With eye on long term, Israel plans for ‘leapfrog’ growth to stem brain drain

JERUSALEM (JTA) — It was at a conference 15 years ago in the raw months following Yitzhak Rabin’s assassination that an unlikely Israeli trio — a young Navy officer, a leading businesswoman and a senior bureaucrat — hatched a plan for Israel’s future.

It wasn’t exactly a plan for the future, but a plan to plan for the country’s future in an entirely new way: one focused on long-term strategic thinking to propel Israel into the world’s top 15 socioeconomic powers.

Last week, the goal of becoming a nation with one of the highest GDPs per capita — the type of dramatic “leapfrog” growth that would see incomes and other quality-of-life metrics boosted across the socioeconomic divide — went from an idea to headline news when the goal was adopted as policy by the Israeli government.

Prime Minister Benjamin Netanyahu, at a conference in Jerusalem called Israel 2021, announced to a hall packed with government officials, business leaders, students and social activists that “Good strategy with mediocre execution is better than mediocre strategy excellently performed. Our goal therefore is to present an excellent strategy for Israel.

“We cannot rest on our laurels,” he said. “We are entering a more competitive era.”

The plan is to turn Israel into a “leapfrogging” nation. That’s defined as a case in which a nation triggers high and sustained growth for eight years while providing high quality of life — not just economically but also in terms of social services such as education, welfare and health. For Israel, leapfrogging is seen as imperative to keeping the country’s best talent from migrating overseas.

Israel is suffering from acute “brain drain.” The country exports more PhDs than any other — a quarter of Israeli academics work abroad — and tens of thousands of others live in an ever-swelling Israeli Diaspora where career opportunities and higher quality of life beckon.

Gidi Grinstein, president of the Reut Institute — the think tank that partnered with The Marker, the business section of Israel’s daily Haaretz, to host the conference — is the once-young naval officer who has been championing Israeli leapfrog growth for a decade and a half.

The other two he originally designed the plan with are Raya Strauss, co-owner of Strauss Investment Ltd., and David Brodet, then the director general of the Finance Ministry.

At the conference Grinstein spoke of the dire existential consequences for Israel if an increasing amount of the country’s talent leaves the country.

The problem, he said, is that Israel has the highest gap in the world between local talent and local quality of life.

“Israelis are short-changed in quality of life, and if this gap grows beyond a certain level we could lost a critical amount of our talent,” Grinstein said.

The conference convened some 3,000 Israeli decision makers to talk long-range strategy — not the strong suit of Israeli governments, which historically have prided themselves on improvisation in times of crisis rather than long-term strategic thinking, particularly outside the military arena.

Hailed as the “biggest brainstorming session in Israel’s history” by its organizers, the conference featured hundreds of roundtable discussions by experts in civil society, economics and government. There were two days of intense discussion on a series of topics, including Israel’s competitiveness internationally and the integration of Arab citizens and haredi Orthodox Israelis into the labor force.

Grinstein said the roundtables were part of a transformation in Israeli public discourse he believes is pivotal for leapfrogging to work.

“Countries don’t leap because of a small group of people at the top who make decisions,” Grinstein told JTA. “In Israel we need to mobilize what we call the serving elite: leadership in business, NGOs, academics, heads of labor unions and government. We know in countries that leapt there was an honest and credible discourse about priorities between business leaders, the nongovernment elite and the government. We need to educate and empower that group.

“Not all of them believed they are part of a large enough and powerful enough group to transform Israel, and we wanted to give them confidence that they are part of the group that could change Israel,” he said.

The conference also brought together three leading international experts on long-term development for their guidance on how lessons from abroad might be applicable to Israel. They were Michael Spence, a 2001 Nobel Prize laureate in economics; Rory O’Donnell, head of the National Economic and Social Council of Ireland; and Ricardo Hausman, director of the center for International Development at Harvard University.

Economists at the conference argued that Israel cannot depend on its high-tech sector, which spurred most of the dramatic growth seen in the past two decades, in either the short or long term. That’s because studies show that it’s not growth in the elite sectors of the economy that boost high per capita GDP but higher salaries for workers across the socioeconomic spectrum.

Recent leapfrogging success stories include Germany, Ireland, China, Singapore and South Korea.

O’Donnell, the Irish economist who helped craft his country’s economic ascent from one of the poorest countries in Europe to one of its wealthiest until the recent economic crisis, cited the parallels he saw in the Irish and Israeli experiences as small countries with large Diasporas, often fragile coalition governments and a history of national conflict.

While in the past two years Ireland has returned to economic dire straits, O’Donnell ascribed his country’s dramatic rise until 2008 after decades of high employment to a “social partnership” between government, employers and unions. Among their successes was managing to get large numbers of long-term unemployed back into the labor market through activist public policy that promoted universal job training.

In an interview with JTA, O’Donnell suggested that it was a model that might be applicable to Israel as it struggles to increase the low workforce participation of the haredi and Arab sectors.

Yitzhak Herzog, speaking as Israel’s welfare minister at the conference — he has since resigned — underscored the challenges ahead when he bemoaned what he described as a lack of public interest in forward-thinking strategy in Israeli.

“The demands are immediate and fast-paced,” he said. “When you talk about the long term, there is rarely deep public debate.”

Emerging from a roundtable meeting on Israeli competitiveness, Jerusalem artist Aramit Lotem said she hoped such discussions were indicative of a new national conversation.

“I think it addresses an important question that touches on Israel’s very essence,” she said, “because one of the things we have yet to succeed at as a country is moving from the project of establishing a state to being ready to really look towards the future and the long-term.”