Where Are We Now, 20 Years Later?

Twenty years after the Berlin Wall fell, the argument over who can take credit for it rages on. Was it unyielding anti-Soviet policy? Or mounting internal unrest in the Soviet Union? Should the acclaim go to Ronald Reagan, who throughout his stint as U.S. president was unrelenting in his war on the Soviet bloc? Or perhaps Mikhail Gorbachev, who declared immediately upon the Wall's fall that the USSR would no longer interfere in the affairs of its satellite states?

The list is long, the argument boils on, and not only is no consensus forming, a new candidate is taking shape. With the rise of Putinism in Russia, a return to a regime of fear under Vladimir Putin, it starts to look like oil prices had been responsible all along for the conquest over the Iron Curtain.

Putin has been drawing his strength from the unprecedented surge in oil prices. The full might of the Russian economy and government, and their mounting clout in Europe, rely on oil and commodity prices staying high.

In the late 1980s, oil sank to $15 per barrel and the USSR's economy was almost helpless when faced with competition from the economies in the West.

Falling walls worldwide

While the reasons for the meltdown of the Iron Curtain remain controversial, there's no argument over who benefited. The last 20 years were the golden years of globalization. World trade boomed, and capital and manpower moved around the globe. GDP per capita, adjusted for inflation, grew 11-fold in China, eightfold in Vietnam, fivefold in India and threefold in South Korea.

In Israel too, walls fell in the 1980s and 1990s. First to crumble were the walls of customs and taxation, which were suffocating the local business sector. Then came the Oslo agreements, which brought down the walls isolating Israel - the Arab boycott - which led to a vast wave of foreign investment. Finally, the wall of supervision over the forex market came down, triggering a huge surge in capital movement into and out of the country.

Industrialists who had bitterly fought against ending protectionist customs policy admit today that fully opening the economy to imports ultimately drove the surge in exports, too.

The result has been impressive. Israel, a country devoid of natural resources, with no oil or commodities other than some potash, has increased its exports sixfold in dollar terms. During the last 20 years, Israeli exports grew from $15 billion to $80 billion a year, led by the high-tech sector.

During the last 20 years, the Israeli economy has changed beyond recognition. Military knowhow, academic research and the Russian immigration were leveraged to turn the country into a high-tech center. Israel absorbed 1 million immigrants from Russia, greatly reduced its dependence on aid from America, decreased its external debt and became one of the few economies in the world that didn't suffer a body blow during the global economic crisis.

Yet against all these achievements, what it missed is all the more stark.

While the business and high-tech sectors gallop ahead with globalization, most of the public sector has remained behind. Productivity there is low. The system is glutted with manpower, and weighed down with monopolies.

Mine eyes dazzle

The "peace process" remains a "process," eternally. Defense spending continues to grow irrespective of any relation to, or coordination with, actual threats to the nation, limiting the government's ability to invest in education and healthcare.

Israeli politics have not changed much in the last 20 years. Perennially dazzled by the smokescreen of "the security situation," politicians repel any attempt to genuinely delve into social and economic issues. The competitiveness of Israel's economy, which is its stuff of life, interests Israel's politicians about as much as yesteryear's snow in the Alps.

Even Prime Minister Benjamin Netanyahu, the most economically minded of all Israel's leaders, abandoned his previous reforms (instated when he was prime minister) when retaking the reins as prime minister.

Nature abhors a vacuum. The void left by the politicians and public sector does not remain empty. In recent years it has been filled by the local oligarchs, who have gradually been taking the reins and assuming domination over the economy.

The capitalism that developed in the formerly communist countries over the last 20 years has dramatically increased inequality there. The elite of the ruling classes have been replaced by nouveau-riche oligarchs, most of whom made their fortunes by virtue of their contacts in government.

The most corrupt models are those of Russia and China, followed by some of the countries in eastern Europe and South America.

The level of corruption in Israel is still far below the above, but the similarities are glaring. For instance, Israeli democracy bows before the business elite.

Moreover, an alliance has been forged between the big business groups and the big trade unions.

Instead of devoting their energies to fighting one another, they learned that they have a common aim: to strangle competition before it can get to its feet.

The two groups, the business owners and the workers, have different targets, to be sure. Israel's oligarchs are fighting to contain any nascent competition in the cellular, banking and automotive sectors. The big unions are fighting to block the advent of competition in the electricity, ports and transport sectors. The oligarchs make their money by milking consumers; the unions live off the taxpayer's dime.

And that is where we stand 20 years after the Berlin Wall was torn to bits.