Israel is at a crossroads. It is home to some of the world’s most innovative private sector companies as well as to some of the leading universities and medical centers. At the same time, a very large – and increasing – share of the population is being left behind. There is a growing dichotomy between those at technology’s cutting edge and those in the expanding population groups who receive inadequate tools and conditions to work in a modern economy. This dichotomy is reflected in high rates of income inequality and poverty as well as in low productivity, the key ingredient in generating sustainable long-run economic growth. The gap in labor productivity between the leading developed countries and Israel has been rising steadily for over four straight decades – with major consequences regarding the country’s future ability to retain its most skilled.
Israel’s high rates of poverty and low productivity emanate primarily from deficient physical and human capital infrastructures. With regard to the latter, roughly half of Israel’s pupils receive an education in core subjects that is below levels provided in many underdeveloped countries. These tend to be children in the large and fastest growing segments of Israel’s population. Aside from the obvious economic and social ramifications, it should be clear that a Third World education will lead to a Third World economy, which cannot support the First World army that Israel needs to physically survive in its extremely hostile neighborhood.
National security is not just jets, tanks and battalions. It requires a civil society capable of sustaining a flourishing and innovative economy that can support Israel’s existential needs. Internalization of this fact involves a tectonic shift in Israel’s national security paradigm. The country still has one of the finest knowledge bases in the world. Foreign investments and venture capital continue to flow in at rates that other developed economies can only envy. However, the window of opportunity to make a significant change in national priorities is rapidly closing. Policies that are already difficult to change will become increasingly difficult to modify in the future. There exists a democratic-demographic point of no-return after which it will simply become impossible to find a majority in the Knesset to make the necessary changes in national priorities.