Thinking ahead: A SWOT analysis of Israel's economy at war - opinion

A curious debate rages in the US presidential campaign. Donald Trump claimed at a rally in Michigan that he and his party represent “common sense.” His opponent Kamala Harris counsels, “choose common sense over nonsense.” Each candidate seeks to appropriate the virtue of pragmatism.

Common sense is a vital, often missing ingredient in wise public policy. And, as the bittersweet Israeli joke goes, rancor and silliness got citizenship; common sense migrated to Bermuda. 

A vital complement of common sense is the ability to think ahead, plan strategically, and prepare for looming crises – preferably, avoiding them. As the saying goes, clever people escape from troubles that wise people avoid from the outset. At present, our political leaders act neither wisely nor cleverly. 

Let us analyze Israel’s economy as it gears up for a sustained wartime emergency – and think ahead about how best to meet the coming daunting challenges. I will employ a management tool known as SWOT – strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal to Israel. Opportunities and threats are external, based in the Mideast and the world. Wise leaders leverage strengths to capture opportunities. 

Strengths:

The Israeli economy entered the war on October 7, 2023, in a relatively strong position – low public debt (62% of GDP), low unemployment, low inflation. And a moderate budget deficit, 4% of GDP. The tax base was strong, with up to a quarter of revenues generated by hi-tech.

Weaknesses:

The Gaza war is enormously expensive, in resources and in lives. In March, the business weekly The Economist asked in its headline, “Can Israel afford to wage war?” – and noted that the IDF burned through NIS 30 billion ($8 billion), equal to 2% of GDP, in the last three months of 2023.

The government budget is bleeding money, and the deficit has doubled to 8% of GDP. The daily Haaretz reports that “the money machine was turned on with the 2023-24 budget, approved by the Knesset, which contains an unprecedented NIS 14 billion ($3.6 billion) of coalition-designated spending, most of it for haredi institutions and programs.” 

Hence, a wise war budget is crucial – but is stymied. 

Finance Minister Bezalel Smotrich has zero experience in managing a corner store, let alone a large economy. Polls show he has even lost support of his own National Religious party, polling below the 3.25% threshold for Knesset representation. He humiliates his ministry’s own professionals and refuses to present a 2025 budget, though one is desperately needed.

Opportunities:

Iran, a burgeoning nuclear power, is not deterred by little Israel, whose population is only 10% of Iran’s. But it is surely deterred by the military might of the US, specifically the F-35s and aircraft carrier battle groups the US deploys and maintains in the Mideast. 

An end to the Gaza war can bring normalization with Saudi Arabia and a US-Saudi-Israeli alliance against Iran, bringing stability to the Mideast and secure Israeli borders. Israel can then again leverage its creative entrepreneurs, in biotech and AI, and offer its neighbors help in building an innovation economy. 

New Palestinian leadership in Gaza could at last choose life for its people rather than death and tunnels; investment in education and exports in the sunlight rather than death and fanaticism in the depths of hell. As Gaza rebuilds, Israel could offer well-paying jobs to Gazans, supplying much-needed labor for its growing GDP. 

Threats:

It has been proven that prior to October 7, Israeli intelligence judged that our enemies detected weakness and distraction, stemming from the disastrous judicial reform, and had decided to exploit it. Prime Minister Benjamin Netanyahu ignored them. The fanatics, led by the justice minister, continue in their quest to hamstring the courts and bend them to their will. Israel’s enemies study us very closely and are better at reading us than we have perhaps been at reading them. Recall that the Hamas chief knows Hebrew and spent 20 years learning Israeli foibles in our jails. 

In the history of the Jewish people, strong leadership has emerged from crises, dating back to Rabbi Yohanan ben Zakkai and the sages, who pivoted our religion from Temple-centered sacrifices to rabbinic home-based Torah study in 70-90 CE, after the Second Temple was ravaged. It was existential foresight and common sense coupled with geopolitical skill, as ben Zakkai demonstrated in his negotiations with Roman emperor Vespasian.

In the coming Israeli elections – and they will come sooner than many believe – let us choose wisdom, common sense, empathy, and thinking ahead. At the moment, there is not a molecule of these qualities in our political leadership. A new pivot is in the offing – from fanatical insanity to think-ahead common-sense wisdom. May it come soon!

Postscript:

On September 3, Smotrich made a startling U-turn, authorizing the preparation of a new 2025 budget by his ministry’s experts, with significant spending cuts amounting to NIS 35 billion. No explanation was given for his stunning reversal.■