As I was drafting this note, I heard the first news of Israel's attack on Gaza. It had to come sooner or later. Two days ago Hamas and its friends fired 80 missiles and mortars toward Israeli civilians. There are extensive casualties in Gaza, as well as the ritual of protests and calls for international intervention, and threats of massive retaliation from Gaza.
When this will be over, we shall still share uncertainty and worse from the economic crisis that I was beginning to write about.
It was depressing to watch the fall of bonds and banks in September. Now it is even more depressing to read about America's indebtedness to China, and what it may mean for the world as we know it. The trigger of this catastrophe may have been free houses for those unable to pay, but it was compounded by money schemes too complex for those who invented them and those who invested in them. Now we read that the huge bubble was financed by the Chinese. According to several commentators, they enticed Americans to overspend for cheap goods, and then bought many of the bonds that financed America's debts. The Chinese hold a mortgage on America. Will they be content to accept re-financing at reasonable rates, or will they demand an early return of their capital? If the latter, we can expect political as well as economic upheaval.
What does this mean for Israel?
Americans may be insulted by the question. They, of course, are far more important in their eyes. But my eyes are only partly American, and so I will proceed with the question.
There are pluses and minuses in Israel's situation.
It helps to be a small country, away from the mainstream of the international economy. Like other small countries, Israel's industry and agriculture cannot produce all that it needs, and it depends more than large countries on international trade. As a small player, however, Israel can be more agile than the 800 pound gorilla that is the American economy. It is partially dependent on many countries, but not entirely dependent on any one of them.
Israel is more centrally controlled, and more authoritarian than the free-enterprise United States. Financial regulation is tighter. Israel has shysters among its money managers. However, they did not operate with the blessing of so-called regulators as did the mortgage sellers and financial wizards of the United States. Israeli lenders did not follow a policy of giving large mortgages to families who could not make the first payment.
Israel's social services are more thorough than those of the United States. The country retains a socialist inclination, despite several years privatizing and outsourcing. Israelis are less vulnerable than Americans to economic distress. The health system is high quality, and close to egalitarian.
Israel has been hurt. The stock market index that measures the fortunes of the 100 largest companies has fallen from its peak even more than the S&P 500. There is considerable damage among the universities, hospitals, religious academies and other institutions that benefit from international Jewish philanthropy. Bernie Madoff is not popular here, except as a symbol of all that is foul.
This crisis will test Israeli wisdom and flexibility in politics as well as economics.
One pleasant event is the drop in the price of oil, and what that may mean for Iran's own adventures, as well as those of its allies on Israel's northern and southern borders.
Israel does not aspire to police the world. It has no troops more than a few miles from its borders. It has learned the lesson of occupying hostile populations. Note what it did in Lebanon during 2006, and the West Bank since 1993: in and out, without a continued presence. No military leader or mainstream politician is talking about occupying Gaza.
Politicians as well as generals urge restraint. It is common to say that Israel should negotiate, directly or indirectly, even with those cursed as terrorists. It is not easy. There is no assurance of success.
It is a game for the agile. Limited goals are better than apocalypse. Wise Israelis do not aspire to an end of national problems. "Final solution" are dirty words.
Pessimists say that if the United States catches cold, Israel is sure to get pneumonia. Optimists put the emphasis on knowing the risks, and being wise enough to avoid the most threatening of them.
Think of this while you are studying Chinese.
It is comforting to remember that just a few years ago, cynics urged a study of Japanese.
Things change. Disaster is not inevitable.
Due to spam, I do not permit comments on the blog. I welcome them sent to my e-mail address below.
Posted by Ira Sharkansky at December 27, 2008 08:04 AM
Ira Sharkansky (Emeritus)
Dept of Political Science
The Hebrew University of Jerusalem