Start-Up Nation’s Worst Enemy: Donald Trump

Israel’s main interest isn’t thriving settlements but a thriving global economy, which the U.S. president-elect seems determined to take apart.

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Backdrop to a Trump Israel rally.
At a Trump supporters' rally in Israel. Credit: Olivier Fitoussi
David Rosenberg
David Rosenberg

We in Israel have good reason to be smug right now, at least economically speaking.

The Israeli economy grew by about 3.2% in the third quarter of 2016, the government said Wednesday. That is impressive enough and will probably be revised upward as the Central Bureau of Statistics gets more data. The stats bureau has already revised the second-quarter figure a couple of times, on Wednesday saying the economy expanded at a 4.9% pace.

That kind of growth is not enough to give China a run for its money, but it does mean that Israel is on track for growth of about 3.5% this year, leaving Europe, America and the rest of the developed world in the dust.

At a time when our government is stealing private property from Palestinians and destroying public broadcasting so the prime minister can enjoy a good night’s TV news, at least we know there are jobs aplenty, wages are growing and our biggest consumer anxiety is where to fly on our next vacation.

Not only that, Israel has enjoyed a dozen or so years of uninterrupted growth at a time when the world suffered its worst recession since the 1930s, the Arab Spring wreaked havoc on the region and Israel itself fought enough wars to take heavy toll on consumer and business confidence in any normal economy.

Godzilla plant in a tiny country

Can it all last much longer? Probably not. If you dig beneath the top line, you uncover some less-than-encouraging numbers.

For one, the last several quarters have seen the level of investment by industry shoot up. Normally that spell economic growth going forward, because it means the machinery and equipment now being installed at factories will eventually starting making stuff. 

The problem is that much of this growth was due to one factor -- Intel Israel’s massive investment in upgrading its Kiryat Gat semiconductor plant.

The upgrade is complete and the good news is that Intel will be adding to Israeli exports, which have been in a slump. The bad news is that investment not counting Intel probably hasn’t been growing that much, so that it doesn’t point to future growth.

Intel plant in Kiryat Gat: Intel has received $1.5 billion in various Israeli government grants over the years.Credit: Alberto Denkberg

The worse news is that the consumer spending boom that has lifted the economy for the last couple of years seems to be tapering off, as it was bound to do. Even the most avid consumers can only shop till they drop, and the splurge on consumer durables like cars and washing machines had to run its course.

That means that the economy is going to have to return to its traditional growth engine, which is exports. And these days aren’t a good time to be counting on something like that.

Do you like settlements?

In case you hadn’t noticed, Americans last week put into office a president whose message above all others is that he opposes globalization, which means international trade and cross-border investment.

In Europe, the Brexit vote is likely to find an echo in elections in Germany, France and the Netherlands next year, signaling a move toward protectionist economic policies and declining international trade and investment.

The Israeli right, which looks at the world through the prism of “do you like settlements, or not,” cheered Brexit for no other reason than it hates the European Union and cheered Trump even more because they are certain he is the greatest friend of the Jews since Cyrus the Great.

But anyone with an ounce of common sense knows building settlements isn’t Israel’s key interest and that we shouldn’t be picking our friends and enemies on that basis.

Israel’s chief interest is ensuring political stability, world economic growth and a globalized economy. We don’t require it just for trade, which accounts for 40% of the Israeli economy, but for our high-tech industry, which is 100% globalized.

Nearly all of Startup Nation’s capital comes from abroad. Its markets are all international and its mergers and acquisitions activity are all cross-border. Without the rest of the world, Waze would be a mom-and-pop app giving directions to drivers lost in Tel Aviv.

Some observers, including people in the government, are taking comfort in the thought that Trump hasn’t singled out Israel in his anti-global tirades. But that’s not because of his deep love of Israel. It is because Israel is a drop in the trade ocean that doesn’t take away American jobs.

China and Mexico are Trump's main targets, but if a trade war with China develops, and the world and Chinese economies slow, Israel is going to dry out. The last thing Israel should want is Trump, Brexit and a deglobalizing world.

Inside Blendle, a Dutch online news startup with portraits of Donald Trump on the walls: Globalization is key to more than Israeli startups. Credit: Jasper Juinen, Bloomberg

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