This is a guest post from economist Jerry Bowyer ...
Israel turned 60 this week. In human-years, that’s middle aged; in nation-years, that’s adolescence. The stories will be almost all about national security, and why shouldn’t they be? The state of Israel has been in mortal peril more than any state in memory. But what about Israel as a wealth creator, why ignore the money miracle?
Israel punches way above its weight class in initial public offerings, patents, and technology in general. It should – the nation is itself, after all, an IPO. In 1948, the country was an act of entrepreneurship – an idea, an implementation plan, setbacks and then success. In this way, it’s a lot like its closest ally, America: utopian vision, harsh reality, painful lessons, improved performance. Like America, it had its failed experiments with central planning and inflationist policies in the 70s. Like the US it lurched towards markets in the 80s, and again in the 90s. Like America, it has staked much of its future on commerce with other nations.
But Israel has had a much tougher row to hoe. Its foreign conflicts are existential, not optional. Its local markets are far too tiny to sustain its economy. It needs trade in a way that very few nations in the world need trade to survive. Perhaps that’s the secret to Israel’s success – very small margins of error. My friend, and serial entrepreneur, Ron Morris (known to radio listeners as The American Entrepreneur) says that when he’s broke his IQ goes up 10 points. Scarcity forces him to be smarter. Fat, dumb and happy go together with bad policy – thousand year old nations sitting on huge natural resources can afford mistakes. Refugees from genocide with brains, but not much more than the clothes on their back, can afford very, very few errors, and no really big ones.
The difference is in the national DNA, not the racial DNA. Israelis and Arabs are one race, cousins really, descendents of half-brothers, themselves descended (by their own traditions) from father Abraham. What, if not, different tutors of different histories explains why cousins living on different banks of the same river have such different levels of economic achievement that they can be seen not only from the stock charts, but from the satellite photos? Personally Israel’s experience tells me that there’s hope for us all.
Jerry Bowyer is chief economist at Benchmark Financial Network and makes appearances on CNBC.