Israelis may not think much of Joe Biden as a reliable partner, but most Americans have even less faith in him, if the polls are to be believed.
Biden, who landed in Israel on Wednesday for an official visit, has brought some normalcy back to American politics after the chaos and anger of the Trump years, but that has done him little credit at a time when the United States seems beset by economic woes.
Inflation, of course, is the headline economic issue for Biden, but the problems for him and the U.S. go well beyond that – housing and job markets that seem to be constantly out of balance, continued supply-chain disruptions, widening economic inequality, an inability to grapple with climate change and giant budget deficits, to name a few. Americans are more pessimistic than they have been since the Great Recession..
The U.S. economy seems to be in a state of persistent decline, or at least in persistent crisis. That should be a concern for Israelis as much as it is for Americans.
For sure, Israel is less reliant economically on the United States than anytime in the past. Business with China and India has grown a lot over the past decade, and the Abraham Accords are now turning the Arab world into important sources of trade, investment and maybe one day tourism.
But the fact is none of these can match the U.S. economy for size and scale and, most importantly for Israel, for technological prowess. The U.S. is by far Israel’s most important economic partner – our biggest export market after the European Union and our largest source of incoming tourism.
Most of all, the U.S. is our biggest market for technology goods and services and the biggest source of investment capital for startup companies. Wall Street remains the place to go when a startup wants to go public, and American companies are far more often than any others to be buyers for Israeli tech companies. America is Startup Nation’s lifeblood.
So, while America may no longer be the low-tech manufacturing power it once was, having ceded that status first to Japan and then to China and South Korea, it is still the No. 1 tech power. Of the top 164 global tech companies last year as measured by Forbes magazine, 72 were based in the U.S., compared with just 21 in China, the only country that comes close to matching it. Half of the world’s unicorns (startup companies worth more than $1 billion) are in America, versus just 15 percent in China. The U.S. ranks No. 3 for innovation, according to the World Economic Forum, nine places above China.
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America’s overall economic situation looks grim in many respects, but it’s seemed that way before. In the 1980s, Japan and its efficient and innovative manufacturing sector seemed poised to overtake the U.S. For a while, there was talk that the European Union, united by the common currency of the euro, would outperform the U.S. In the 2000s, China emerged as the up-and-coming economic power destined to supplant America as No. 1.
But China’s rise should no longer be treated as a given. In the short term, Beijing draconian coronavirus policies, which have imposed quarantines on whole cities and brought business to standstill, are hurting economic growth. Chinese leader Xi Jinping is showing himself to be less concerned with ensuring economic growth than with tightening the state and the Communist Party’s social and political control.
Not surprisingly, foreign capital has been fleeing the country and even China’s middle class is starting to have doubts about the future. China’s tech sector, which is of keen interest to Israel, hasn’t escaped this. Beijing has cracked down on its biggest companies, imposing new rules and regulations on them and even all but “disappearing” Jack Ma, the legendary founder and owner of Alibaba.
Xi says he believes in innovation and technology, but he wants the government to keep a very close watch on it. He opposes what he calls the “disorderly expansion of capital” and wants China to develop technology on its own rather than cooperate with foreign partners – mainly America, but possibly Israel as well. Tech companies are lying low and venture capital investment in China is plummeting.
If China once looked like a rival to America, and one that Israel could not afford to ignore, that seems no longer to be the case.
Alas, the world economy isn’t a zero-sum game. Whether it turns out to be relative or absolute, China’s decline doesn’t mean America will thrive. In the absence of any other emerging economic superpowers, we may be heading into a world where no one economy enjoys the dominance that America has since the end of World War II.
It’s hard to say what that world will look like, but there is good reason to be concerned. Imagine a world economy without the institutions (albeit many of them reviled) that ensure fair rules for trade, enforce intellectual property and patent rights, and bail out countries when their economies fail, to name a few. No one likes the International Monetary Fund anymore than they like their local cops except when they’re needed.
America’s economic problems are probably not quite as bad as the public perceives them. But the country faces no shortage of long-term challenges, and it has been slow to address, in part due to a preoccupation with its bitter culture wars.
In its favor, it seems that the U.S. has not lost its ability to re-invent itself, experiment and innovate, absorb new ideas and new people (immigrants) and move forward. A generation ago, that flexibility enabled the United States to transition like no other economy from the rust-belt industries of the 20th century to the Silicon Valley high-tech of the 21st century. For our sakes and theirs, let’s hope America hasn’t lost its mojo.