World on Fire - Brownstein, Michael [115]
I was struck, more than ever before, by the contrast between the poverty that seemed to be everywhere and a world of astonishing wealth. At a downtown car dealership, I listened as two men, wearing sparkling rings, argued and gesticulated, flailing their arms, over the price—$400,000—of a new Mercedes, which had just arrived. Then I watched bands of ten-year-olds lumber by in mule-drawn carts. Their faces were pretty but filthy, and they were dressed in rags; they lived among smoking piles in south Cairo’s City of Garbage, and they survived by collecting rubbish along the streets.
But one of my most vivid impressions on this visit was of decay: of crumbling buildings seen through a patina of dust; of torn-up sidewalks and sewage in the street; of a city that was angry and was living on the edge as its population continued to grow. . . . And the more the city crumbled and the more its population swelled, the more eager it appeared to be to embrace revival of Islam.
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In a region of prodigious inequality and mass poverty, Israel is like a tiny industrialized Western enclave. Indeed, a constant charge hurled by Arabs is that Israel is “an extension of the West.” Compared to the rest of the region, a starkly disproportionate percentage of Israel’s population is highly educated, highly skilled, and highly “Westernized.” Unlike the Arab states, Israel is not considered a “developing” country; in 1996 the IMF reclassified Israel as an “advanced economy.” Moreover, despite the fact that Israel has no oil, while the Gulf States sit on the largest reserves in the world, marketization and economic liberalization in the region has reinforced Israel’s disproportionate prosperity as well as its industrial and technological superiority. In January 2001, Limor Nakar reported in the Chicago Sun-Times:
Bear Stearns has just established its first Israel office and HSBC will open its first branch in Israel early this year. They join Lehman Brothers, U.S. Bancorp Piper Jaffray and other investment companies.
These investors are responding to economic changes in Israel that began when the government instituted a reform program based on three pillars: the privatization of state-owned companies, the de-regulation of major industries and the liberalization of markets. With these policies in place, Israel’s economy took off.
. . . Israel, a start-up nation, now is filled with start-up companies and second only to the United States in the number of new companies it pioneers. As a result, more venture capital dollars are invested in Israel than in anywhere outside of the Silicon Valley. . . . In the last two years, Israel also has seen the largest deals ever with U.S. firms.
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In all these respects, despite the ravaging economic effects of prolonged warfare, Israeli Jews can be viewed, at the regional level, as a market-dominant minority within the overwhelmingly Arab-populated Middle East.
Reasons for Israeli Economic Dominance
If you ask Israeli Jews the reasons for their market dominance in the region, they tend to respond consistently. They invariably cite the unique origins of modern Israel, in which, beginning around 1882, thousands of well-educated European Jews came together in their common commitment to a Jewish state. They emphasize Israel’s impressive tradition of the rule of law (Arabs would angrily disagree), including its well-respected independent judiciary and relatively low levels of corruption. They point out that Israel is the only democracy in the Middle East (again Arabs would disagree), an attribute that, but for constant warfare and terrorism, is attractive to foreign investors and global markets. Many Israeli Jews acknowledge, and some worry about, the tremendous amount of financial assistance that Israel has received from external sources. Between 1950 and 1985, U.S. government grants to Israel totaled approximately $21 billion, a level of aid far exceeding that provided to most