Seventy years ago, the future of the infant state of Israel looked dismal.
That’s not exactly a compelling piece of historical analysis. Even if some revisionist historians have tried to recast the story of an Israeli David versus an Arab Goliath into something more of a battle of equals, that was certainty not how it looked at the time.
Given the objective balance of forces, the fact that Israel won defied the very bad odds. Losing the war would have mean nothing less than the end of the state with consequences for the Jewish people that are hard to imagine.
But beyond the security threat, the economic prospects of the new state were no less a challenge to its long-term ability to survive.
That is because in 1948 and for roughly the next 40 years, the key to national prosperity was big industry. And, industry needed access to natural resources and large populations that could work in factories and buy the products that churned out by them.
Israel had none of those advantages. Its population, including the Palestinians that remained after the war, was just over 800,000. Twenty years later, after a wave of immigration it was still just 2.8 million. What little industry there was had been shattered during the fighting in 1948 and the only natural resources were potash and a few other chemicals from the Dead Sea.
There were small economies like Switzerland or Belgium that succeeded, but they were in the heart of Europe. Anyhow, Israel never had a tradition of craftsmanship or labor discipline that industry required.
A venture capitalist and management expert recalled to me his feelings in the 1980s when Japanese just-in-time manufacturing was being adopted by industrial economies around the world. It was, he thought at the time, the last nail in the Israeli economic coffin. How would Israel ever adapt to such exacting standards? Whatever else you might say about the Israeli worker, keeping to an exacting and consistent schedule was not one of his qualities. We might develop a textile industry or an arms industry, but the fundamental problem of building a developed economy remained. Israel was too small to be an economic autarky but had none of the competitive advantages to really succeed in the global economy.
Without that economic base, how could Israel over the long term afford to field the army it needed to defend itself? How could it be a home for the world’s Jews if it couldn’t create jobs or a Western standard of living for them? Worse still, how could it keep own best and brightest from leaving?
Israel didn’t change, but the world did.
The world changed
There are still plenty of advantages to having a big, disciplined workforce and access natural resources, but the real source of prosperity in the post-industrial world is a country’s ability to create new technology. Indeed, the pace of technological change is so rapid that innovation itself is a commodity, even if you yourself don’t fully exploit it.
That’s been the story behind the Startup Nation phenomenon. Israelis have the rare ability to think outside the box and develop new products and services, which these days, means digitizing everything from automobiles to insurance. We may not be so good at capitalizing on the innovation by building big, globally competitive tech businesses, but we’ve been super-stars at selling our innovation to others.
Israel’s startup economy was entirely a function of culture and values going back to the earliest days of the Zionist movement. Among other things, that ethos looks askance at authority and tradition, is easy about open (and often acrimonious) debate, has an appetite for risk, and values teamwork and group loyalty, but at the same time leaves a lot of room for individuality.
These values lie at the heart of the global startup phenomenon and are routinely praised by academics and management gurus, but on a national scale, they are rare commodities. More than 30 years into the global tech revolution that started in California’s Silicon Valley, it’s plain that most of the world is struggling to catch up to Israel and may never do it.
Whether Israel will be in such good shape for its 100th anniversary is another question.
The problems of Israel's education system are widely acknowledged. Indeed, the schools are so bad that outside of Israel’s vaunted high-tech sector, the country’s economic performance is pretty mediocre, among other things, because of the low quality of its workforce.
However, there’s a much deeper problem facing Israel and that is the assault from the country’s political right on the basic values that make Israel the technology power that it is.
The right believes that what makes Israel strong is a vacuous nationalism that values deference to authority (except when exercised by the High Court), loves symbols over substance, has little tolerance for critical opinion, is always on the lookout for enemies at home and around the world, distrusts expertise and too much education, and hallows tradition over change.
What’s made Israel a high-tech power is exactly the opposite of all that the right holds dear. Thus, Tel Aviv is both the epicenter of Israeli high-tech Tel Aviv and representative of everything the right loathes, home of half-hearted Zionist and outliers.
No one is going to erect a giant semiconductor in front of their house for Independence Day, take a family trip to a startup accelerator or write a patriotic poem in honor of Gil Shwed, the founder of Check Point Software. But it wouldn't be a bad way to honor something that has made the country great.
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