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Former Israeli national security adviser Uzi Dayan says 'real threat' comes from deteriorating socio-economic conditions

Published by The New York Sun on 2005-01-20

The former chairman of Israel's National Security Council warned yesterday that the "real threat" to the 56-year-old Jewish state came not from Islamic terrorists or Palestinian guerrillas but from a high unemployment rate, an insipid annual economic growth rate, corruption, social inequality and the deteriorating quality of general education.

"The combination of these elements constitutes the biggest threat that Israel is facing -- and it's time that we got our act together," Uzi Dayan, currently president of the Zionist Council in Israel, told The New York Sun in an interview. "I am not worried about whether Israel will continue to exist. The world need not fear that our Jewish democratic state will be extinguished. What worries me is what kind of existence we are going to have, what kind of society we are going to bequeath to our children."

His worries, Mr. Dayan said, flowed from a study of statistics that suggested that Israel's economic well-being may be endangered. For example, he said, there was a cumulative drop of 6% in per capita income, starting in 2000 and continuing through the end of last year. The current per capital figure is $17,000, the highest in the Middle East but lower than the 30 members of the Organization for Economic Cooperation and Development, or OECD, the so-called "rich countries club" which is based in Paris.

While living standards in OECD's seven wealthiest industrial countries -- America, Britain, Canada, France, Germany, Italy, and Japan -- rose by 82% between 1973 and 2003, they increased in Israel by barely 48%, added Dan Ben-David, professor of economics and public policy at Tel Aviv University. Professor Ben-David accompanied Mr. Dayan on his trip to New York to brief policymakers and businessmen about new efforts, mostly in the private sector, to re-energize the Israeli economy.

Those efforts, according to both Mr. Dayan and Professor Ben-David, include creating fresh awareness of economic and societal trends, helping launch educational reforms at high school and college levels, and promoting adult education.

"If you don't deal with social issues, you won't find much cohesion in Israeli society," Mr. Dayan, a former deputy chief of the general staff of the Israeli Defense Forces, told The Sun, adding that while it was critical for Israel to concentrate on fighting regional and global terrorism, it was even more important in the long term for it to focus on improving its internal economic and social conditions.

He said he was particularly troubled by the fact that Israel allocated more than $12 billion of its $45 billion budget on social expenditures, such subsidized housing and welfare payments to the unemployed -- almost 25% more than the figure spent on defense. The country's unemployment rate has been rising steadily since 1973, when it was 3%, to nearly 11% in 2004.

"More than one-third of Israeli families have fallen below the poverty line," Mr. Dayan said, an unacceptable figure in a nation of barely 6 million people. "The failure to invest in basic infrastructures -- better schools and transportation -- has prevented a large and growing segment of society from getting opportunities to improve their economic prospects."

Professor Ben-David said that while it was customary in many Israeli circles to apportion the country's economic woes to the Palestinian intifada, or uprising, that started in late 2000 -- after the late Yasser Arafat, head of the Palestine Authority, rejected peace proposals made by then American President Bill Clinton -- the economic deterioration began "well before the intifada." The World Bank has estimated that the intifada has cost Israeli some 3% of the annual gross domestic product of $120 billion.

The comments yesterday by both Mr. Dayan and Professor Ben-David are certain to intrigue the New York -- and American -- financial community as well as policy makers because of the traditionally close relationship between America and Israel. Since Israel's founding in 1948, America has given it more than $100 billion in aid, averaging around $2 billion annually. American economic assistance to Israel accounts for almost a third of the aid it provides to developing countries (another third goes to Egypt).

In addition to bilateral assistance, Americans give Israel $1 billion in private philanthropic assistance, as well as but another $500 million worth of Israeli bonds. Israel also typically gets short-term commercial loans from American banks of about $1 billion a year.

"The problem is not lack of public money," Mr. Dayan, who has served as an adviser to Prime Ministers Arial Sharon and Ehud Barak, said. "The problem is a lack of direction."

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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