Tuesday, October 01, 2013

Israel and the global economic crisis II

In view of some interesting responses to my summary of Pinchas Landau's lecture, I decided to write a follow-up. First, here are Pinchas' comments and corrections:

There are a few minor points I would adjust or correct:
Europe doomed – also and especially demographically
‘unofficial financial commitments’ not exact but it will do, in any event, the number is in excess of 400% (FOUR!!)
Re France and Roma : a) decision taken by Sarkozy right-wing gov’t (in 2010); b) did not relate to ALL Roma, at least not explicitly. The point is, it was a major signal of how things are shaping up
PIIGS – includes Italy
Jews in UK – c-250-275,000
I have incorporated these corrections into the version posted in my blog, ISblog.

Second, an astute reader, Mike Axelrod from California, wrote:
I would not associate UKIP with Le Pen, Golden Dawn, and even EDL. The latter are truly extremist and fringe. I don't think that characterizes UKIP at all. ...The rise of UKIP is a logical consequence of the excesses of the EU, which started out as a trading block, and now wants to take over Europe.
I pretty much agree that Europe is doomed. The north countries can't even afford to bail out Italy let alone France. Too big to fail, and too big to bail out-- the irresistible force meets the immovable object. The EU Central Bank (ECB) has been buying them time with money creation despite that being prohibited by its charter. The PIIGS need to have their own currencies. The north countries need to go their own separate ways inside their own trading block. They need to be separate from the PIIGS both economically and politically.
The three success stories are Switzerland (not a member of the EU), Singapore, and Israel. Switzerland has solved the problem of having a multinational state by defusing power- the Canton system. Singapore is the most remarkable of all. From a poor Third World country to the First World in 40 years. Not only that, the IMF puts Singapore at rank three in the world in terms of GDP per capita; Qatar and Luxembourg being one and two. I submit the first two are anomalies. Singapore shows how well a valued-added economy can work with a business friendly climate, and a lack of corruption in government. In my opinion, if Israel becomes more like Singapore it will enjoy more prosperity and get into the top five in GDP per capita.
I'm not optimistic about the future of the U.S. Empires last between 200 and 250 years, and we are not immune from whatever forces operate to bring their downfall. Sir John Glubb's "The Fate of Empires" provides a canonical set of descriptors. See especially Section XXII-- The Influx of Foreigners. I would advise an ambitious, intelligent, and energetic young American to emigrate.

Another reader pointed out that:
(1) The Haredim and Israeli Arabs make up a significant portion of the population of Israel. I've read accounts that they're 1/5 the population & still growing while the Seculars are barely holding their own. With their large and growing families, & since many in this population do not have gainful employment, I would think this issue would put a huge drain on the Israeli economy.
Comment: This is true and is the cause behind the current political efforts to introduce an equitable draft into the IDF. The hope is that if the haredim carry out national service they will also be more likely to be gainfully employed.

(2) Hi-Tech employment effects a small sliver of society. There are not finite positions available nor a skilled population to work in this industry. Hence, I do not see the Hi-Tech economy dribbling down to the masses.
Comment. In a small country like Israel the Hi-tech industry is a huge component of the economy and does provide large sums in taxes to the Govt. as well as provide employment for a significant sector of the population.

(3) Olim to Israel take a huge investment in housing, transportation, and getting accustomed to a new home in the Middle East. I would suspect that this issue would be a huge drain on the economy, especially if there is immigration from France & England.
Comment. Yes, this is true, but the pluses exceed the minuses, the olim bring assests with them, they buy apartments and set up businesses and add signficantly to the economy

(4) Israel needs a strong military. I would think military budgeting puts a huge drain on the economy.
Ans. Israel has a huge military budget, but the defense budget is undergoing real cuts for the first time in history.

(5) Your speaker did not mention that israel discovered a huge reservoir of Natural Gas & that Israel can export this resource. Wouldn't this factor be an A + for the economy?
Comment. Yes, this is a major factor that will bring Israel real tangible income and energy independence in the near future.

(6) Also, could you explain why Electric Cars have failed in Israel & in Denmark? I believe these countries, small & compact, would be a perfect model for the Electric Car industry. Why did this industry, " A Perfect Place" file for Chapter 11?
Comment. The answer is simple really, because not enough people were convinced that their investment in an electric car would be worthwhile for them. Remember, metal boats couldn't get passengers at first because people thought they would sink and airplanes couldn't get fliers at first because they thought they would crash. Some ships did sink and some planes did crash, but now they are basic to our civilization. It will come.

(7) Is there an Israeli "brain drain" out of the country? I believe there used to be.
Comment. there used to be and there are a huge number of Israelis employed in the US, but as the economic situation there worsens and with Israeli Govt. inducements, more are coming back and fewer leaving.


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