After a Turbulent Decade, What Does Israel's Future Hold?

In the realm of security and economics, this decade of illusions was too close for comfort to the 1930s.

Dan Ben David
Dan Ben-David
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Dan Ben David
Dan Ben-David

Many illusions were shattered during the past decade. It was a decade that began with Camp David and ran head-on into a murderous intifada; a decade beginning with a soaring dot-com bubble that crash-landed within a year; a decade that America began as the world's only superpower, and within less than two years had national symbols destroyed by terrorists; a decade in which a small country discovered how limited its ability is to defend its towns from threats from the skies and its soldiers from threats from below the surface; a decade in which the superpower discovered that its ability to deal with extremely dangerous small threats is limited.

In many respects, this decade of illusions was too close for comfort to the 1930s. In the national security realm, that's when the countdown began for the great cataclysm of the '40s. Are the accumulating signs in this realm pointing to an outcome with similarly catastrophic potential?

In the socioeconomic realm, memories from the 1930s received a place of honor during the past year - and not by coincidence. During the first 12 months of the Great Depression, global output fell by 13 percent, a figure echoed in the first 12 months of this current crisis. Eventually, as economists Barry Eichengreen and Kevin H. O'Rourke so vividly showed in their recent study, "A Tale of Two Depressions," output continued to fall during the Depression, and after three years, global industrial output was nearly 40 percent lower than it had been before the crisis.

The stock market was down 20 percent by the end of the first year of the Great Depression. This time, the drop was much greater, approximately 40 percent. In recent months, there have been signs that this freefall has stopped, and there have even been some relative increases. That said, the overall decline in today's global stock markets is identical to what it was at this stage of the Great Depression. It is important to point out that that crisis came in a series of waves, and within three years, the average value of stocks worldwide was 70 percent lower than at the beginning of the Depression. One of the greatest policy lessons from the Great Depression was in the area of international trade. Countries that saw a steep rise in unemployment adopted autarkic policies of closing their borders to imports, with the intention of protecting their workers - which only magnified the Depression's negative impact on other countries. The result were trade wars, which substantially reduced world trade and only worsened an already bad situation. During the first three years of the Depression, world trade fell by about 30 percent.

This time, Western economies have been working together to minimize the recession's damage - with cooperation between governments and between central banks. Despite this, the decline in trade this past year was even sharper than it was during the Great Depression. During the Depression's first year, global trade fell by less than 9 percent, while during the first year of the current crisis, it was down 15 percent. During the first half of 2009, the decline halted, and it is possible that we are changing direction. Israel's export statistics this past month point to a sharp positive turnaround.

So, we may be at the beginning of an emergence from this severe crisis. If so, hopefully, we will then open our eyes and stop looking at the past month, the past quarter, or even the past year, and begin to see the big picture. When we do, we will see that it reveals a surprising perspective of the pace at which Israel is speeding toward its future.

That future is sitting today in classrooms. Who is sitting there? What kind of tools is the future receiving? We need to internalize how quickly things changed over only one decade, and understand the implications.

Massive non-employment

Israel's education system has four streams: state, state-religious, ultra-Orthodox and Arab. There are fewer primary school students in the state education stream now than there were a decade ago. In contrast, the state-religious primary schools have seen a 9 percent increase since 2000. The number of children in the Israeli-Arab stream grew by 35 percent, while the number of ultra-Orthodox children grew by 49 percent. All of this transpired in just one decade. About half of all primary school students in Israel already study in either the Israeli Arab or the ultra-Orthodox systems.

And what is Israel's next generation studying? Is it receiving the tools it needs to survive in a modern and competitive market?

If these children adopt their parents' work norms, then what can Israel look forward to in a number of years? Last year, 12.5 percent of men of prime working age (25 to 54) in OECD Western countries were non-employed, meaning they were either unemployed, or had dropped out of the labor force. The percentage of non-employed Israeli Arab men was almost twice that. Of the ultra-Orthodox men, more than 70 percent were non-employed. Among women, 74 percent of Arabs and 46 percent of ultra-Orthodox were non-employed, compared to only a third in the West.

Could such rates of non-employment characterize the majority in a first-world country? Could a non-first world, non-Muslim country survive in this Middle Eastern neighborhood?

And what about the current majority that is destined to become the minority? Non-employment rates of 16.5 percent among non-ultra-Orthodox Jewish men of prime working age may look good when compared to other groups, but they are nonetheless one-third more than is common in the West. How has this happened?

One explanation can be found in grade-school curricula as it relates to core subjects. Recent studies have found that education in core subjects affects an individual's income and the country's standard of living. A new study by the Taub Center for Social Policy Studies in Israel, which will appear in an upcoming report on the state of the country's society and economy, summarizes an entire decade of international exams, and compares Israel to a fixed list of 25 OECD countries.

Since 1999, Israel has participated in five different international exams in mathematics, science and reading. In all but one of the exams, Israel's children performed lower than their peers in every single Western country. In light of the fact that since the 1970s, Israel's living standards have been steadily falling farther and farther behind the leading Western countries, these outcomes do not suggest a change in direction is in the offing.

Educational gaps within Israel were higher than those in each of the 25 OECD countries during every year in the past decade. Since Israel's economic gaps are already among the highest in the West, and in view of the fact that the education system is the primary springboard into the labor market, how could one expect any future improvements?

Since 1999, Israel's weakest students, those in the bottom fifth percentile, have performed worse than the weakest students in every one of the 25 OECD countries, on every single exam. Israel has one of the Western world's highest poverty rates - and among its children, one can see what the future holds

It is important to point out that pupils in ultra-Orthodox schools, who do not study math or science at core curriculum levels, do not participate in the international exams. In other words, Israel's children managed to garner these problematic achievements without any assistance from the ultra-Orthodox sector.

During the decade since 1999, Israel passed a milestone when its future formally parted ways with its past. In the past decade, former Israeli pupils went on to receive more Nobel Prizes in the sciences per capita than in any other country in the world. Meanwhile, current pupils, those in the country's top fifth percentile, ranked close to the bottom compared to the Western world in every single exam (see table). How ironic it is that while receiving such a reminder of Israeli society's potential, we're also witnessing the terrible bungling of the baton's passing between generations.

Is this our destiny?

We could look at the decade that ends next week and return our heads to the sand. We could look for false comfort in the delusion that this is destiny. We could continue to depend on politicians who act as though there is nothing that can be done. We could ignore, or we could pack our suitcases.

But there are also other possibilities. We could stop the incessant bickering on small matters, and start distinguishing between what is truly important and what is not. Dreams cannot be a substitute for an operational plan - and there is such a plan. The kind of systemic reforms required in education, employment and in other areas do not have a chance of passing in the current electoral system, in which personal and sectoral incentives far outweigh national concerns.

When instability is inherent in the system; when the executive branch is made up of heads of competing political parties who view policy as a zero-sum game - your failure is my success; when a third of the legislative branch is serving in the executive branch, while the other two-thirds do all they can to bring down the first third; when the fragments of parties representing the heart of the Israeli consensus barely constitute a majority in the Knesset - then, there is no other issue more important for saving the country's future than a comprehensive change in Israel's system of government.

I happen to favor a particular system that I have written about often - a president as chief executive and MKs all having to get elected on a personal basis to fixed terms of office; a complete separation of powers between branches, including checks and balances that enable governance and oversight; cabinet ministers who are chosen not because they head political parties but because they are people who actually know something about the offices that they head - but this is not the point. There is no perfect system, and there are other possibilities. The point is that we may not have another opportunity to learn from our mistakes.

This is a time for real leaders, and there are some in the Knesset, who understand the importance of the hour and what their place will be in the history of the Jewish people if they don't start taking care of its home. No one can do it on his or her own. But together, they can. This is one of our best and last opportunities. The decade that begins next week must be our reality check decade, otherwise it could be the countdown decade.

Dan Ben-David is executive director of the Taub Center for Social Policy Studies in Israel and an economist at Tel Aviv University. All opinions are his alone.

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