Honestly, Does Israel Have a Future?

Before October 7, 2023, Israel was widely regarded as one of the strongest and most dynamic advanced economies in the world. While its economy was far smaller than that of the United States and the largest European nations in absolute size, it consistently outperformed many advanced economies in areas such as growth, innovation, employment, and fiscal stability.

Israel had earned the nickname “Startup Nation” for good reason. It had one of the highest concentrations of startups and venture capital investment per capita anywhere in the world. Israeli companies led breakthroughs in cybersecurity, artificial intelligence, medical technology, and semiconductor research. Global technology giants including Intel, Microsoft, Google, and Nvidia invested heavily in the country because of its extraordinary talent pool and innovative ecosystem.

Unemployment was near historic lows. Government debt, while not insignificant, was considerably lower than that of many other advanced economies. Domestic natural gas production had reduced dependence on foreign energy supplies, insulating Israel from some of the energy shocks that affected Europe following Russia’s invasion of Ukraine.

Even with its structural problems, including an exceptionally high cost of living, expensive housing, and disparities between the high tech sector and other parts of the economy, Israel entered late 2022 from a position of considerable economic strength.

Diplomatically, there were also reasons for optimism.

The Abraham Accords had already reshaped relations between Israel and several Arab states. There was growing discussion about possible normalization with Saudi Arabia, something that only a few years earlier would have seemed almost unimaginable. Israel’s leadership believed that expanding economic cooperation and a shared concern about Iran could gradually transform the Middle East without first resolving the ‘Palestinian’ conflict.

Whether that strategy would ultimately have succeeded remains unknown. Although governments in the region were becoming more willing to cooperate with Israel,........

© The Times of Israel (Blogs)