Israelis go to the polls tomorrow and, as we’ve noted previously, there’s not any doubt about who will lead their next government. The voters appear poised to give Prime Minister Benjamin Netanyahu a qualified endorsement, and while his own party appears to be getting fewer votes than expected, the factions that made up his current government will collectively get what amounts to a landslide victory over the prime minister’s left-wing and Arab critics in the Knesset. But the financial sector’s approval of his performance in office appears nearly unanimous. As Bloomberg News reports, the country’s bonds have gone up 36 percent in dollar value since he took office in 2009 as opposed to a 22 percent average rise for global government debt. The shekel has also gained 13 percent against the dollar in that period and is, according to financial experts, the second-best performing currency in Europe, Middle East and Africa during this time.
That’s a message that gets drowned out by complaints about the rise in the cost of living that generated street protests in Israel in the summer of 2011. Yet for all of the country’s problems, including a deficit that is fueled by Israel’s need to spend a disproportionate amount on defense, there’s little doubt that Netanyahu’s administration has been economically sound and that the country’s economy has grown by leaps and bounds under his leadership. His commitment to maintain the Jewish state’s commitment to a free-market model and the stability that his leadership has given the nation are not the only factors behind the growth numbers, but Israel has become an even better bet for investors in the past four years. The near-certainty that he will stay in office will ensure that this will continue.
Those who only know Israel through stories about the conflict with the Palestinians see the country through a prism that doesn’t take into account the amazing progress it has made in recent decades, as it was transformed from a third-world economy to one of the most dynamic markets in the world. It may be that not all of this has trickled down yet to many of Israel’s citizens who rightly complain about crony capitalism and high prices. But Israel’s strength is not only measured in the vaunted abilities of its armed forces. If it has been able to shrug off the disappointments of a peace process in which the country traded land for more terror rather than peace, it has been because its start-up nation economy has become a model for the world in terms of innovation.
This happened for a number of reasons, but the chief one was a commitment by its leaders to shedding the old socialist Labor Zionist model that helped create the nation but ill prepared it to compete in the global economy. Netanyahu played a key role in this change during his first term as prime minister in the 1990s and his years as finance minister under Ariel Sharon. But as prime minister he has continued this progress, keeping a steady hand on the tiller and avoiding many of the problems experienced elsewhere in a challenging environment.
Stuck in a region with neighbors who won’t make peace and still besieged by terrorist movements that launch missile barrages into the country whenever they want to heat things up, Israel doesn’t have a normal economy or a normal political culture. But in spite of that, Netanyahu has received good marks for keeping the economy sound and largely resisted the demands to reverse course. That might have appeased some of his critics, but it would have set the country back. That took exactly the sort of political courage that, according to Jeffrey Goldberg, President Obama thinks he lacks. As Netanyahu embarks on his third overall and second consecutive term in office, the one certainty amid so many variables is that Israel’s finances are in good hands.