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Israel Inside

Can emancipated Israel emancipate Arabs too?

By 8.10.09

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The Israel Test
By George Gilder
(Richard Vigilante Books, 296 pages, $27.95)

This latest book from one of the planet's intellectual titans of the past generation is one of his most important. Given George Gilder's astonishing range and foresight -- including family structure, welfare, the practical and moral case for enterprise capitalist wealth creation, the transformation of the computer and telecommunications industries -- this is saying a lot.

What Gilder sets out to do in his poetic prose is show how Israel's accelerating migration over the past twenty years from a socialist to a capitalist economy has transformed the Jewish state from an economic basket case to a powerhouse player in the world economy. Gilder then applies the implications of this metamorphosis to the prospects for finding a way to settle the Arab-Israeli conflict.

Israel has become such a huge driving force in computing and telecommunications that Gilder intellectually riffs off the "Intel Inside" logo that sits on the exterior case of countless millions of personal computers, and says that today's Internet and computers should be labeled "Israel Inside." Now Israel is making major moves in biotechnology, including drugs for plants used in agriculture. Symbolic of the more agile Israeli economy, one CEO noted: "The process is faster for drugs because the plants don't have lawyers."

Calling Israel the central front in the war dividing two global camps, Gilder begins his book by framing the divide:

The prime issue is not a global war of civilizations between the West and Islam or a split between Arabs and Jews….The real issue is between the rule of law and the rule of leveler egalitarianism, between creative excellence and covetous "fairness," between admiration of achievement versus envy and resentment of it….

The test can be summarized by a few questions: What is your attitude toward people who excel you in the creation of wealth or in other accomplishment? Do you aspire to that excellence, or do you seethe at it? Do you admire and celebrate exceptional achievement, or do you impugn it and seek to tear it down?

The Palestinians, needless to say, epitomize the wrong side of these juxtapositions, while Israel and America generally are on the right side. But now America must look toward Israel, whose Prime Minister exemplifies the right side of these divides, whereas the newly elected American President is on the wrong side -- despite his having been richly rewarded by the society he now wishes to turn away from its historical celebration of private capitalist enterprise.

Gilder notes the politically incorrect fact that Jews contributed to scientific progress (and artistic achievement) in vast disproportion to their minuscule number. As for Arab militancy its roots, he explains, lie in the noxious totalitarian ideologies of Marxist socialism and Nazism. Ironically, Marx's socialism also animated the early generations of Israelis. Thus Israel was for its first four decades an economic mess.

Gilder spotlights the legendary mathematician John von Neumann as first among the genius Jews who transformed mathematics, physics, game theory, information theory and many other disciplines; von Neumann was the intellectual godfather of the modern computer as it evolved over six decades. Nazi persecution drove von Neumann and a legion of great Jewish scientists out of the lands of Eastern Europe and from Germany. Gilder captures the result perfectly: the great mathematician David Hilbert, a von Neumannn mentor at Göttingen University in Germany, was asked in 1934 by Hitler's education minister, "How is mathematics in Göttingen, now that it has been freed of the Jewish influence?" Replied Hilbert: "Mathematics at Göttingen? There really is none anymore." Von Neumann, Einstein and many other Jews combined with Jews like J. Robert Oppenheimer in the West to win the race for the atomic bomb, and thus end World War II; many then were central to the West winning the Cold War. After the Berlin Wall fell, a huge wave of Russian Jewry took immense scientific talent and entrepreneurial energy out of Russia and into Israel, laying the foundation of Israel's rise to world economic ascendancy.

The prime Israeli architect of economic prosperity was Benjamin Netanyahu, who learned his economics during his education in the States and was an early supply-side tax cutter. His shining moment came in Ariel Sharon's term as prime minister. Israel's economy was still 60 percent government controlled. The Palestinian suicide bombing campaign of 2000-2002 scared off foreign investors and caused an added risk premium to be priced into Israeli bonds. Needing a guarantor, Sharon's Finance Minister, Netanyahu approached the Bush administration. President Bush and his Treasury Secretary, John Snow, agreed to have the Treasury guarantee Israel's bonds, which would reduce the risk premium and make affordable financing possible for Israel, on one condition, to which Netanyahu eagerly assented: implement broad financial and economic deregulation. The upshot was that within a few years the government share of Israel's economy plummeted by two-thirds to 20 percent, and Israeli economic growth went into racing gear.

Gilder details how from 1967 to 1992, when Israel governed the West Bank and Gaza, Palestinians prospered as never before. In the 20 years from the 1967 War to the launching of the first Palestinian "Intifada" (Arabic for "shaking off"), 250,000 settlers on the West Bank and Gaza built the area's first real modern infrastructure, and thus attracted ten Arabs for every Jew living there. The territories saw annual economic growth running 25 percent, far higher than socialist stagnated Israel. Arab incomes tripled, seven universities and 2,500 factories were built, and life expectancy jumped from 40 to 70. In an area widely viewed as an economic backwater under Israeli rule, 92.8 percent of the Arab population had electricity in 1986, compared to 20.5 percent in 1967. Then came the UN, the "international community" and Israel's "peace now" leaders, who gave the Mideast the Oslo Accords and placed Yasser Arafat, lifelong terrorist and mass murderer, on the throne of Arab Palestine.

The upshot: terrorism, Nazified brainwashing of children to hate Jews, massive corruption and economic immiseration. Inundated by foreign aid that fell into Arafat's palm Palestinians, Gilder writes, "became arguably the world's most twisted welfare culture of violence and demoralization….with leadership based entirely upon terrorism and hatred and international grievance-mongering."

Thus the path to peace is not the hidebound "peace process" in which Israel makes irrevocable territorial concessions in return for revocable Palestinian peace promises. It lies, rather, in Arabs being freed from terrorist leaders and anti-Semitic fantasy, instead embracing cooperation with and thus acceptance of Israel. Modern game theory explains the divide. A short-run game rewards predatory players, while productive players must use cooperation to gain vastly more over time.

History suggests strongly that Gilder is right. The two most successful Mideast peace accords were based upon Arabs moving first: accepting Israel's right to exist, then making peace. Israel is, in truth, the easiest country in the world to make peace with. All it needs is a partner for peace. But when Israel has gone first the result has been disaster:

After the 1993 Oslo Accords, Israel traded land for lies -- broken Palestinian promises. After Israel vacated southern Lebanon unilaterally, it got the al-Aqsa Intifada and suicide bomber attacks. After Israel uprooted settlers in Gaza and unilaterally vacated, the Palestinians destroyed the assets Israel let behind, and then let loose with thousands of rockets, leading to the 2008-2009 Gaza War. Thus over the past 16 years of "peace process" Israel's "peace now" faction has serially traded land for lies, land for suicide bombers and land for rockets. If they trade land yet again, whatever they get will not be peace.

Yet the international community -- the UN and most nations -- persists in the fiction that Israel's "occupation" of the West Bank is the reason for Palestinian terror, although terror antedates Israel's 1967 victory. The "L" in "PLO" stands for "liberation" of Israel from Jewish control. Gilder also notes in a bitter irony that alone among peoples on the planet Arabs are given a presumed right to a territory free of Jews -- the judenrein ("Jew-free") dream of Hitler. (Conveniently forgotten is that Jordan's 1950 annexation of the West Bank was legally recognized only by two nations: Britain, and Britain's creation, Pakistan.)

After each wave of Arab aggression the international community libels Israel as the aggressor or as a war criminal for using excessive -- "disproportionate" -- force. Aid flows invariably to the Palestinians, nearly all of it diverted from avowedly humanitarian purposes to financing the next round of terrorism. In national security as in economics, if you tax (penalize) something you get less of it, while if you subsidize (reward) it you get more. In this case, terror is rewarded, and grows.

Perhaps most important in Gilder's masterwork is that he shows why Israel is essential to American prosperity as well, with its technological prowess. Israel could be the economic engine for the entire Mideast. This is the new Israel, no longer a financial ward of America. It is this Israel that most Americans know not of. "Israel Inside" would be a great slogan for an ad campaign educating Americans about the new Israel, and its supreme value to America and the West. In lieu of an ad blitz, Gilder's book does the job beautifully.

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About the Author

John C. Wohlstetter is a senior fellow at the Discovery Institute and London Center for Policy Research, author of Sleepwalking With the Bomb, and founder of the issues blog Letter From the Capitol.