Wednesday, August 03, 2011

It's better than Arab cottage cheese

Over the last couple of years, there was a vibrant cottage industry among American conservatives in travelling to Israel and proclaiming the discovery of a new economic miracle in the land of milk and honey.  The canonical texts -- which launched a thousand op-ed pieces -- are Startup Nation by Dan Senor and Saul Singer and The Israel Test by George Gilder.

To the extent that these books had any economic methodology -- as opposed to an implicit Up Yours to Israel's immediate neighbours -- it involved talking to a highly selected sample of successful export-oriented rich people in Israel and using these venture capital-dependent cases to draw conclusions about the overall success of Israel's economy. 

Minor issues such as the validity of comparing Israel to clapped out dictatorships and petro-states as opposed to small European states (a peer group that Israel itself seeks) can be set aside.  Because it turns out that Israel's American boosters missed the story.  The story being that actual Israelis were growing ever more frustrated with the basic cost of living, complaints now exemplified in the tale of the over-expensive cottage cheese and the vested interests that lie behind it.  Here's an excellent article from another of those actual Israelis that explains the economics of the problem.  The neocon view of Bibi Netanyahu as a combination of Churchill and Thatcher on the Jordan looks a bit rougher against this backdrop (not to mention Bibi about to quietly follow Barack Obama's once outrageous 1967 peace line principles of a few weeks ago).

In the spirit of seeking general principles where there might not be any, the lesson appears to be that when The National Question dominates domestic political debate, it leaves huge room for economic mischief.  That's a problem we know in Ireland.

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