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Miracle in the Holy Land
Dec. 11th, 2007 10:13 amDecember 8, 2007; Page A10
Jerusalem
'Here is the past," says Benjamin Netanyahu. "That's the future." The Likud leader, at his Knesset office, is talking about Jerusalem and Tel Aviv -- less than an hour's drive apart but on different planets. If regional turmoil and political intrigue hang heavy over this ancient capital, the party town along the Mediterranean brims with entrepreneurial energy. And of late, Tel Aviv's youthful, capitalist spirit is rubbing off on the rest of Israel.
Little noticed amid the grim Middle East headlines, a Jewish state founded by European socialists and long hobbled by stagnant growth and inflation is turning into a mature market economy. This ongoing transformation is no less dramatic than Eastern Europe's since 1989.
( Read more... )Israel can't afford a return to expensive welfare policies. It already spends north of 8% of GDP on defense. This won't soon change. The economy is handicapped by the lowest labor participation rate of any developed country. One in four ultra-Orthodox working-age Jewish men, and about as few Israeli Arab women, hold down jobs. That leaves only 37% of Israelis in the work force, compared with around 45% in a typical Western country. As a result income per worker is on par with Europe, notes economist Omer Moav, but per capita significantly lower.
With the right policies, Mr. Netanyahu says, Israel could grow at an Irish-like 8% for a decade. But its experience already shows that strong human capital and an opening market are the best resources any country could ask for -- a good lesson for the oil-rich Middle East. And while far from finished, the mini-revolution of recent years ties Israel into the world, and vice-versa. That's good news for its future prosperity and security.
