While economic growth is like a recipe, leapfrogging is different for each country. The common denominator for each country that leapfrogged was that they developed sophisticated tools, identified growth engines and turned the quest into a national obsession.
Below is an extract of the speech I gave at the Herzliya conference last Sunday, based on what I believe Israel needs to do to become one of the leading 15 countries in the world in terms of quality of life within the next 15 years.
"The first point I would like to share is that Israel's growth of recent years can be intoxicating. But although Israel grew, it didn’t succeed in leapfrogging. In the first 20 years of the State, Israel's economy bounced upwards, beginning at around 30% of average US annual salary and reaching 60%. But since the 70s, we have not been able to bridge the gaps with the richer countries. At the same time, other countries such as Ireland, Singapore and South Korea have leapfrogged.
The reason why it is more important for Israel to close its gaps then it is for the richer countries is due to the mobility of three resources: people, technology and investment. These three elements "choose" which country to go to, and therefore countries must actively compete for them. The control over these elements is essential for the future of any country, and this should be our national target.
It's difficult to measure Quality of Life, but like pornography, you know it when you see it. In this context, there is a clear linkage between income per capita and quality of life. Currently, Israel is ranked 28th in the world and bringing it into the Top 15 means being able to parallel countries like Holland, Canada, Finland, Singapore and New Zealand. In order for this to happen, we need to move from a discourse of growth to one of leapfrogging, something that will require economic growth of around 7-8% for at least 6 years.
Economic growth is a recipe, we know what to do to achieve it. Leapfrogging on the other hand, is different for each country. The common denominator for each of the countries that leapfrogged was that they developed sophisticated tools, identified growth engines and also turned the quest into a national goal, something that involved each and every citizen.
Other things that are needed to leapfrog are vision and the containment of the unique burden and the tapping of individual potential of each country. For example, Singapore understood that it was located at a junction between East and West and therefore constructed one of the most advanced airports in the world. Ireland tapped its potential inclusion into the EU. The State of Israel hasn’t even scratched the economic potential of its links with Diaspora Jewry (which is more than just philanthropy). In my opinion, the Jewish people are our economic strategic depth of the State of Israel.
The state of the public arena and the connection between individual and social segments and the government is another element for growth. When you look at the facts, Israel's macro outlook shows that Israel's problem does not lie in its economy but rather in its government: While Israel's private sector is one of most advanced in the world, the public sector is only ranked 29th, at the bottom of the list of developed countries. In fact, there is no other country that has such a large gap between the two sectors. Bridging this phase is a little like the problem of chicken and egg and can only be solved through trust.
Each country that has carried out a leap had its own unique advantages and disadvantages. For example, Holland has hard to invest billions in dams, and now that the water level has increased they will have to invest even more. The point is that we are no different – we have to think about how we can leverage our advantages to achieve this aim.
Becoming one of the leading 15 countries won't happen unless this turns into a national obsession. We have had such things in past; we made the desert bloom, redeemed land. We can turn the next challenge for the State of Israel into becoming one of the Top 15 countries in the world."
Gidi Grinstein is founder and president of the Reut Institute. The views expressed in this blog are his own and do not necessarily reflect the views of the Reut Institute.
For additional information regarding BloGidi see his original post: A Link in the Chain.