Shattering the Myth of the 'Startup Nation'

This lofty title has long served as a cover for the low productivity that plagues the Israeli economy.

Amir Teig
Amir Teig
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Amir Teig
Amir Teig

Legend has it that a treasure trove of economic reforms is hidden deep down in the confines of the Finance Ministry's budget department – dozens of important reforms formulated over the years just waiting for the day when the right politician will come along and pluck them out of the files.

The department's capable economists and senior bureaucrats cover all their bases by running everything through committees and past experts. Usually they identify clearly, and in real time, the numerous problems and challenges threatening the Israeli economy, and even formulate solutions.

But this work usually goes no further than the filing cabinet: Barring the sense that there is a terrible crisis or a fire that needs to be put out, no politician will commit to risky long-term reforms.

And yet, without them, Israel will always be behind.

There isn't any high-tech fire, and this glorious industry still remains a bottomless source of national pride, and rightfully so. But the truth must be acknowledged: High-tech is a small niche that remains separate from the economy as a whole and doesn't permeate other sectors.

This industry is comprised of 230,000 lucky, well-paid people who manage to attain a standard of living nearly on par with their colleagues in the United States, Europe and the developed countries of Asia. More importantly, these talented people are at the forefront of global technology and possess the tools to compete effectively, in the long-run too, with any other worker in the world.

But this group does not a startup nation make: It barely comprises 10% of the workforce. The other 90% suffer from low work productivity and the inability to compete globally.

The concept "startup nation" has for years served as a cover for the low work productivity that plagues the Israeli economy. Low work productivity means lower pay, a poor standard of living, less job security, larger social gaps, smaller pension savings, and a higher chance of Israel's citizens sinking into poverty at some point in their life.

Thus Israel's social-justice protests highlighted the primary long-term solution, perhaps the only one, to reviving the economy: improving work productivity –raising the value of work produced by each and every worker.

Public housing projects and increased welfare payments to the poor won't close Israel's income gaps in the long run, nor will they narrow the widening gap between Israel's standard of living and those of other developed countries. Only improving productivity by bringing in new technologies to all the dark corners of the Israeli economy will do.

The first step in solving the problem is recognizing its existence. That is the main purpose of a report put together by economists at Trigger-Foresight, who wrote that "The extent to which the Israeli public sector harnesses information and communications technology doesn't match its own national self-perception as a global leader in technology and innovation."

It's not easy to shatter the "startup nation" myth, but it needs to be shattered if we want to push the Israel's information revolution forward.

Most of us already have a sophisticated smartphone, a new tablet and ready access to a high-speed network that connects us to the Internet wherever we are. The revolution made quick progress as long as it depended on Israelis' deep desire to buy gadgets and on companies' business needs. But now it has run up against the powerful bureaucratic forces in the civil service and the politicians' inability to carry out lengthy reforms.

These forces will shove the Trigger-Foresight recommendations into the treasury's filing cabinet of forgotten reforms. As with all reforms, someone is bound to wake up eventually – but by then it might already be too late.

The Waze navigating app has become ubiquitous in Israel, but the Transportation Ministry may not allow its ride-sharing service.Credit: Bloomberg

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