A Professor Highlights Socioeconomic Problems in Israel - and Offers Solutions

Israel has two economies running in parallel: One at the height of global knowledge and innovation, and the other that lags far behind and cannot pull itself up

Sami Peretz
Sami Peretz
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Prof. Dan Ben-David from the Taub Center.Credit: Michal Fattal
Sami Peretz
Sami Peretz

There is no lack of prophets of doom among us, but one of them, Prof. Dan Ben-David, has been making the rounds for years with a thick file filled with concrete evidence of his predictions about Israeli society and its economy. Ben-David, a professor of public policy at Tel Aviv University, was until recently the executive director of the Taub Center for Social Policy Studies and is now the president and founder of the new Shoresh Institution for Socioeconomic Research.

At Shoresh, Ben-David continues to diagnose Israeli society with his sharp scalpel, looking both backward and forward, not giving anyone a break. He tells us how close we are marching to the cliff's edge, and where we still have a window of opportunity to deal with our problems.

The better-known trends in Ben-David’s analyses deal with demographic issues like gaps in inequality and the high growth rate among the Arab and ultra-Orthodox communities. But Ben-David is not a professional doomsayer. He usually offers solutions and leaves room for hope: not everything is beyond saving, it's possible to change things, and we must do so. In the first report from the Shoresh Institution, released last week, there are a number of findings that inspire such hope.

For example, one of the positive figures in the report is Israel’s high position in venture capital investments. The percentage of venture capital investments relative to GDP is the highest in the OECD at 0.38% in 2014. There are a number of reasons that Israel is a superpower in venture capital investments in particular, and high tech in general: the Israeli sense of entrepreneurship; being a nation of immigrants who learned to adapt and survive; the country's security needs, which created a sophisticated weapons industry; and a high level of research in the universities.

There is another, less sociocultural reason: The Israeli venture capital industry receives government incentives through the Yozma program, which was founded in the early 1990s by then-finance minister Avraham Shochat, and Yigal Erlich, the former chief scientist in the Industry and Trade Ministry. Even now, the plan is considered to be a great success, and was studied, analyzed and copied by other countries. The existence of the high tech industry in Israel and the push it received from the program is proof that the government can implement a significant long-term process here — and it raises the question why it doesn't happen more often, and in other areas.

One possible explanation is that we were fast movers once, but because of a deterioration in governance and the government’s ability to get things done, we no longer are. A second explanation is that we operate at our best only when our backs are up against the wall. Or as former foreign minister Abba Eban is quoted as saying in the Shoresh Institution report: “History teaches us that men and nations behave wisely once they have exhausted all other alternatives.”

There is also a third explanation: It is much simpler and easier for the government to place the cherry on the top, as it did in the high tech industry, than to carry out the difficult and demanding infrastructural work of dealing with the bottom layers of the cake.

This brings us to the more bleak findings of the report, which are ample. They describe well-known trends, such as low labor productivity that requires us to work many more hours, frozen wages, some of the highest economic inequality in the world (even if we factor out the Haredim and Arabs, the two poorest populations), low levels of achievement in core school subjects, enormously lagging road infrastructure and public transportation, bureaucracy, a hospital bed shortage, low civil expenditure, and much, much more.

These are issues that occasionally receive treatment in various committees, but get stalled or move forward too slowly. The result is that there are two economies in Israel, running in parallel. One is at the height of global knowledge and innovation, and is speeding ahead; and the other lags far behind and cannot pull itself up. This applies not to just a small slice of Israelis, but to millions who are not connected to the flourishing knowledge economy or to the stable and well-paying centers of employment.

Readers of Ben-David’s reports can reach one of two conclusions: The first is that the situation is not great, so everyone must take care of himself somehow, or leave. The second is that the situation is not great and we must, and can, fix it before it finishes off the country.

I verified this with Ben-David, and he says he has reached the second conclusion.


A few years ago, a well-known philanthropist visited TheMarker’s offices, and asked us to help him invest a million dollars, and maybe a more, in an interesting social project. “Bring me an idea,” he requested.

This is not exactly a task that journalists deal with regularly, but it was a challenging experiment. A number of colleagues from the paper and I held a series of meetings with mayors in communities in the periphery, far from Israel's center, and tried to come up with a plan for developing local leadership to help advance those districts.

We wrote a nice proposal a few pages long, and were quite excited that we had an opportunity to influence the philanthropist. When we met with him to present our project, we enlisted all our powers of persuasion. Our eyes were shining and we had a feeling we would succeed in changing the world, the philanthropist with his money, and we with our brilliant idea.

He listened to us without questions or comments. When we finished, he said, "Do you have another idea? I want something exceptional, here in Tel Aviv.”

Perhaps it was just this one specific person, but maybe it is something broader. My verdict is that it's easier and more enticing to invest in the best and help them excel, than to invest in the weak and raise them up a level. The best are few and their chances for success are high. The weak are many, and the road to improve their circumstances is long and hard. But that is a privilege that belongs to philanthropists, not the government.