can one person be, eh?

That Vidal doesn't like particular Israeli policies in the occupied territories, and thinks AIPAC controls too many votes in Congress is something many American Jews -- starting with myself -- would say they are in agreement with.

[Joseph] Sobran on the other hand, is not so easy to defend....

Mitchell J. Freedman Poway, CA

Haaretz Books, December 2009, haaretzbooks@gmail.com