The American Dream, the American Reality and Israel

Israelis seem to obsess with the state of the United States. Is it envy of their neo-feudal system, or a fear of following them into economic morass?

On Monday last week, mid-day in Israel but morning in New York, 12 hours after hundreds of thousands of Washington's secrets were plastered across the Internet by WikiLeaks - the top headline on the New York Times online kept faith with the print version of the international edition of the newspaper. That headline stayed there all night and throughout the morning: "Cables Uncloak U.S. Diplomacy."

Near the bottom of the website was the usual "Most popular" box, counting the articles that had been sent by email the most times in the last 24 hours. The first article on the list, the one that website readers had sent the most times to others, was: "A Dying Banker's Last Instructions." Second on the most-popular list was Frank Rich's column "Still the Best Congress Money Can Buy." That was also the third-most read article on the site.

The American dream

The article about WikiLeaks only came fifth in the popularity meter.

What sort of articles are Web surfers sending their friends? Mainly, articles that relate to their condition, that intrigue or annoy them. Articles with which they identify, articles that they want their friends to read. Articles that touch them personally.

The first one, "A Dying Banker's Last Instructions," tells of a former top banker at Goldman Sachs. Realizing he was dying of brain cancer, he spent his last moments writing a book about the secrets of capital market investment.

The second is a long column by commentator Frank Rich, which boils down to this: Bankers and Big Business bought Washington. Corporate profit doesn't trickle down to the American people, it stays in the hands of the rich. Most Americans understand that the money companies pour into politicians created a caste society, and there's little opportunity to upgrade.

It took Americans 30 years of widening social gaps, and vast accrual of wealth in the hands of the upper crust, and one single financial crisis that wiped out trillions of dollars in value for the middle class - to understand the distance between the American dream and the American reality.

The American dream is of a free market, because no market has arisen yet that creates more talent, competition, productivity and progress. But the American reality is a market "regulated" by a handful of powerful players, abetted by politician, for their own personal gain.

Who really can

The American dream is that anybody can. The American reality is that a few hundred thousand or maybe a few millions can. The other 300 million can't. Climb the caste ladder, that is. Their room to maneuver is a lot smaller than they think.

Last week the Israeli historian Prof. Eyal Naveh, speaking with TheMarker Week, described the American nation as decadent, overweight and sinking, like the Roman Empire. It's a process that can take decades, even centuries, but it's begun, he says.

That article was the most widely read on TheMarker website (Hebrew ) over the weekend.

Why would an article about the American economy garner so much interest on an Israeli website?

The U.S., Israel and the chattering classes

I can think of at least two reasons. The Israeli economy and society are tightly tied to America. Many Israelis who believe in the American dream are interested in the state of its economy. The second reason, which one learns from the comments to the article: Many Israelis feel that the description of a sinking America applies here too.

Despite the geographical, economic and cultural distance between New York and Tel Aviv, it is interesting to compare the comments to the article on TheMarker website to the comments on the New York Times pieces.

Both sites have comments demonstrating tremendous frustration with the politicians groveling before business leaders. Both mention oligarchy and plutocracy, meaning governments that sport the trappings of democracy but are really controlled by a handful, of families (Israel ) or giant companies (America ). More and more Israelis and Americans, at least the ones who learned some history, feel like vassals in a feudal state.

Today's latter-day vassals have 40-inch televisions running nonstop reality shows. They have cars and mobile phones. But the vassals are starting to realize their real status in the food chain and to realize that their ability to be upwardly mobile is limited - and that the older they get, the more likely they are to suffer a deteriorating lifestyle.

The yearning for change and calls for a middle-class rebellion may seem naive, sometimes ridiculous. But they're showing up more and more in the comments.

The middle class, which has the know-how and leisure to understand at least a small part of the political and economic mechanisms robbing its future, and the future of its children, is angry.

But Israel isn't the United States. We haven't suffered an economic crisis. We still don't have millions of people who have lost their life savings on the stock market or in the deflation of a real estate bubble. For us, these nightmares lie in the future. But they will come, in some uniquely Israeli format. They will inevitably come because the government isn't doing a thing to prevent it.

We have hundreds of thousands of young people who can't buy homes or finance the mortgages they've already taken out. We have tens of thousands of people who grew up in the high-tech generation and only now begin to grasp what they may expect at age 45, 50 or 60. We have an education system that boasts the fastest rate of deterioration in the West, which is already producing results that fall far, far short of American schooling.

The macroeconomic figures for Israel and the United States in 2010, and apparently 2011 as well, are flattering for Israel. The U.S. deficit is growing at terrifying speed but here, it's under control. In the U.S., unemployment has doubled in the last five years: Here, it's steady.

But the figures are misleading. The American economy is tremendously powerful by virtue of its sheer size, strong institutions, and the best universities and research institutes in the world. America attracts the best talents. The American economy is resilient to crisis, at the end of the day. Meanwhile, investors the world wide are happy to continue buying up more and more greenbacks.

We do not have the size or power of America. We do not have its vast market. Israel must excel. It must be the most competitive economy in the world in order to survive in this cruel world.

Is Israeli competitiveness improving? Deteriorating? Going nowhere?

We have some idea. But the best demonstration of the truth is that almost nobody cares about the answer. Nobody in government is thinking about it seriously. Next week we shall delve into a fascinating corner of the Israeli economy, one that hasn't won attention for the last 30 years - but it will provide an excellent way to begin discussing the true state of competitiveness in Israel.