Israel's opportunity in a time of economic crisis

March 11, 2009

Now is the time for investment in a national strategy to exploit the next technological wave. The world stands on the threshold of a multi-dimensional technological renaissance, and Israel can and must be an important player in these developments. Its task is to invest in human capital and in the conditions required for it to realize its goals in this respect.

The global economic crisis and the elections held in Israel last month again sharpen the questions about the role of the state and the government in shaping economic policy. The crisis generates expectations of the government, most of them to do with the short term, and diverts attention away from the need for serious public discussion of long-term national economic strategy. The basis for such a strategy is the goal, where does the country want to be in another five years, or ten, or more?

It’s hard to answer that question in our complicated geopolitical circumstances and in the changing “flat” world. I want to propose a flexibly defined goal whereby Israel wants to create and keep a global competitive advantage in the areas on which it chooses to focus.

Keeping a competitive advantage in a global world will enable us as a country to maintain a growing economy and to invest in growth producing areas and in important national aims (security, welfare, and so on).

After deciding on the goal, we have to choose the areas on which we wish to focus, to choose the ways in which we can obtain an advantage, and to decide how to measure progress.

Developing knowledge

Israel should focus on developing knowledge and innovation-intensive industries, and on exporting the goods and services they produce. By this I mean products and services that exemplify originality, inventiveness, and combinations of scientific disciplines, through which we can stay ahead of competing countries. The innovation industries can be in various fields: communications and computing, medicine, design, genetically modified agriculture, complex materials, and so on.

The pace of technological progress is dramatic. The concept “science fiction” has lost its meaning today, it’s hard to think of things that won’t be fact in the next decade or in the course of this century.

An example of this is the tremendous developments in computing and information technologies. The capability and power of today’s personal computer are a million times those of the first personal computer, which was developed 35 years ago. This pace will accelerate, uses and applications will broaden, providing answers to many problems that concern us in areas such as energy, education, and healthcare.

The world stands on the threshold of a multi-dimensional technological renaissance, and Israel can and must be an important player in these developments. Its task is to invest in human capital and in the conditions required for it to realize its goals in this respect.

There are many layers of investment, such as:

* Development and support of basic research at universities and research institutes (for example, encouragement and subsidies for researchers from overseas);

* Increasing the size of grants for commercial companies on the basis of their investment in R&D, with clear criteria for such aid (such as number of patents registered annually);

* The definition and implementation of a national education strategy, with an emphasis of nurturing teachers, excellence, and core subjects (languages, natural sciences, creative thinking);

* Removing bureaucratic bottlenecks, such as restrictions on the flow of investment capital to Israel;

* Expanding investment in the national communications infrastructure and turning Israel and its citizens into leaders in the use of advanced technologies.

Sixth in the world for innovation

A good yardstick for monitoring progress is the Global Competitiveness Index compiled by the World Economic Forum. The index combines data in 12 “pillars of competitiveness”, and ranks 134 countries according to their ability to compete in international markets and provide a basis for rapid growth. Israel is currently ranked 23. In the past few years, our ranking has fallen, from 14th, to 17th, and now to 23rd.

For innovation, we are ranked 6th in the world. On the other hand, we are ranked in 56th place for macro-economic stability, and 24th for the standard of higher education. These figures show that we have the ability, but that we must improve performance in the other areas in order to be among the leading countries.

Many commercial companies have flourished in times of crisis, and Israel too has an opportunity to define and implement a national economic strategy, based on cultivating its innovation industry, to turn us into one of the 10 leading countries in the world for competitiveness and capacity for growth.