The Oslo Accords Didn't Achieve Peace. But They Did Birth Startup Nation

The much-disparaged Oslo accords didn’t bring Israel security, but they did end Israel’s isolation and enabled the economy to take off

Send in e-mailSend in e-mail
Send in e-mailSend in e-mail
The ruins of the Yasser Arafat International Airport, Rafah. But 25 years after the first Oslo agreement, the airport, formerly  a symbol of the hopes for independence and peace, is long abandoned.
The ruins of the Yasser Arafat International Airport, Rafah, created when the Oslo accords were still grounds for hopeCredit: Said Khatib, AFP

It's ironic how much Israelis disparage the Oslo accords while enjoying its fruits.

The Oslo accords, which were signed 25 years ago on Wednesday, are conventionally judged an abject failure. They didn’t lead to the state the Palestinians wanted, nor did they bring the peace and security Israel sought.

But those are very narrow criteria. What Oslo’s critics ignore, is that it made possible Israel’s high-growth, high-tech economy.

Of course, it wasn’t just Oslo that worked the magic: it was the entirety of the peace process, which began with the 1991 Madrid conferences and limps along to this day with Trump’s “deal of the century.” The big changes occurring in the world with the end of the Cold War and the rise of the internet played a role, too.

But at the heart of it was Oslo, and the message it broadcast to the world:  that Israel was ready to end its dispute with the Palestinians on the basis of negotiations and compromise.

The heart of Oslo

Pre-Oslo Israel was economically isolated and on a permanent war-footing. The Arab boycott deterred many of the world’s biggest companies from doing business with Israel; also, the economy was weighed down by the high taxes required to cover the massive defense budget. Post-Oslo Israel became globalized in just a few short years; 25 years later, the security threat Israel  faces has been immeasurably lowered.

One small example of the sudden change and its economic impact is the Israeli automobile market.

Until the early 1990s, none of the major Japanese or Korean car companies would come near Israel, which limited competition to a handful of mainly European companies. The end of the Arab boycott of foreign companies doing business with Israel brought new competition and more choice within just a few years. Today Mazda and Kia are among the most popular cars in Israel.

Another effect of the boycott was an almost complete absence of foreign direct investment in Israel. In the decade before Oslo, it ranged from a paltry $21 million a year to a maximum of $589 million. in the decade following, FDI jumped to $1.35 billion in 1995, then to $4.82 billion in 2005 and has kept growing since.

The birth of Startup Nation accounted for much of that rise, but it’s unlikely that the tech boom would have ever happened if the peace process hadn’t created the political environment that made multinational companies feel comfortable investing and doing business with Israel. That includes non-tech companies like McDonald’s, Nestle, Unilever and PepsiCo, which had avoided the Israeli market.

The peace process also lifted the weight of defense spending off the economy. As a percentage of GDP, defense expenditure had declined since its peak following the 1973 Yom Kippur War, but on the eve of Oslo it was still in the double digits. From 1995 on, it fell steadily, dropping to about 5.5% of GDP today. That has enabled the government to cut taxes and spend more on economically beneficial things like health, education and infrastructure.

I’m opening myself to the charges of lauding Oslo for giving us McDonald’s and Mazdas at the cost of hundreds of Israeli lives. But that equation is facile.

The binary scenario Oslo-haters peddle – that the accords brought the Second Intifada and Hamas while an Israel that had remained singled-minded in refusing to negotiate would have enjoyed peace and security – is so much fantasy.

It beggars the imagination that the Palestinians and the Arab world would have passively accepted a situation like that. The only real question (and it’s one that we can never know) is how many wars would have been fought and how many lives lost had Israel stuck to the principle of not negotiating while expanding the settlements.

In any case, economic growth as an outcome of Oslo shouldn’t be disparaged. It’s not just about profits for capitalists, but about creating jobs and livelihoods. It’s about an economy that can pay for things like health and education and defense.

The Oslo process has petered out in all but name, and there was even a time when it looked like the dying peace process and Israeli human rights violations might bring back the pre-Oslo era of isolation.

It didn’t happen, and Israel is more a part of the global community than ever. Foreign investment last year reached $18 billion and last month PepsiCo (a company that wouldn’t sell its soft drinks in Israel pre-peace process) went ahead and bought the Israeli company SodaStream last month. Almost every major global tech company has a research and development center in Israel.

One reason Israel hasn’t become a pariah again is the widely accepted story line of the peace process being on hold and that it will one day be revived – a line that Netanyahu has kept alive with aplomb.

But even if the line is wearing thin, the fact is Israel is too deeply embedded in the global economy to be expelled so easily.  Just ask the BDS movement.