Making sense of Israel: A 60-year-old start-up

TEL AVIV, Israel--Watching the news from Israel over the last several years, it sometimes seems that the political culture in the country is broken. Yet at the same time, the economic and entrepreneurial trends seem stronger than ever. I've never been able to explain that contradiction. Now that I'm back in Israel, a country where I worked several years in the 1980s, that contradiction is more striking than ever.

As always, the "matzav" or the security situation, dominates discussions here. Just prior to my arrival, the Israeli cabinet OK'd a controversial prisoner swap with Hezbollah in return for two abducted Israeli soldiers believed to be dead.

Maybe it's the Israeli knack for compartmentalization, but the entrepreneurs and venture capitalists I've been meeting on this trip take the security question more in stride than do the outsiders. They continue to wax optimistic about prospects for the country's high-tech industry, particularly in the area of clean technology. And even though most would agree with Eric Benhamou's apercu that Israel is a 60-year-old start-up, one that's often overlooked strategic aims in favor of the tactical, the "return on investment" is enviable. In 1950, Israel had average annual gross domestic product of $3,500. Last year, it was $22,500.

As with previous years, the Internet continues to attract a lot of interest, but venture capitalist Chemi Peres told me that now life sciences and, especially, energy are the new, new growing areas.

"I think that potentially those are new sectors where Israel can stand in the forefront of technology," Peres said. "The issue is whether our market can become aware of changes in the world at the same time that others are. This is one of the critical factors related to the long-term perspective of the Israeli technology sector. We need to be aware of changes--if not ahead of everybody--then definitely no later than anybody else. Because we are far away from markets, the result is that sometimes we start things with a delay, which is not so good."

I'll have more over the next couple of days, including a one-on-one with Israel's richest man, Stef Wertheimer, now in his eighth decade, who remains undeterred by regional unrest and insists there is time to enlist business in the cause of peace in the Middle East.

[jimalaiyah]

Can you elaborate on how a political culture can be broken?

[charlie cooper]

briefly, ongoing political gridlock, year after year, where inside deals & political corruption/bribery cases crop up, leaving important policy decisions - mostly foreign policy -- for "later...year after year, government ministers who get caught feathering their own nests...inside deals while the "suckers" can only watch....what's really amazed people now is that olmert escaped taking responsibility after the publication of the winograd commssion despite the track record of disasterous decisions made during the second lebanon war. on top of that you now have the talansky affair - just the latest corruption scandal olmert's been caught up in. and yet he continues to cling to power.

[shurygin]

I tend to agree with your take on it, but I think it happens mostly due to a lack of alternative. There are no strong players left - all front runners had their chance in the past and failed, each for his own reasons. Public probably does not see the reason to replace one looser for another.