PM Explains Israel's Success

PM Netanyahu, talking business in a special interview with FoxNews this week, said Israel has become "an export-driven, high-tech economy."

Hillel Fendel , | updated: 2:44 PM

Israel News Photo: GPO

Prime Minister Binyamin Netanyahu talked business in a special interview with Fox Business Channel this week, and said that Israel has "essentially become an export-driven, high-tech economy."

Netanyahu utilized his visit to the United States not only to meet with Secretary of State Hilary Clinton and other officials, and not only to addess the Jewish Federation of North America’s General Assembly in New Orleans, but also to talk about Israel's successful economy and other issues.

Fox co-host David Asman introduced the selection of video bites with a comparison of the US and Israel: "We spoke to him [Netanyahu] about America's lackluster economy and Israel's booming economy." First, however, he was asked about the extent of the threat to international economics presented by Iran's nuclear ambitions.

A Global Threat
Netanyahu said that he believes Iran threatens not only the Middle East, but is also "a global threat, because Iran's reach is far and wide. I mean, look at what they're doing today. They're in the Arabian Peninsula with a beachhead in Yemen. They're in Eritrea. They're in Sudan, in Africa. They're obviously in Lebanon and in Gaza, we see them. They're here in this hemisphere, [and] in South America. And this is what they're doing without nuclear weapons. So if they have nuclear weapons, a nuclear umbrella, think of what they could be doing?"

"And the first thing they'll probably do is make a bid for Middle Eastern oil," Netanyahu continued, "and that's going to affect the economies of the entire world. So this is not just an Israeli problem. It's rightly seen more and more, by the United States, by the major European countries, by us, and I can tell you, by many, many Arab governments in our region... So I think the answer [is that] it has to be dealt with by the international community, not merely for Israel's sake but for the sake of the peace and prosperity of the entire world."

Co-hostess Liz Claman asked if the U.S. and the Obama Administration are supportive enough of Israel in this regard. "I was in Israel a year ago this summer for the Maccabiah Games," she said, "and I was asking taxi drivers, people on the street, restaurant owners, what do you think of President Obama?  They don't like him because they feel that he doesn't understand or he isn't supportive enough of the Israel that matters most, and that is a democratic bastion in the middle of the Middle East. Do you think President Obama is supportive enough when it comes to the Iranian question?"

Avoids Criticizing Obama
Netanyahu avoided the trap elegantly, saying the "close nature between Israel and the United States... is a powerful bond, and President Obama has expressed it more than once. We have had security cooperation in the last year that people don't know about, but I think has surpassed all previous levels... I was very pleased to hear that the president has said that he is determined to prevent Iran from developing nuclear weapons. I think that's a very important statement."

PA Seeking Detours
Asked if he thought the new Republican Congress would be more friendly to Israel, Netanyahu said that both the outgoing and incomnig Congresses were/will be friendly to Israel, and that "basically, that's a constant in the relationship between Israel and the United States. We're dealing with a government and I'm dealing with a president, I hope that we can get peace talks back on track. And that the crucial thing to me is - the only way you're going to conclude a successful peace negotiation is if you actually engage in it. And I'm disappointed with the fact that the Palestinian Authority has found ways not to negotiate, to seek a detour, to somehow go to the UN or go to the Security Council, or go elsewhere in avoiding the critical negotiation that we have to engage in."

Weak PA Economy
"The economies of the Palestinian areas are nowhere near as vibrant as the economy in Israel itself," Asman said. "Is there a way to include Palestinian economies in the growth that Israel is now experiencing?" Netanyahu answered affirmatively, "Yes, and we've been doing that. We haven't waited for peace..."

How Does Israel Do it?
Each of the co-hosts in turn compared Israel's economy quite favorably with the rest of the world: "The international recovery may be sputtering, but take a drive through Israel's rapidly developing cities and you will see a very different economic picture. We asked Netanyahu how his country has powered through the global recession to leave other developing nations in its financial dust: 'You folks in Israel are growing at great guns. You're growing over 4 percent
right now. We have anemic growth rates in the United States. The president's budget called for 4 percent growth. We're lucky to reach 2 percent this year. How have you guys been growing so well?'"

"Well, first of all, we're a speedboat," Netanyahu answered, "and you're a cruise ship. So there's a difference... I can tell you as captain of a speedboat that we have followed a certain policy that has been good for us, but I don't pretend that it is necessarily good for every country, especially one that is a fifth of the world's economy. We're just, you know, a small niche economy. But what we've done and what we've instituted is essentially turning Israel into a high-tech free market economy. And that is a fundamental change from where we were decades ago."

"We were growing oranges and selling polished diamonds," he elaborated, "and now we're selling the software on chips and we're producing all sorts of innovations, technological innovations. And we've essentially become an export-driven, high-tech economy that has a very open marketplace. Not open enough. That's actually our strategic opportunity for growth. That is, if you're lucky enough to have a lot of bureaucratic controls, by removing them, you actually get added growth. And that's the secret of what you do in an advanced economy and you want to keep it growing after it has reached $30,000 per capita income. That is our situation."

Claman didn't let up, though: "There are some people who would say, boy, we wish the U.S. would figure that out, in fact making it a lot more easy for businesses to open up operations here in the United States. We talk to CEOs of the high-tech realm that you talk about, Intel, Applied Materials. When you drive from Jerusalem through to Herzliya, you see all of those names, Microsoft, Yahoo. What is it specifically that you're doing right to attract those businesses to open plants there?"

The Prime Minister answered:
"I think we enjoy the fact that we had a concentration of young people who went through the military and received a technological education. That created the potential. That potential could not be unleashed until we made the Israeli economy more friendly to business. And I had something to do with that, first as Prime Minister, again as Finance Minister, and now again as Prime Minister. What we did was basically follow three things. We controlled spending. We cut tax rates and projected them in a very deliberate path into the future. And we removed obstacles to competition.

"And the combination of the three propelled our economy from a crisis of contraction, about 1 percent contraction, to about 5 percent growth within 18 months. And it stayed that way more or less since, with a dip during the height of the recent crisis. But essentially that's what we've been doing. Now will that work for every economy?  I don't know. It has worked for our speedboat.

"...A lot of the changes that we did were very hard to do. I mean, they were politically very, very difficult. As Finance Minister I raised the pension age to 67; I haven't found a single voter who voted for me for that. And we did a lot of other things. We did capital market reforms. We took away a third of assets of our banks. We have large banks, a handful of them that controlled most of the economy. And we took away the long-term savings from those banks. That was very tough. Cutting government spending doesn't make you popular, believe me. It is very hard. So we did all of that. And the important thing is we did it [all] at the same time. So the effect of the reforms bundled together is greater than the sum of their parts. It's a very powerful growth stimulus."