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Four Reasons Why Israel's Economy Is So Strong

(Atlantic) Jordan Weissmann - In the span of just a few decades, the Jewish state has "transformed itself from a semisocialist backwater into a high-tech superpower," as The Economist put it in 2010. Here are four big reasons its economy barely flinched during the financial crisis. It learned from disaster. In 1984 the inflation rate averaged 450%, sparking reforms that would lay the groundwork for Israel's present-day prosperity. It welcomed brilliant immigrants. Between 1990 and 1997, more than 710,000 Soviet immigrants landed in the country, 60% of whom had a college education. The government played venture capitalist (briefly) with the Yozma program, a $100 million state-owned venture capital fund that opened in 1993. The program convinced foreign venture capitalists to create funds in Israel by lowering their taxes and promising to match part of the money they raised from investors. In doing so, it created a thriving, independent venture capital market that was backing hundreds of startups a year by 2000. Israel pulled off a remarkable feat by cleverly growing a financial ecosystem for its tech entrepreneurs from scratch. They may have the world's smartest central banker: Stanley Fischer, the U.S. educated head of the Bank of Israel. He is a former MIT professor, chief economist at the World Bank, deputy managing director at the International Monetary Fund, and vice chairman at Citigroup.
2012-08-03 00:00:00
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