War Has Sent Israeli Economy Into a Tailspin

Source: Mondo Weiss

It is unheard of when the headlines of Israel’s mainstream newspapers and the slogans of the BDS movement are almost identical. No state on Earth has been able to inflict so much damage to the Israeli economy as the State of Israel itself, and the result is growing indications that the Israeli economy has reached an impasse, with no path forward as long as the state remains an apartheid Zionist state rejected by the whole world except the U.S and Germany.

When Israeli protestors against the government carried a huge sign with the BDS slogan “From startup nation to shutdown nation” it was nothing short of a copyright violation. But this was in February 2023. After October 7 everything changed.

Israel’s genocidal attack on the Gaza Strip, which has killed more than 40,000 Palestinians, more than 15,000 children and may well have doomed over 146,000 additional Palestinians from Gaza to die in the upcoming months from health complications due to injury, starvation and disease. The war has ruined the lives of 2.3 million people in the Gaza Strip, and of thousands in the occupied West Bank. Estimates by the UN are that 70% of the houses were destroyed, and that the rubble will take 15 years to clear. Nevertheless, there is little doubt that the Palestinian survivors of the genocide, though traumatized, impoverished and mourning their lost family members and friends, will eventually rebuild and recover, however long it may take.

The physical destruction in Israel inflicted by the war is minimal in comparison, and yet one thing has been destroyed: the country’s future.

The economic indicators speak of nothing less than an economic catastrophe. Over 46,000 businesses have gone bankrupt, tourism has stopped, Israel’s credit rating was lowered, Israeli bonds are sold at the prices of almost “junk bonds” levels, and the foreign investments that have already dropped by 60% in the first quarter of 2023 (as a result of the policies of Israel’s far-right government before October 7) show no prospects of recovery. The majority of the money invested in Israeli investment funds was diverted to investments abroad because Israelis do not want their own pension funds and insurance funds or their own savings to be tied to the fate of the State of Israel. This has caused a surprising stability in the Israeli stock market because funds invested in foreign stocks and bonds generated profit in foreign currency, which was multiplied by the rise in the exchange rate between foreign currencies and the Israeli Shekel. But then Intel scuttled a $25 billion investment plan in Israel, the biggest BDS victory ever.

These are all financial indicators. But the crisis strikes deeper at the means of production of the Israeli economy. Israel’s power grid, which has largely switched to natural gas, still depends on coal to supply demand. The biggest supplier of coal to Israel is Colombia, which announced that it would suspend coal shipments to Israel as long as the genocide was ongoing. After Colombia, the next two biggest suppliers are South Africa and Russia. Without reliable and continuous electricity, Israel will no longer be able to pretend to be a developed economy. Server farms do not work without 24-hour power, and no one knows how many blackouts the Israeli high-tech sector could potentially survive. International tech companies have already started closing their branches in Israel.

Israel’s reputation as a “startup nation” depends on its tech sector, which in turn depends on highly educated employees. Israeli academics report that joint research with universities abroad has declined sharply thanks to the efforts of student encampments. Israeli newspapers are full of articles about the exodus of educated Israelis. Prof. Dan Ben David, a famous economist, argued that the Israeli economy is held together by 300,000 people (the senior staff in universities, tech companies, and hospitals). Once a significant portion of these people leaves, he says, “We won’t become a third world country, we just won’t be anymore.”

Data on the actual numbers of Israelis leaving the country is confusing and self-contradictory. In a time of great uncertainty, when Israeli newspapers are pumping disinformation about a global wave of antisemitism as if Jews would be more at risk in Europe or North America than they are in Israel, many Israelis are still opting for emigration — families are taking extended vacations, and other Israelis explore options for work and study abroad. Still, the estimates of the number of Israelis who have already left vary wildly.

The two sectors of the Israeli economy that do not report a crash are the arms companies, which are reporting high sales (although most of them are domestic, arming the genocide), and the “exits” — as international corporations scavenge the carcasses of Israel’s tech sector looking for bargains. Even Google expressed interest in buying the Israeli cyber security company Wiz, founded by Israeli intelligence officers who are eager to sell their company to Google in order to be able to leave Israel.

Israeli economists are expecting the Israeli government to take urgent action to deal with the crisis, end the war, cut public spending, raise taxes, restore public trust in Israel’s public institutions, and repair Israel’s foreign relations, especially with the countries that it depends upon for trade — the EU, Turkey, and Colombia. The Israeli government is instead implementing plans to destroy the Palestinian economy not only of Gaza but also of the Palestinian Authority in the West Bank. It adopts a belligerent approach towards any state that criticizes its policies and has passed a last-minute and unrealistic budget for 2024.

In the age of the information economy, the economic prospects of states are neither determined by raw materials nor the quality of the workforce. Instead, we live in an era of an “economy of expectations.” The hype of Israel’s “startup nation” has turned into a #Shutdownnation. Two senior Israeli economists, Jugene Kendel and Ron Tzur, published a secret report in which they predict that Israel will not survive to its 100^th year. The report is kept secret because they do not want it to become a self-fulfilling prophecy, but they gave interviews about it. On Israel’s 76^th Independence Day, Haaretz published an editorial on both its English and Hebrew editions, with the headline, “Will Israel survive to celebrate 100 years? Only if Netanyahu resigns.” The Hebrew edition was published without the qualification. Almost four months have passed and Netanyahu shows no signs of relinquishing power and is sabotaging negotiations for a ceasefire in order to prevent elections.

Three Israeli historians, two Zionists and one anti-Zionist, have declared that the Zionist project has come to an end. When a critical mass of Israelis, regardless of their political opinions, become convinced that Israeli apartheid has become unsustainable, they will no longer agree to invest energy and money and risk their lives and their families for the sake of the Zionist project. They will seek out a better future for themselves, as every sane person would, either by leaving Israel, or better yet, by working towards a new and democratic political system in Palestine. One person, one vote, and a future in which everyone of every religion and ethnicity can have a stake.