Reimagining Greater Israel: A Liberal Strategy For Peace & Prosperity in The Middle East

Reimagining Greater Israel
A Liberal Strategy for Peace & Prosperity in the Middle East
Charlie Dameron
June 2, 2010
Leadership & Grand Strategy
Dartmouth College
Israel today rests on two parallel and contradictory truths: on one hand, the last quarter-
century has witnessed phenomenal economic growth that has transformed Israel into a globalized,
prosperous OECD nation; yet, despite its economic progress, Israel is weighed down by active
conflict with an array of non-state regional actors (Hamas, Hezbollah, independent Palestinian
nationalist groups), and by generally hostile relations with the other nations of the region. This
complex situation is made murkier by emerging signs that Israel’s long-term economic prosperity
is imperiled by widespread socioeconomic problems and declining productivity.
But even as the Arab-Israeli conflict appears more intractable than ever, and even as
economists despairingly warn of long-term economic regression, Israel’s strategic situation actually
remains quite strong. Israel has the potential in the coming years to obtain peace for itself and for
the region, to defend against its enemies, and to lock in the gains of its remarkable economic
growth. Through a strategy of liberal engagement abroad and liberal reform at home, Israel can
satisfy its national interests in peace, prosperity, and a Zionist state, and claim an undisputed place
of political and economic leadership in the Middle East. This paper will study Israeli strategy by
first examining Israel’s strategic environment and identifying its core national interests. It will
move on to evaluate Israel’s current strategy, and conduct a very brief discussion of the available
alternatives to that strategy. Finally, it will propose a strategy for Israel composed of three
elements: the formation of a liberal regional economic regime founded upon a regional political
resolution of the Palestinian issue; the assembly of a regional coalition against Israel’s strategic
non-state and state opponents; and the systemic reform of Israeli society, through the inclusion and
assimilation of Israel’s Arab and ultra-Orthodox minorities. Throughout, this essay attempts to
demonstrate that Israeli strategy up to now has failed to make use of Israel’s most important assets,
and has needlessly imposed heavy costs upon Israel and the region.
Israel’s Strategic Environment
1
Israel is located in the midst of a highly unstable multipolar regional order. Although the
international system at large is anarchic, this is particularly true of the contemporary Middle East,
where the frequency of conflict and omnipresence of instability is such that it is the region of the
world “where the realist paradigm retains its greatest relevance.” 1 The absence of a regional
hegemon or a comprehensive and effective international normative regime in the Middle East
imbues states and their leaders with serious, even existential, worries about national security on an
unusually frequent basis. This is particularly true of Israel, where the discussion on security and
strategy, even at elite levels, is often accompanied by apocalyptic overtones. 2
To be fair, Israel has faced opponents throughout its short history committed to its
destruction. Even in a particularly anarchic self-help system, Israel stands out as something of a
popular pariah, the ultimate go-it-alone nation. From its spectacularly bloody War of Independence
in 1948 to the Suez War, Six Day War, Yom Kippur War, and Lebanon War, Israel has often
experienced (and sometimes merely perceived) a remarkably fragile hold on its territory and
security. Meanwhile, contemporary asymmetric threats to Israel’s military and civilian population
are real: extremist actors like Hezbollah and Hamas direct Katyusha rockets from southern
Lebanon and the Gaza Strip and Palestinian suicide bombers plague downtown Tel Aviv. And this
says nothing of a contemporary threat from one of the region’s largest state actors, Iran, which
appears determined to acquire a nuclear weapon, and whose radical regime has long been publicly
committed to the destruction of the Zionist state of Israel.
While Israel is no longer constrained by its erstwhile hostilities with neighbors Egypt and
Jordan, with whom it enjoys standing peace treaties, Israel’s relations with the states of the Middle
East remain frosty, if not outright hostile. Indeed, Arab-Israeli tensions might be said to constitute
the most constant feature of contemporary international relations in the region. More than forty
years after it seized the Golan Heights, Israel remains legally at war with Syria; thirty years after it
1
Raymond Hinnebusch, The International Politics of the Middle East (Manchester: Manchester University Press, 2003), p. 1.
2
Yehezkel Dror, "A Breakout Security-Political Grand-Strategy for Israel," Israel Affairs 12.4 (2006): 843-879.
2
first intervened in the Lebanese Civil War, Israel still makes periodic reprisal incursions into
southern Lebanon for attacks against Israel; sixty years after it pushed the bulk of Palestine’s
population out of Israel, and forty years after it seized the West Bank and Gaza, Israel remains
subject to attacks from an impoverished and restive nation without a viable state. Even its relations
with the Gulf Arab nations aren’t normalized: Israel recently refused a Qatari offer to renew
diplomatic ties.3
Yet, Israel’s opponents are at a distinct strategic disadvantage, as Israel is the most
prosperous and technologically equipped power in the region. Hawkish Israeli strategists have
traditionally preferred to envision Israel as a garrison state, an undersized David surrounded by
menacing Arab Goliaths. This view has become harder to uphold in recent years, as the tremendous
power potential disparities between Israel and its neighbors has become starkly apparent.
Nonetheless, some Israeli thinkers endeavor to dream up strategies based upon Israeli
disadvantage. Yehezkel Dror (2006) provides a good example of this increasingly outlandish
tendency:
Such instabilities are all the more critical to Israel because of its vulnerabilities. However
strong militarily, Israel is a small country and most of its population is concentrated in
parts of the coastal area. It has a large minority that may become actively anti-Israeli.
And its economic base, however successful, is limited…if Western backing should
diminish, Arab countries modernize technologically, weapons of mass killing proliferate,
and global terror groups upgrade their capabilities while focusing on Israel, then the very
existence of Israel may well be endangered. 4
Note that Dror leans heavily on his if clause: indeed, he lays down a set of four conditions,
or assumptions regarding the future, and makes them the basis for his proposed “breakout strategy”
that urges Israelis to prepare to “kill and be killed,” and to largely abandon international norms.
But instead of speculating about what might happen (an easy way of glossing over real
strategic challenges), strategic thinkers must deal with the material and ideational settings as they
3
Barak Ravid, "Israel Rejects Qatar Bid to Restore Diplomatic Ties," Haaretz 18 May 2010.
4
Yehezkel Dror, "A Breakout Security-Political Grand-Strategy for Israel," Israel Affairs 12.4 (2006): 843-879, pp. 4-5
3
exist. Any honest examination of the material setting clearly demonstrates Israel’s substantial
strategic advantages.
With a current per capita GDP of $27,652, Israel is easily the wealthiest state in the region,
excepting the oil-rich Gulf emirates. Israel’s most obvious international competitors don’t even
come close: Syria and Iran have per capita yearly incomes of $2,682 and $4,028, respectively.
Even Saudi Arabia, a regional heavyweight with tremendous oil and natural gas resources, pulls in
only $19,022 per capita. Disturbingly, Israel’s Occupied Territories, the West Bank and Gaza, are
reckoned as the poorest polity in the entire region, with an annual income of just $1,123, or about
$3 per day.
In addition to its wealth, Israel benefits from a tremendous technology and innovation gap:
between 1980 and 2000, Saudi Arabia registered 171 patents; the UAE, 32; Kuwait, 52; Egypt, 77;
Syria, 20; and Jordan, 15. Over that twenty-year time period, Israel registered 7,652 patents. 5
Israel’s Arab neighbors are so far behind economically and educationally that any ability to catch
up is likely decades away. For the foreseeable future, Israel will enjoy substantial economic
advantages over its neighbors; indeed, this essay will go on to argue that this considerable
economic power might be “cashed in” to achieve security.
History suggests that Israel’s military advantages are also decisive. First, it remains the
region’s only power to have acquired nuclear weapons, a major strategic advantage, and one that
Israel guards jealously. In addition, Israel has demonstrated its ability to win conclusive victories
against an array of conventional enemies, making use of what Zeev Maoz, in his masterful history
of Israeli strategy, Defending the Holy Land (2006), calls the Israeli military’s “qualitative
advantage.”6 In conventional engagements, Israel demonstrated that its land and air forces were
sufficient to take on all comers. Since those engagements (Six Day War, Yom Kippur War),
Israel’s “qualitative advantage” has only grown.
5
Dan Senor and Saul Singer, Start-Up Nation (New York: Twelve, 2009), pp. 209-210
6
Maoz, Defending the Holy Land, p. 12
4
From this perspective, we can begin to understand how Israel’s neighbors might quite
pragmatically see Israel as a threat to their own security, not on religious or ideological grounds,
but based simply on the enormous relative power disparity between Israel and its surroundings.
Israel, long caught in a particularly gripping security dilemma, has long been unable to clearly
perceive its own security environment.
This tendency stems from the fundamental assumption that lies behind most of Israeli
strategy: the fervent belief that Israel is “under a constant and severe existential threat” from the
Arab states and Palestinians.7 Examples of this can be found throughout the literature on Israel: in
one popular work, Will Israel Survive (2007), Israel expert Mitchell Bard claims, “The presence of
radical Muslims who will not accept a Jewish state in what they consider the Islamic heartland
makes it unlikely that Israel can achieve the kind of peace that the United States has with its
neighbors.”8
But this argument completely ignores historical trends. As Maoz argues, “from the late
1960s on, there has been an increasing trend in Arab rhetoric that suggests a willingness to accept
the state of Israel and to live in peace with it.” 9 The old trope that Arab states will never craft a
lasting peace with Israel is empirically undermined by the Egyptian-Israeli thirty-year peace, and
by Saudi Arabia’s 2002 attempt to implement a regional Arab peace initiative that would recognize
Israel’s right to exist.10 Nevertheless, the ideational power of the “Radical Arabs will never accept
peace” narrative retains significant influence.
The assumption that Israel’s security environment is unremittingly hostile springs at least
in part from a more basic ideational feature of Israel’s security environment, which is the state’s
anomalous Jewish-Zionist character in a region of overwhelmingly Muslim states and societies. As
Dror says, “In Islam Jews are traditionally regarded as inferior, so Israel’s successes are hard to
7
Zeev Maoz, Defending the Holy Land: A Critical Analysis of Israel's Security & Foreign Policy (Ann Arbor: The University of
Michigan Press, 2006), p. 544
8
Mitchell Bard, Will Israel Survive? (New York: Palgrave Macmillan, 2007), p. 115
9
10
Karin Laub, "Olmert Seeks Regional Peace Conference," Washington Post 2 April 2007.
5
accept.”11 Though this notion is quite flawed, depending as it does on a very crude conception of
Islam, it is reflective of the environment in which Israeli strategy is steeped. In particular, Israel’s
need to retain its Jewish identity, and its obsessive fear of losing that identity, is the primary agent
behind a unique security dilemma in its civil conflict with the Palestinian population of the
occupied West Bank and Gaza Strip. Israel cannot afford to allow a non-Jewish majority to emerge
in its own society, and the precarious position of its Jewish majority is a key factor in Israel’s
strategic positioning. The relevance of Israel’s Zionist ideal to Israel’s national interest, particularly
in relation to the state’s security concerns and Israel’s democratic character, will be discussed
below.
Finally, Israel’s security environment is increasingly shaped by the globalized world
economy, in which Israel is tightly interdependent with the economies of Western Europe and the
United States. Today, more Israeli companies are listed on the NASDAQ stock exchange than all
European companies combined. Israel has become a technology and investment hub par
excellence. On a per-capita basis, the level of venture capital investment in Israel is extraordinarily
higher than in any other country in the world: in 2008, Israel enjoyed well over twice the rate of
venture capital investment as did the United States, which had the second-highest levels of capital
investment in the world.12 The link between Israel’s security and its globalized economy is a
critical one: while firms like Google and Intel have set up major operations in Israel, they have
often done so in suboptimal circumstances: Google started building its Israeli facilities at the time
of the 2006 Lebanon war, and Intel Israel was made to continue producing processing chips even as
Iraqi Scud missiles rained down during the 1991 Gulf War. 13
Yet globalization also has social and political ramifications that impinge upon the very
foundations of Israeli strategy. In particular, globalization and economic liberalization could have
the effect, over the long term, of weakening the national spirit of Zionism that animates Israeli
11
Yehezkel Dror, "A Breakout Security-Political Grand-Strategy for Israel," Israel Affairs 12.4 (2006): 843-879, p. 4
12
Dan Senor and Saul Singer, Start-Up Nation (New York: Twelve, 2009), p. 11
13
Ibid, p. 158
6
strategy. Anthropologist Uri Ram (2008) documented the polarizing effects globalization has
brought to Israel, with the emergence of a split between the affluent, urban, and often post-Zionist
population along Israel’s Mediterranean coast and the increasingly hard-line Orthodox Jewish
nationalists found in Israel’s settlements around Jerusalem and in the West Bank. He says that
“globalization bifurcates the ‘Jewish-democratic’ unison and splits the ‘Jewish’ and the
‘democratic’ dimensions into a Jewish-Jihad trend – which we term ‘neo-Zionism’ – and an Israeli-
McWorld trend – which we term ‘post-Zionism.’”14 An example of the change in identity comes
from an advertising executive interviewed in the Israeli daily Haaretz:
“We in Israel might live on the eastern seaboard of the Mediterranean, but our actions are
determined further and further by multinational corporations. Five years ago I would
have defined my identity as of an Israeli fighting Israel’s enemies. Today I am an Israeli
fighting for a corporation operating in 163 countries…Our company’s Hebrew name will
cease to exist too…Where are our pride and independence? We tried to postpone the end.
It was a tough decision but an inevitable one. If we are not integrated we will not survive.
Maintaining independence spells suicide.”15
Even as liberalization enables a post-Zionist shift for the affluent, it also engenders a
backlash among those who have not shared equally in the new liberal economic prosperity. “Peace,
liberalization and privatization together are a coherent formula for the success of the dominant
Ashkenazi middle and upper classes in today’s world…This is the context for Shas party’s talk of
the material interests of its underprivileged class Oriental supporters, who are the losers of
liberalization, facing independent subsidized social services or a less generous welfare state.” 16
Shas, a hard-right nationalist/religious party has been quite successful in recent elections, winning
an important place in Benjamin Netanyahu’s current governing coalition, along with Avigdor
Lieberman’s Yisrael Beitenu (Israel is Our Home), a party that appeals to the mass of working class
and lower-middle class Soviet Jewish émigrés who moved to Israel after the USSR’s collapse. The
marriage of nationalism and economic protectionism/state corporatism – the formula that sustained
14
Uri Ram, The Globalization of Israel: McWorld in Tel Aviv, Jihad in Jerusalem (New York: Routledge, 2008), p. 7
15
Ibid, p. 69
16
Michael Shalev and Gal Levi, "The Winners and Losers of 2003: Ideology, Social Structure and Political Change," in Asher Arian
and Michal Shamir, The Elections in Israel 2003 (Albany: SUNY Press, 2005)
7
Israel for so long before its move toward liberalization – threatens to ascend again to the
commanding heights of Israel’s political economy, on the backs of globalization’s losers: the
working-class mizrahim and Russian Jews, as well as the ultra-Orthodox haredim, who benefit
handsomely from the welfare state, and who identify first and foremost as Zionist Israelis. Their
political success has contributed to a paradox in Israeli strategy, which has heretofore
unsuccessfully blended economic liberalism with a nationalist security policy.
These factors – an unstable multipolar environment, active regional hostility, economic
preponderance, and globalization – form the milieu in which Israel exists, and from which it
identifies three core national interests: peace with its enemies, the preservation of Israel’s Jewish
identity, and continued economic prosperity through liberalization.
Israel’s National Interest
Peace with the Palestinians and Neighboring Arab States
In laying out a set of strategic objectives for Israel, it is necessary to first assess the state’s
basic strategic preferences. Seeking our basis for consideration broadly, we might ask: is the Israeli
state a status quo or revisionist power? Or, phrased differently: does Israel have a national interest
in peace with its neighbors, or an interest in strengthening its relative position in the region, even at
the expense of its neighbors?
Maoz contends that while Israel has often maintained an offensive strategic posture, its
underlying intent has historically been focused on preserving its territorial status quo. He writes
that there has long been a gap between Israel’s stated and genuinely peaceful intentions and its
aggressive and often provocative behavior. “Israeli political leaders,” Maoz says, “believed that
Israel could not afford to fight defensive wars. The preference for an offensive strategy was never
due to proactive political ambitions; it was an outgrowth of structural constraints.” 17 This strategy
of “strategic defensive and operational offensive” will be discussed later; for now, it is important to
note that in the past, even when Israel has acted in the interest of what it perceived to be the status
17
8
quo, it has acted incongruously as a revisionist power on the offensive, and has often been
perceived by its neighbors as such.
Since the conclusion of the Oslo Accords in 1993, Israel has had less reason to act
preemptively; its formal peace treaties with Egypt and Jordan gave it a measure of stability vis-à-
vis two former adversaries, while its steps toward reconciliation with Yasser Arafat’s PLO, and the
creation of the PNA, divested Israel of some of its occupying responsibility for the West Bank and
Gaza. In addition, Oslo forced Arafat and his associates to formally drop their demands for Israel’s
destruction, and to accept the legitimacy of the Israeli state. 18
After Oslo, a consensus emerged among most of the Israeli political establishment that a
negotiated settlement with Palestinian leaders was the necessary and inevitable end to Israel’s
occupation policy in the West Bank, and until recently, Gaza. Prime ministers from Barak to
Sharon to Netanyahu have backed (with preconditions) the establishment of a Palestinian state, and
an Israeli retreat from settlements and military positions in much of the West Bank and all of Gaza.
Last June, Prime Minister Netanyahu caused some distress among his nationalist political base by
announcing his support for a Palestinian state, on the condition that the Palestinians acknowledge
Israel as a definitively Jewish state. 19 Since then, despite grave misgivings among many in his
coalition (although with strong support among the younger members of his Likud Party),
Netanyahu has agreed to participate in indirect peace talks, and has recently called for direct peace
negotiations.20 These may sound like meager steps, but one might keep in mind that this is from a
government whose foreign minister is arch-nationalist Avigdor Lieberman. Even such a hard-line
scholar as Dror argues in his “Breakout Strategy” (2006) that “Israel’s ability to thrive in the long
term and perhaps also its very survival, depend on reaching a modus vivendi with Islam and Islamic
18
Barry Rubin, "Israel and the Palestinians," Robert O. Freedman, Contemporary Israel (Boulder: Westview Press, 2009) 175-196, p.
177
19
Howard Schneider, "Netanyahu's Peace Stipulation," The Washington Post 24 June 2009.
20
Douglas Hamilton, Israeli coalition wobbly on peace terms: minister, 17 May 2010, 20 May 2010
<http://www.reuters.com/article/idUSTRE64G0S120100517>.
9
actors.”21 It is clear that a peaceful political agreement with the Palestinians of the West Bank and
Gaza has become the inevitable objective of most of the significant players in Israeli politics, even
if Israel continues to undermine negotiations by upholding an active settlement policy and
engaging in heavy-handed retribution military strikes against targets in Gaza and the West Bank.
The same can be said of Israel’s interaction with its neighbors, particularly Syria and
Lebanon. A host of opportunities for a formal peace treaty with those states have been passed up by
Israeli leaders, but not necessarily for lack of a desire for peace. David Lesch, an expert on Israeli-
Syrian relations, wrote in 2009 that the last big opportunity for peace came in 2006 following
Israel’s anti-Hezbollah offensive in Lebanon. Syrian President Bashar al-Asad – eager to reclaim
the Golan Heights for domestic political reasons – tendered signals to the Israeli government to
resume peace negotiations that had stalled in 2000. But Ehud Olmert’s Kadima government
refused, first because “[Olmert] did not want to negotiate from a position of perceived weakness
following the debacle in Lebanon,” and also out of a desire to please the Bush Administration,
which sought to isolate Damascus diplomatically.22
Notwithstanding the failed efforts of the past, as a status quo state Israel has a strong
interest in formally ending its hostilities with Syria and Lebanon, and in finding ways of solving
the security threat posed by Hezbollah on Israel’s northern border. Indeed, Lesch confidently poses
the counterfactual: what if Israel had made peace with Syria when it had the chance in 2000?
History could have been quite different in the event of a Syrian-Israeli peace treaty.
Lebanon would certainly have signed on the dotted line soon thereafter, and the Arab
Gulf states would not have been very far behind…And with Lebanon at peace with Israel,
Hizbollah would most certainly have been emasculated by now, the Israeli-Hizbollah
conflict of the summer of 2006 would not have occurred, and Iranian influence in the
heartland of the Middle East would have decreased. 23
Although one might disagree with Lesch’s specific historical and strategic analysis, one thing
is certain. Israel has little to lose in a favorable peace settlement with Syria and Lebanon, and will
21
Yehezkel Dror, "A Breakout Security-Political Grand-Strategy for Israel," Israel Affairs 12.4 (2006): 843-879, p. 846.
22
David Lesch, "Israel and the Arab World," Robert O. Freedman, Contemporary Israel (Boulder: Westview Press, 2009), p. 223
23
Ibid, p. 211
10
be much more secure when it deprives Hezbollah of any excuse for threatening Israel and its
people. The resolution of the Palestinian issue, along with a general peace with Israel’s Arab
neighbors, must be considered a vital national security interest.
Israel as a Jewish and Democratic State
As indicated by the conditions of Netanyahu’s June 2009 offer for peace and Palestinian
statehood, the Israeli leadership puts its highest priority on defining Israel as a homeland for the
world’s Jewish population, and defending the Israeli state as an identifiably Jewish state. This
interest isn’t limited to Israel’s religious or nationalist political sectors: most on Israel’s left-wing
consider themselves Zionist, and popular support for a non-Zionist state is low. 24 While some on
the left push for “a state for all its citizens,” the formulation that has been adopted by many of
Israel’s liberal advocates of reform is “a Jewish state and a state of all its citizens.” 25 Indeed, Israeli
law limits the public discourse on this issue, preventing effective advocacy for an expressly secular
state: a July 1985 amendment to the Basic Law (Israel’s constitution, of sorts) posited that
candidates for the Knesset would be disallowed who pressed for a “negation of the existence of the
State of Israel as the state of the Jewish people.” 26 More recently, the Israel Central Elections
Committee – spurred on by the rightist Yisrael Beitenu party – disallowed the candidacies of two
Arab lists for the Knesset on highly questionable charges of racism and anti-Zionism in 2009. 27
Israel’s Supreme Court later overturned the decision, but the Election Committee’s decision is
nevertheless an example of the institutional barriers that stand immediately in the way of a re-
imagined Israeli national identity.
The necessity of preserving a distinctly Zionist state limits the array of strategies that might
be employed in securing Israel’s objective of peace with the Arab Palestinian population in the
24
Yoav Stern, "Poll: 50% of Israeli Jews Support State-backed Arab Emigration," Haaretz 27 March 2010.
25
Hillel Schenker, "Jewish National Self-Determination at the Crossroads," Dan Leon, Who's Left in Israel? Radical Political
Alternatives for the Future of Israel (Portland: Sussex Academic Press, 2004) 100-112, p. 112
26
As'ad Ghanem, "The Palestinian Arab Minority in Israel," Dan Leon, Who's Left in Israel? Radical Political Alternatives for the
Future of Israel (Portland: Sussex Academic Press, 2004) 22-36, p. 26
27
Tomer Zarchin, "Lieberman to Tibi: We must treat some Arab MKs like we treated Hamas," Haaretz 20 January 2009.
11
occupied West Bank and in Gaza. From a strictly international perspective, for instance, the
establishment of a single bi-national state in the land between the Jordan River and Mediterranean
Sea makes sense. But Israel’s Zionist preference and demographic realities render that strategy
impossible, as they do the long-held Palestinian demand for a “right of return” of Palestinian
refugees to Israel: because there is a non-Jewish majority between the Jordan River and the
Mediterranean, Israel must find a multi-state strategy for obtaining its preferred outcomes. 28 Of
course, Israel could retain all of the current territory (including the West Bank and Gaza) and
remain a Zionist state: but doing so would come at the cost of enacting an entrenched apartheid
policy, where the bulk of Arab Palestinians are denied standard rights and privileges. 29 Examples of
past attempts at this strategy in South Africa and the American South suggest that it is
unsustainable and ineffective, not to mention immoral. The resulting international opprobrium
would undermine the last of Israel’s external alliances and leave the Zionist project in crisis. If
Israel is to retain its long-established Jewish and democratic character, it must do so with a
majority Jewish population and a citizenry of social and political equals.
Sustained & Widespread Economic Prosperity through Liberalization
Establishing physical security for the state and the Israeli people forms up just one-half of
Israel’s strategic national interest. Security is of little value unless it is accompanied by a clear plan
for economic growth; indeed, material prosperity, while a worthy end in itself, is also a critical
component of Israel’s national security. As noted above, Israel’s tremendous military advantage in
the region rests largely on the technological and material superiority of the IDF. An account of
Israel’s national security must address Israel’s continued economic development, and assess the
state’s basic preferences in that development.
The important ideological and material phenomenon of Israel’s globalization is rooted in a
deliberate policy shift to economic liberalization that started in the 1980s and has moved forward
28
Hillel Schenker, "Jewish National Self-Determination at the Crossroads," Dan Leon, Who's Left in Israel? Radical Political
Alternatives for the Future of Israel (Portland: Sussex Academic Press, 2004) 100-112, p. 111
29
Avraham Burg, "The End of Zionism," Dan Leon, Who's Left in Israel? Radical Political Alternatives for the Future of Israel
(Portland: Sussex Academic Press, 2004) 53-56, p. 55
12
without interruption since. What’s all the more remarkable about this trend is that it is such a sharp
contrast from what came before. The gradual ideological transformation from Ben-Gurion’s
kibbutz socialism to today’s entrepreneurial, globally integrated, free market economy has yielded
a societal transformation that is rightly described as an “economic miracle” by many
commentators. One example of the literature surrounding this phenomenon is Start-Up Nation, a
2009 work from Dan Senor and Saul Singer. They write:
Visitors [to Israel] during the 1970s might have been excused for thinking they had
landed in a third-world country. Israeli universities and Israel’s engineering talent were
by this time fairly advanced, but much of the country’s infrastructure was antiquated. The
airport was small, quaint, and shabby…There was no major road that could pass for a real
highway…Phone lines were still being slowly rationed out by a government ministry, and
it took a long time to get one.30
Likud began introducing scattered market reforms in the Eighties, but it also followed very
generous government spending and monetary policies that spurred a spiral of inflation from which
Israel was unable to recover from until it buckled down and slashed public spending, privatized
Israel’s most unwieldy public firms, and removed many of the governmental restrictions on capital.
Senor and Singer propose that the decision to undertake these Washington Consensus reforms,
combined with an entrepreneurial culture, led to an economic renaissance. Israel today is a land
remade:
Visitors to Israel arrive in an airport that is often far more slickly modern than the one
they departed from. Unlimited numbers of new phone lines can be set up with only a few
hours’ notice, BlackBerrys never lose reception, and wireless internet is as close as the
nearest coffee shop…In 1990, though, there wasn’t a single chain of coffee shops, and
probably not a single wine bar, decent sushi restaurant, McDonald’s, Ikea, or major
foreign fashion outlet in all of Israel…Now McDonald’s has approximately 150
restaurants in Israel, about twice as many as there are in Spain, Italy, or South Korea. 31
Israel’s rising prosperity and global economic integration can be seen not only on a
superficial visual level; Israel’s economic prowess was affirmed by its recent inclusion in the
Organization for Economic Cooperation and Development (OECD), a club of the world’s
30
Dan Senor and Saul Singer, Start-Up Nation (New York: Twelve, 2009), pp. 116-117
31
Ibid, pp. 119-120
13
wealthiest and most highly-developed nations.32 The OECD’s admission of Israel was a capstone
moment for the nation’s economy, and a tribute to the nation’s fundamental ideational shift. Today,
there is no significant political voice in Israel that denies economic liberalism’s successful formula.
Michael Shalev, a professor at the Hebrew University of Jerusalem, wrote (2001) that the
consensus that undergirded the old, low-tech Israel has been replaced by an equally strong
neoliberal consensus: “Both Labor and Likud are now committed to reducing the economic role of
government, making the economy more attractive to foreign investors and other shibboleths of
contemporary economic liberalism.”33
The economic growth of the last two decades has demonstrated that liberalism works;
insofar as it is in Israel’s interest to prosper, Israel’s leaders have also concluded that a policy of
economic liberalism is in the nation’s best interests. The consensus that has developed around a
liberal conception of the state stands in radical contrast to the austere consensus of socialism or
state corporatism that previously prevailed. Yet, Shalev writes that a paradox also emerges – an
apparent conflict between Israel’s interest in the preservation of the Jewish state, and its interest in
achieving prosperity through economic liberalization. While both the right and left in Israeli
politics agree upon liberalization, they also agree on the desirability of a predominantly military
solution to Israel’s security problems. Shalev writes, “The [economically] reformed state continues
to confront the consequences of being a settler society, and its most compelling discourse continues
to mandate acceptance of these collective [Zionist] responsibilities.” 34 While, as noted above,
Israeli society is undergoing a process of change derived from the increased interconnectivity of
globalization, this process is a long-term one; in the short run, Israel must also confront (and
sometimes accommodate) the rise of neo-Zionism in the settlements, a force that is perhaps equal
in strength to the post-Zionism of Tel Aviv and its prosperous Mediterranean suburbs.
32
Josef Federman, Israel Admitted to OECD in Key Diplomatic Victory, 10 May 2010, 17 May 2010
<http://www.google.com/hostednews/ap/article/ALeqM5hJ9yWddXiM1wIvqFj_xzOsIrv6TAD9FJUOCO0>.
33
Michael Shalev, "Liberalization and the Transformation of the Political Economy," in Gershon Shafir and Yoav Peled, The New
Israel: Peacemaking and Liberalization (Boulder: Westview Press, 2001) 129-159, p. 130
34
Ibid, p. 151
14
Satisfying Israel’s basic security and political preferences thus requires a very delicate
balancing act: the establishment of a liberal state at peace with its neighbors, which yet plausibly
manages to retain its core Zionist character in the long term. To achieve these goals, the strategy
that Israel has used to date is ineffective. Indeed, as Shalev and others make clear, Israel’s
continued pursuit of a security-heavy means of protecting the Zionist project threatens to
undermine Israel’s physical security and economic prosperity. An examination of the heavy costs
of Israel’s current strategy clarifies the need for significant course correction.
A Militarized Liberal State?
One of the prominent features of the current debate over Israel’s strategic future is that
parties of all stripes – right and left-wing alike – argue strenuously that Israel’s current security
policy is decidedly suboptimal and in need of reform. This isn’t surprising, because the exorbitant
cost of Israel’s security policy puts it acutely at odds with its increasingly liberal character. There
are two major features of Israel’s status quo security policy: the first is the full militarization of
Israeli society through universal IDF conscription and a policy of “strategic defensive, operational
offensive,” which leans heavily on military solutions to emerging threats; the second is the
establishment and defense of Jewish settlements throughout the West Bank, as a means of securing
greater territorial depth and acquiring a better bargaining position vis-à-vis the Palestinians for the
day when a negotiated settlement is finalized.
Meanwhile, Israel’s rightly liberal economic strategy leaves much to be desired in
addressing long-term structural problems, many of which are directly related to Israel’s security
strategy and the sub-optimality of social relations in Israel between Ashkenazim and Mizrahim,
Jews and Arabs, and secularists and the ultra-Orthodox. The tangled knot of social inequality,
societal militarization, and inflexible settlement policies must be untied.
Maoz, the dean of academic scholarship on Israeli strategy, argues “the mobilization of
Israeli society carried a heavy cost. It served to prevent real treatment of some fundamental social
problems in Israeli society. And over the long run, it had an indirect effect on Israel’s economic,
15
technological, and social performance relative to the Western industrialized world.” 35 Here, one
must briefly delve into that mobilization, and the nature of one of Israel’s most important
institutions: the Israel Defense Forces.
One of the foundations of the “economic miracle,” as Senor and Singer make clear, is the
IDF, which acts as a catalyst for entrepreneurship and forges social and business connections that
last a lifetime. “Relationships developed during military service,” they write, “form another
network in what is already a very small and interconnected country…While Israeli businesses still
look for private-sector experience, military service provides the critical standardized metric for
employers – all of whom know what it means to be an officer or to have served in an elite unit.” 36
Military connections are a vital source of social success and material prosperity throughout life –
but the IDF excludes ultra-Orthodox Jews and Israeli Arabs from its conscription program,
meaning that these demographic groups are de facto shut out of much of the economic life of the
country. The results aren’t attractive: sixty percent of Arabs, who make up twenty percent of the
population overall, live below the poverty line.37 The employment numbers for both communities
are astoundingly low. Among mainstream Israeli Jews, 84 percent of men and 75 percent of women
are employed. But among Arab women and ultra-Orthodox men, only 21 percent and 27 percent,
respectively, are employed. Maoz’s verdict is definitive: “The IDF was never a melting pot of
Israelis but rather served as a significant factor enhancing and sustaining social stratification and
increasing rather than reducing social and economic inequalities.” 38
In addition, Maoz shows that the IDF is built around a philosophy of “strategic defensive,
operational offensive.”39 That is, it has long relied upon “escalation dominance,” taking the fight to
the enemy, and engaging in both punitive and preventative attacks because of a belief that it cannot
35
36
Dan Senor and Saul Singer, Start-Up Nation (New York: Twelve, 2009), pp. 75-76, 83
37
As'ad Ghanem, "The Palestinian Arab Minority in Israel," in Dan Leon, Who's Left in Israel? Radical Political Alternatives for the
Future of Israel (Portland: Sussex Academic Press, 2004) 22-36, p. 26
38
39
Ibid, p. 549
16
afford to act defensively. “Israel’s decision makers,” Maoz writes, “tended to overwhelmingly and
systematically rely on the use of force as a favorite solution to both military and political
challenges.”40
The militarization of Israeli society, in addition to its other social/strategic costs, is a fiscal
drain. Israel spends a far greater share of its national wealth (7.3% GDP) on defense than any other
OECD nation, even more than the United States (4% GDP), a superpower with global military
obligations. Indeed, Israel’s current spending represents a significant decline from previous levels
of defense spending, which began to be cut following liberalization reforms in 1985. 41 On one
hand, Israel’s traditionally heavy defense expenditures make Israel’s economic development all the
more impressive. On the other, it points to lost opportunities for the Israeli economy, even today. In
particular, Israel’s devotion to defense and welfare programs, and its failure to invest more in
transportation infrastructure and education have had crippling effects on the nation’s long-term
growth potential.42
Yet, the social and fiscal costs of Israel’s militarized society pale in comparison to the toll
exacted on the state by its program of Jewish settlements, as most commentators sympathetic to
Israel will admit. Bard writes,
Today, more than 260,000 Jews live in roughly 120 communities in the territories. Israel
could continue along this path in the hope of either preventing the creation of a
Palestinian state or further reducing its potential geographic size. On the other hand, the
cost of maintaining the status quo is enormous. The economic costs have been largely
hidden, but the expense of building roads and other infrastructure, subsidizing mortgages,
providing security, and all the other services to the settlers over the years is undoubtedly
in the billions of dollars. Many Israelis believe that money could be better spent on other
societal needs…few Israelis advocate maintaining the current situation. 43
Bard’s findings aren’t particularly new; analysts of the settlements in the West Bank and
Gaza have been saying the same thing for decades. In 1987, Aaron Dehter wrote a report, How
40
Ibid, p. 552
41
Michael Shalev, "Liberalization and the Transformation of the Political Economy," Gershon Shafir and Yoav Peled, The New Israel:
Peacemaking and Liberalization (Boulder: Westview Press, 2001) 129-159, p. 135
42
Dan Ben-David, "Inequality and Growth in Israel," July 2002, Tel Aviv University, 18 May 2010
<http://www.tau.ac.il/~danib/israel/socio-econ/forward.pdf>.
43
Mitchell Bard, Will Israel Survive? (New York: Palgrave Macmillan, 2007), pp. 115-116
17
Expensive are West Bank Settlements, which found that the cost of most settlements was
prohibitively expensive; and, barring questions of the settlements’ overall strategic or economic
optimality, Dehter found that funding to settlements was riddled with graft and inefficiencies. 44 The
problem has only gotten bigger since Dehter’s time. Indeed, the Netanyahu government seems
determined to continue building settlements apace: under his tenure, he has provoked international
outcry by accelerating the construction of Jewish settlements in East Jerusalem, and sounding notes
that new settlements will continue to be built apace throughout the West Bank after the passing of a
current “settlement freeze.”45 46
Meanwhile, the Netanyahu government has floated plans for economic development
programs in the West Bank, financed by foreign nations. Yet those plans have run into opposition
from Palestinian leaders Mahmoud Abbas and Salam Fayyad, who suspect (not without reason)
that Netanyahu’s economic program is a tactic designed to stall and delay the implementation of a
political settlement.47 48 Just days ago, Netanyahu reiterated his commitment to “economic peace,”
but neglected to propose any specific policies to solve the pressing poverty in the West Bank and
Gaza.49
Yet even as Netanyahu integrates Israel with the West through OECD membership, and
pays lip service to economic development in Palestine, current Israeli strategies for the
revitalization of the Israeli economy, of integration with regional economies, and of broader
regional peace are almost completely absent. Netanyahu has used tax reduction as his primary
economic stimulus tool, although many economists warn that such an approach will do little to
44
Aaron Dehter, How Expensive are West Bank Settlements? A Comparative Analysis of the Financing of Social Services (Jerusalem:
Jerusalem Post, 1987).
45
Hazel Ward, Israel defiant on settlements as it marks Jerusalem Day, 12 May 2010, 25 May 2010
<http://www.google.com/hostednews/afp/article/ALeqM5jRv8s2bj94wIFCTbzgKWeanSwp4A>.
46
Herb Keinon, "Begin: PM won't extend freeze," The Jerusalem Post 26 May 2010.
47
Raphael Ahren, "Netanyahu: Economics, not politics, is the key to peace," Haaretz 20 November 2008.
48
Barak Ravid, "Palestinians reject Netanyahu's 'economic peace' plan," Haaretz 7 September 2009.
49
"Netanyahu resurrects campaign to boost Palestinian economy in bid for peace," Haaretz 27 May 2010.
18
alter Israel’s basic economic problems. 50 Netanyahu seems to be following the same unoriginal
path of liberalization described by Klein (2005) in his overview of Israeli economic policy:
focusing on cutting taxes, stimulating market competition, and increasing foreign investment,
without addressing naked economic inequalities and structural flaws. 51 The current government has
also failed to discuss any settlement of the Golan Heights with Syria, or embarked upon serious
general negotiations with its neighbors to revive the moribund Middle East North Africa [MENA]
economic summits that once heralded the arrival of a new Israel, more integrated with the region
economically.52 The 2002 Arab Peace Initiative – forwarded by Saudi Arabia as a way of linking a
Palestinian political settlement to broader regional recognition of Israeli statehood – lies forlorn
and neglected by Israel’s political leadership.
Israel’s current strategy – to prop up a liberalized economy through tired and
unimaginative economic solutions, and to stall on the diplomatic front even as it works to improve
its strategic position through settlement construction and military force – has had little success in
the short term, and augurs long-term ruin. A new way is clearly needed.
Alternative Strategic Options
The broad strategic alternatives to the status quo are few. Many of the theoretical
alternatives would require Israel to sacrifice core national interests: a one-state solution to Palestine
might obtain peace (though this is certainly not guaranteed), but would definitely destroy the
Zionist dream; the permanent annexation of the West Bank and Gaza would ensure continued war
with the Arab world. Some on the Israeli left would prefer that Israel seek peace and return to the
statist economic policies of the past.53 But giving up on economic liberalism would mean
50
David Rosenberg, Netanyahu Set to Fight Recession with Repeat Dose of Tax Cuts, 25 February 2009,
<http://www.bloomberg.com/apps/news?pid=20601087&sid=a6f9TlJgBdUU&refer=worldwide>.
51
Michael W. Klein, "Studying Texts: A Gemara of the Israeli Economy," May 2005, National Bureau of Economic Research, 24 April
2010 <http://www.nber.org/papers/w11352>.
52
Jonathan Paris, "Regional Cooperation and the MENA Economic Summits," Gershon Shafir and Yoav Peled, The New Israel
(Boulder: Westview Press, 2000), p. 266
53
Lev Grinberg, "Post-Mortem for the Ashkenazi Left," Dan Leon, Who's Left in Israel? Radical Political Alternatives for the Future of
Israel (Portland: Sussex Academic Press, 2004) 84-99, p. 98.
19
dismantling what appears to be a fairly successful formula; in any event, the liberalization of the
economy is by now strongly entrenched.
A stronger strategic option would preserve all of the core national interests identified above
through the extension and fulfillment of Israel’s liberal and peace-seeking tendencies. It would
seek peace and build on the neo-liberal order; make the necessary reforms to Israeli society and
uphold the Zionist mission. It would complete the liberalization of Israel’s domestic and foreign
policy spheres, and make use of Israel’s heretofore-unused “soft power” capabilities. It is just such
a strategy which this essay will now explore.
The Way Forward: Calibrating Israel’s Soft Power
A new strategy must respect the fundamentals of the regional political environment and
play to Israel’s strengths in order to secure vital national objectives. Since Israel’s most outstanding
strategic advantage is its powerful economy, its primary strategic focus ought to be on preserving
its economic strength and using its fungible economic power in an efficient and effective manner.
To that end, a comprehensive national strategy for the survival and prosperity of the Israeli nation
has three primary components: a new security policy that achieves peace with the Palestinian
people and the broader Arab world through engagement and regional economic liberalization; a
policy of international regional cooperation to confront revisionist states and radical fundamentalist
terror; and a domestic policy of economic revitalization through fundamental political reform.
Regional Security Through a Comprehensive Political and Economic Agreement
Israel’s current security strategy, as demonstrated above, has done little to keep Israel
secure: the militarization of society, the standing policy of “operational offense,” and the continued
construction of settlements have been strategic failures. What is worse, they have failed to move
Israel any closer to the lasting peace that is a part of its fundamental security interests. Moreover,
20
as Klein and others have strenuously argued, Israel’s inability to obtain peace has been a crippling
limit on its economic potential.54
Israel’s settlement policy is the first and most critical obstacle to the implementation of a
peace accord with the Palestinian Authority. Israel’s standing strategy in final status negotiations
has taken a hard line on settlements, such that the ultimate object of peace talks often seems
oriented around preserving as many of the settlements as possible. This is a perverse and misguided
policy; it is in Israel’s national security interests that the ultimate aim of peace talks should be the
establishment of peace and of a secure Palestinian state. As such, that goal is the one around which
Israel’s settlement policy ought to be oriented, not vice-versa. Israel ought not to ask, “What is the
final status agreement that will work best for Israel’s settlements?” Instead, looking to its long-term
interest in immediate peace, the question ought to be, “What settlement policy is required to obtain
peace?”
It may be argued that the settler community is such a powerful domestic force in Israeli
politics that a policy of settler eviction is unthinkable. Yet Ariel Sharon’s decision to unilaterally
dismantle all of the Israeli settlements in the Gaza Strip – a decision that earned him the enmity of
most West Bank settlers, as well – proved that Israel’s leaders can afford to stand up to settlers and
win the support of the broader Israeli population if Israelis can be convinced that dismantling
settlements are in Israel’s vital security interests. Indeed, Sharon’s courageous move in Gaza to
accede to reality might be seen as a template for a freeze on settlements in the West Bank and on
an immediate unilateral withdrawal from the most untenable West Bank settlements. Such a step
would go far in demonstrating the Israeli government’s good faith in the peace process, and indeed,
Sharon hinted at enacting a similar policy in the West Bank before a massive stroke took him out
of Israeli politics.55
54
Michael W. Klein, "Studying Texts: A Gemara of the Israeli Economy," May 2005, National Bureau of Economic Research, 24 April
2010 http://www.nber.org/papers/w11352, p. 51
55
Nehemia Shtrasler, "You have to read Sharon's speech," Haaretz 18 August 2005.
21
Palestinian negotiators signaled at Camp David in 2000 and Taba in 2001 that the
Palestinian leadership is willing to accept Israeli annexation of its major settlement blocs in a final
status agreement.56 Israel should take advantage of this open offer while it begins to draw up
evacuation and compensation plans for residents of the settlements that lie outside those major
settlement blocs. If a withdrawal from the bulk of the settlements were combined with an
agreement to permit the establishment of a Palestinian capital in East Jerusalem, the last obstacles
to peace would be unilaterally removed at almost no cost to Israel. There is no persuasive argument
that the West Bank settlements (including those in East Jerusalem) are any more valuable than
those Gaza settlements that Sharon dismantled in 2005. Indeed, they are a pernicious drain on
Israel’s economic resources. The survival of the Zionist state requires that Israel prioritize peace
over settlements; once a conscious decision has been made to incorporate that stance into its
diplomatic strategy, the objective of peace will come much more quickly, and none too soon. A
comprehensive treaty that allows for the creation of a stable Palestinian state will relieve Israel of
its responsibility for a national security nightmare.
In addition, a political settlement allows for the advance of Netanyahu’s vaunted
“economic peace” development plan for Gaza and the West Bank, a vital component of any lasting
solution between Israel and the Palestinians. Indeed, while a political solution must precede
economic development and reform measures, the latter is most important in guaranteeing the
security of the Palestinian state (and by extension, the security of the neighboring Israeli state).
Prime Minister Netanyahu has recognized this, though he stubbornly refuses to give in on the
settlements issue.
But a focus on the economic development of Palestine would give Israel more leverage in
its negotiations with the Palestinians and – perhaps even more importantly – the wider Arab world.
Israel shouldn’t content itself with a narrow agreement over its borders in the West Bank and a
56
Zeev Maoz, Defending the Holy Land: A Critical Analysis of Israel's Security & Foreign Policy (Ann Arbor: The University of
Michigan Press, 2006), p. 551
22
division of Jerusalem; by taking the initiative in peace talks (something it has been loathe to do in
the past), Israel could secure much more for itself and its future security through an expanded
conception of the “economic peace.”
A new economic peace would have two components: a plan for the economic development
of the new Palestinian state, and a plan for enhanced economic ties between Israel and the rest of
the Middle East. As regards Palestinian economic development, any effective solution should lean
on a multilateral framework of support. That means including a new array of representatives at the
negotiating table: not only those from regional powers like Saudi Arabia, the GCC nations, and
Egypt, but also representatives from the Quartet (the US, EU, UN, and Russia) and from the World
Bank and IMF. International finance and development organizations are a critical piece of the
puzzle, as they already have done the extensive work of preparing clear recommendations for the
proper course of economic reform and international aid in Palestine. 57 By making a dramatic
commitment to Palestine’s success, Israel could also demand that Arab nations and the
international community invest themselves in a prosperous and secure Palestine. Using the
proposals of the World Bank and IMF as guidelines, Israel might offer major financial backing to
Palestinian infrastructure projects, with a public challenge to the Arab world and the international
community to each match those investments.
The other half of this regional cooperation would provide for a new liberal regional
economic order. The Israeli government could seize upon the Arab peace initiative advanced by
Saudi Arabia in 2002 and use it as the basis for a regional diplomatic agreement. Such an
agreement would encompass more, however, than the already-proffered Arab recognition of Israel
and diplomatic normalization; it would establish a framework for the development of stronger
regional economic ties, inclusive of Israel. Current Israeli president Shimon Peres advocated
strongly for such a framework in 1994 and 1995, after the passage of the Oslo Accord, when he
57
International Monetary Fund, West Bank and Gaza: Economic Performance, Prospects, and Policies, International Monetary Fund
(Washington: International Monetary Fund, 2001).
23
served as Foreign Minister. His efforts led to a series of regional summits in Casablanca, Amman,
Cairo, and Doha. The incipient regime created by those talks quickly sank, however, after the peace
process stalled under the first Netanyahu premiership in the later nineties. 58
A regional economic agreement – including the creation of a regional development bank,
movement toward a free trade regime, and regional cooperation on public infrastructure projects –
would carry a host of economic and security benefits for Israel. First, increased economic ties are
bound to strengthen relations between Israel and its Arab neighbors on both state and sub-state
levels. Liberal international relations theory has traditionally found a close correlation between
economic interdependence and interstate peace. 59 Moreover, the previous Israeli experience with
regional economic conferences showed that increased business interactions could lead to friendlier
people-to-people interactions. Dan Gillerman, the president of the Israel Chamber of Commerce,
said in reference to the first conference in Casablanca, “They [Arabs] meet with us as equals.” 60
The potential for increased regional stability would be a major win for the Israeli state.
Second, regional economic talks provide a powerful motivator for domestic liberalization
in the Arab world. As Paris says of the earlier regional economic talks, “reform-minded ministers
and private sector leaders used the international spotlight…provided by the summits to push
through regulatory reforms, privatization measures, and trade liberalization policies to facilitate
greater foreign investment.”61 The market forces unleashed by economic talks could help to power
liberal political reform in the region, providing a serious and effective counterbalance to religious
fundamentalism and authoritarian government.62 With time, it is possible that Israel could escape
the isolation that comes with being the region’s only liberal democracy.
58
Jonathan Paris, "Regional Cooperation and the MENA Economic Summits," Gershon Shafir and Yoav Peled, The New Israel
(Boulder: Westview Press, 2000), p. 267
59
John R. Oneal, et al., "The Liberal Peace: Interdependence, Democracy, and International Conflict, 1950-85," Journal of Peace
Research 33.1 (1996): 11-28.
60
Paris, “Regional Cooperation and the MENA Economic Summits,” p. 268.
61
Ibid, p. 272
62
Robert Zoellick, "When Trade Leads to Tolerance," New York Times 12 June 2004.
24
Third, a regional diplomatic and economic settlement stands to increase the amount of
foreign capital flowing through Israel. Paris rightly notes, “Israel is more attractive to multinational
corporations and other foreign investors if it can serve as a hub for wider trade in the region.” 63
Regional cooperation also means that Israel has a much easier time passing Senor and Singer’s
“Buffett Test”: that is, what is the likelihood that a major international investor like Warren Buffett
will take a risk in investing in Israel?64 With stronger assurances of stability in Israel’s political and
economic relations, the risks of investing in Israel are reduced.
What are the odds that Israel’s neighbors would agree to this comprehensive Israeli offer?
There is a clear desire on the part of major regional actors, particularly Saudi Arabia, to resolve the
long-running political dispute over Palestine. A political resolution that allowed for key Arab
demands – an Arab capital in East Jerusalem, and the dismantling of the settlements – would give
Arab regimes the political cover they needed to enact regional economic liberalization. They would
be able to hold up the creation of a free Palestinian state as a major victory; the prospects of such a
domestic political victory would help induce an economic agreement.
This is an important aspect of the strategy, since it should be cautioned that many of
Israel’s Arab partners might come to the table quite wary of Israel’s economic intentions: they have
long worried about Israeli economic hegemony, and would approach any regional economic accord
skittishly.65 This is precisely why any attempt at such an accord must be folded into a bigger
regional political agreement that establishes and aids a Palestinian state and resolves Israel’s
outstanding diplomatic disagreements with the region. It is also why the staunch cooperation of
outside international partners and organizations – the Quartet, primarily – is so vital to the plan.
Israel would benefit from the pressure they would exert to help enact a comprehensive plan.
Making one big open and comprehensive offer for peace, Israel would be able to leverage a
solution to the Palestinian issue for its broader long-term economic and security interests. By tying
63
Paris, “Economic Cooperation and the MENA Economic Summits,” p. 275
64
Senor and Singer, Start-Up Nation, p. 150
65
Shaul Mishal, Ranan Kuperman and David Boas, Investment in Peace (Portland: Sussex Academic Press, 2001), p. 139.
25
a regional cooperation agreement directly to the creation of a Palestinian state, and by bringing
international pressure to bear, the aim would be for Israel to loudly make an offer to the Arab world
that it cannot refuse.
A Grand Coalition Against Radicalism
Newly thawed relations with the Arab world summon the possibility of an additional
security guarantee, which forms the second major leg of a liberal Israeli strategy: the formation of a
grand regional coalition to deter Iran’s revisionist regional ambitions and limit the potency of
radical Islamist terror groups in the Middle East. Already, Israel and its Arab neighbors share a
clear overlapping interest in these twin goals. With normalized diplomatic relations and closer
economic ties, such a coalition is certainly possible. A 2009 survey of Arabs commissioned by
Qatar’s Doha Debates found that “most see Iran as a bigger threat to security than Israel, with a
third believing Iran is just as likely to target Arab countries as Israel.” 66 Another poll of Saudis
found that an impressively sizeable contingent of urban Saudis (one-quarter) support Israeli
military action against Iran to destroy its nuclear program. The same poll found that Saudis also
have substantial concerns about the threat posed by fundamentalist terrorists: forty percent of
Saudis listed either “terrorism” or “religious extremism” as the foremost external threat to Saudi
Arabia.67
Other regional actors endure their own struggles against violent extremism: Egypt’s secular
regime has continually faced an Islamist challenge from the Muslim Brotherhood and similarly
minded groups, while the Hashemite monarchy in Jordan has long battled against the likes of Abu
Musab al-Zarqawi.68 69 The Gulf states, which perhaps stand the most to lose under a hegemonic
Iran (large internal Shi’ite populations and geographical proximity make for a great deal of
unease), would likely be quite willing to engage in an anti-Iranian partnership; indeed, the UAE has
66
Digby Lidstone, ""Iran woos Arab states as sanctions loom"," Financial Times 14 December 2009.
67
David Pollock, "Saudi Public Backs Iran Sanctions but Split on Military Action", 12 January 2010, 20 May 2010
<http://washingtoninstitute.org/templateC05.php?CID=3160>.
68
Fawaz A. Gerges, "The End of the Islamist Insurgency in Egypt?," Middle East Journal 54.4 (2000): 592-612.
69
Chock Tong Goh, "Uniting to defeat terrorism," Asia Europe Journal 4.1 (2006).
26
already signed nuclear agreements with the United States as part of a defiant stance against Iranian
influence. Iraq, certainly no stranger to the dangers of extremist terror, might be interested in a
regional anti-terror partnership, though its resolve in facing down Iran is more ambiguous.
Syria presents the most difficult case for an anti-terror, anti-Iran coalition: it is well known
for its existing partnership with Iran, and stands accused of harboring and transporting surface-to-
surface rockets for Hezbollah.70 However, while Syria’s partnership with Iran is certainly more
than a marriage of convenience, it is also a function of both nations’ isolation from the West. A
2007 US Institute of Peace report suggested that a successful Western policy of engagement with
Syria, including a peace with Israel, might very well cause Syria to peel off from Iran and cut its
support to Hezbollah.71 It is also worth keeping in mind that Israel already has a major card to play
with Syria: Lesch writes that during a meeting with President Bashar al-Asad, Asad commented
that “he would be a ‘hero’ if he was able to effect a return of the land that Israel seized in 1967,
with the clear implication that it might be worth cashing in some chips to reacquire the Golan
Heights, such as Syrian influence regarding Hamas and Hezbollah.” 72 Israel would be able to
further sweeten such a deal through Syria’s inclusion in a new regional economic regime, tied to
Israel and tied to the West.
Indeed, a coalition of cooperation would be a vital tool in allowing Israel to beat back its
non-state adversaries Hamas and Hezbollah. A regional partnership that included Syria would
likely bring Lebanon’s government along, depriving Hezbollah of any safe havens of support in the
Levant. Meanwhile, a regional peace treaty that recognized Mahmoud Abbas’s government as the
constitutional authority in the new Palestinian state and renounced the use of violence would force
Hamas to either play by the rules and devote itself to politics, or lose its relevance and perish.
The coalition could have one more important member: the United States. As a major actor
in the region, the US will inevitably play a sizeable background role in shaping the regional
70
"Report: New evidence shows Hezbollah missile bases in Syria," Haaretz 28 May 2010.
71
US Institute of Peace, USI Peace Briefing, May 2007, 28 May 2010 <http://www.usip.org/files/resources/syria_iran.pdf>.
72
David Lesch, "Israel and the Arab World," Robert O. Freedman, Contemporary Israel (Boulder: Westview Press, 2009), p. 223
27
diplomatic and economic initiatives described above. Israel can use America’s interest in a regional
peace to its advantage by pressing for stronger assurances of security guarantees for Israel and its
new strategic partners. In a quid pro quo with the United States, Israel could exchange its
concessions on settlements and the division of Jerusalem for stronger US guarantees against Iranian
attack. Indeed, Israel might join with its regional partners to seek explicit US nuclear umbrella
protection against Iran. This is an idea that already has some traction in Washington and
throughout the Arab Gulf; such a move could help cement trust among coalition partners, and
assuage concerns about regional proliferation in the event that Iran obtains nuclear weapons. 73
The construction of an international liberal order in the region would thus not only augur
well for Israel’s security and economy in the long run; it could bring additional direct security
benefits for Israel in the short run. By capitalizing on its new interstate diplomatic and economic
ties, Israel could make significant strides in resolving its most pressing security threats from a
revanchist Iran and Iran’s radical non-state proxies. Yet even as it engineers a liberal and
cooperative order abroad, Israel must endeavor to sustain its economic advantages by making a
stronger commitment to its own liberal economy and polity.
Revitalizing the Israeli Economy & Society
As mentioned before, diverse assessments of the Israeli economy have recognized that it
faces significant obstacles for the future. The “economic miracle” – the engine of growth from
which all of Israel’s other strategic advantages flow – threatens to lose its luster as Israel’s
productivity declines and income inequality metastasizes. Senor and Singer quote Israeli economist
Dan Ben-David: “[The economy] is like an engine…You have all the cylinders in the engine. You
have all the population in the country. But we’re using fewer and fewer of the cylinders to move
this machine forward.”74 For the long term, economic reform must be considered Israel’s most
important strategic challenge.
73
Indira A.R. Lakshmanan, "Iran Might be Deterred by US Nuclear Umbrella, Gulf Ally Says", 9 April 2009, 30 May 2010
<http://www.bloomberg.com/apps/news?pid=20601103&sid=aOSbraDk5bvI>.
74
Dan Senor and Saul Singer, Start-Up Nation (New York: Twelve, 2009) p. 220
28
One of the most egregious hurdles to clear is the welfare policy erected by the government
on behalf of the ultra-Orthodox haredim. This hardcore nationalist constituency has benefited
disproportionately from the government in a variety of ways. It was mentioned before that the
majority of Israel’s ultra-Orthodox community is unemployed. Far from being the result of
liberalization, however (as is the case with many working-class Mizrahi [Oriental] Jews), this
particular community’s economic inactivity is a tribute to the government’s elaborate welfare
regime. One key component of that regime is an overly generous child welfare credit to support the
growth of large, Orthodox, “blessed families” with which to populate the Holy Land. Further
generous subsidies for religious study mean that ultra-Orthodox men are able to support large
families for a lifetime without ever contributing to Israel’s economic growth. 75 What is most
troubling about these welfare policies are the underlying demographics: while the ultra-Orthodox
and Arab Israelis make up only 30% of the population today, half of Israel’s schoolchildren now
are either Arab or ultra-Orthodox, and that proportion could reach over three-quarters in the not-
too-distant future.76 Ten years ago, this problem seemed to be on its way out, as Prime Minister
Netanyahu slashed child allowances as prime minister in the 1990s, and later as finance minister.
That policy change helped to reduce the birthrate in low-income haredi (ultra-Orthodox) and Arab
households.77 But Netanyahu, now in his second run as head of government, recently agreed to
double the allowance, setting Israel up for a demographic disaster. 78
Moreover, the Israeli welfare state disadvantages its socially weakest citizens, the Arab
Israelis. The research of Lewin and Stier (2002) shows that government welfare is preferential to
Jewish immigrants and to the haredi, and essentially discriminatory to Arab citizens. 79 By denying
them access to the nation’s most important means of social advancement (the IDF), enacting
75
Ofira Seliktar, "The Israeli Economy," Robert O. Freedman, Contemporary Israel (Boulder: Westview Press, 2009), p. 169
76
Edmund Sanders, "Welfare system could cause Israel to collapse, economist warns," Los Angeles Times 10 May 2010.
77
The Jerusalem Post, "Analyze this: what Shas welfare policy has to do with leaving children behind at the airport - and elsewhere", 7
August 2006, <http://www.jpost.com/Home/Article.aspx?id=110431>.
78
Edmund Sanders, "Welfare system could cause Israel to collapse, economist warns"
79
Alisa C. Lewin and Haya Stier, "Who Benefits the Most? The Unequal Allocation of Transfers in the Israeli Welfare State," Social
Science Quarterly 83.2 (2002): 488-503.
29
policies that encourage large families, and discriminating against them in its disbursal of welfare,
the Israeli government systematically sets up its Arab population for failure.
A strategy for fundamental domestic reforms would reverse these trends by dismantling the
welfare state as it exists today and restructuring it so that it assists those who are genuinely in need
(the elderly and the unemployed), while ending welfare dependency among the working-age and
assimilating Israel’s haredi and Arab populations. Four major policy changes would enable this
mission.
First, Israel must change the basic nature of the IDF’s conscription policies by including
haredim and Arab youth in its ranks. In addition to introducing these youths to the economic
opportunities that membership in the IDF affords, it could also assimilate them into general Israeli
culture, and help reduce the social gap between mainstream Israeli society and these increasingly
prominent subgroups.
Second, the government should stem the demographic overflow of low productivity and
poverty by sponsoring legislation to cut child allowances entirely, and weaning the haredim off of
government subsidies for religious study. As with changes to settlement policy, this effort must be
presented to the Israeli people as a case of bare national security. Israel can no longer afford to put
a substantial portion of its population on the public dole for prayer, and continuing to do so spells
economic ruin.
Third, Arab Israelis must be given a leg up in a society where they start with major social
disadvantages. Again, simply because of Israel Arabs’ demographic strength, Israel cannot afford
to have such a substantial underclass cut off from economic and social opportunity. Such a
situation poses an economic and security threat to the Zionist experiment. In addition to including
Arabs in universal public service conscription, the Israeli government should explore policies of
public sector affirmative action, and reverse welfare policies that discriminate against Arab
citizens.
30
Fourth, the government should use the “peace dividend” that comes from reducing
spending on the settlements to invest in public infrastructure (the poor quality of which has lately
hampered economic growth in Israel) and to redouble its effort at closing the Israeli schools’
achievement gap. Dan Ben-David has identified these two areas as the most pressing of Israel’s
long-term economic needs, though the current political discourse nearly completely ignores them. 80
81
By combining these policies of socioeconomic reform with standard liberalization
measures (tax reductions, trade liberalization, privatization, etc), the Israeli economy can continue
along its impressive positive trajectory. But it should do so with a sense of urgency, knowing that
the liberal consensus underpinning Israel’s success is directly threatened by the growth of
populations which are not part of the new, globalized Israel, and who have little interest in
preserving such a liberal state. Israel must move quickly to bring these populations into the fold
before it is too late.
A Resolution for Action
It must be said that despite the external and internal imperatives for the full liberalization
of Israeli strategy, many of the steps outlined above will require a great deal of courage on the part
of Israel’s political actors. It isn’t just that one might be voted out of office: nobody has forgotten
that the last prime minister to successfully negotiate a splashy peace accord was killed by an
assassin’s bullet nearly twenty years ago. Forcing the Israeli electorate to face hard truths about the
settlements, the welfare state, and Israel’s regional relations will not be easy, and for that reason, it
is easy to dismiss as unrealistic any strategy that demands that such facts be confronted squarely.
This strategy also envisions a long-term future for Israel’s strategic environment that is
radically different than the one Israel currently faces. Although I would contend that such a major
regional shift is eminently possible, many observers may conclude at first glance that the proposed
80
Dan Ben-David, Israel's Transportation Infrastructure from a Socio-Economic Perspective, Tel-Aviv University (Tel Aviv: Tel Aviv
University, 2002).
81
Dan Ben-David, A Socio-Economic Perspective of Israel's Educational System in an Era of Globalization, Tel Aviv University (Tel
Aviv: Tel Aviv University, 2002).
31
strategy presents an overly optimistic view of Israel’s capabilities. I would advise those observers
to consult the history of Israel and of Zionism. They will find a history of one big impossible dream
– a Jewish nation in the ancient land of Israel – that came to fruition almost by sheer force of will.
As such, any resolution for action on this strategy is not just a call for political courage, but also for
political imagination. Yitzhak Rabin once said, “We must think differently, look at things in a
different way. Peace requires a world of new concepts, new definitions.” 82 The end-goal of an
Israel at peace with all of its neighbors is no less likely (indeed, I would argue it’s a great deal more
likely) than Theodor Herzl’s original proposition of an Israeli state, but an Israel at peace requires
the courage to think differently. Israel’s leaders must waste no time in finding that courage.
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Reimagining Greater Israel: A Liberal Strategy For Peace & Prosperity in The Middle East

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Reimagining Greater Israel

A Liberal Strategy for Peace & Prosperity in the Middle East

is imperiled by widespread socioeconomic problems and declining productivity.

Israel’s Strategic Environment

strategy, even at elite levels, is often accompanied by apocalyptic overtones. 2

committed to the destruction of the Zionist state of Israel.

traditionally preferred to envision Israel as a garrison state, an undersized David surrounded by

economic power might be “cashed in” to achieve security.

Israel’s “qualitative advantage” has only grown.

perceive its own security environment.

peace” narrative retains significant influence.

anomalous Jewish-Zionist character in a region of overwhelmingly Muslim states and societies. As

Finally, Israel’s security environment is increasingly shaped by the globalized world

from an advertising executive interviewed in the Israeli daily Haaretz:

unsuccessfully blended economic liberalism with a nationalist security policy.

These factors – an unstable multipolar environment, active regional hostility, economic

identity, and continued economic prosperity through liberalization.

Israel’s National Interest

Peace with the Palestinians and Neighboring Arab States

the expense of its neighbors?

perceived by its neighbors as such.

destruction, and to accept the legitimacy of the Israeli state. 18

if Israel continues to undermine negotiations by upholding an active settlement policy and

which sought to isolate Damascus diplomatically.22

neighbors, must be considered a vital national security interest.

Israel as a Jewish and Democratic State

imagined Israeli national identity.

majority Jewish population and a citizenry of social and political equals.

Sustained & Widespread Economic Prosperity through Liberalization

state’s basic preferences in that development.

The important ideological and material phenomenon of Israel’s globalization is rooted in a

a societal transformation that is rightly described as an “economic miracle” by many

contemporary economic liberalism.”33

to mandate acceptance of these collective [Zionist] responsibilities.” 34 While, as noted above,

continued pursuit of a security-heavy means of protecting the Zionist project threatens to

A Militarized Liberal State?

day when a negotiated settlement is finalized.

Meanwhile, Israel’s rightly liberal economic strategy leaves much to be desired in

societal militarization, and inflexible settlement policies must be untied.

institutions: the Israel Defense Forces.

increasing rather than reducing social and economic inequalities.” 38

Israel will admit. Bard writes,

current “settlement freeze.”45 46

and neglected by Israel’s political leadership.

Israel’s current strategy – to prop up a liberalized economy through tired and

Alternative Strategic Options

economy is by now strongly entrenched.

a strategy which this essay will now explore.

The Way Forward: Calibrating Israel’s Soft Power

Regional Security Through a Comprehensive Political and Economic Agreement

limit on its economic potential.54

its responsibility for a national security nightmare.

In addition, a political settlement allows for the advance of Netanyahu’s vaunted

conception of the “economic peace.”

community to each match those investments.

A regional economic agreement – including the creation of a regional development bank,

economic relations, the risks of investing in Israel are reduced.

domestic political victory would help induce an economic agreement.

that it cannot refuse.

A Grand Coalition Against Radicalism

Israel and tied to the West.

stronger commitment to its own liberal economy and polity.