Israeli Start-Ups

RISHON LEZION, Israel — While discussing the new book “Start-Up Nation,” Rabbi Shmuley Boteach addresses why Israel is more economically viable in the long-term than oil-rich Arab countries:

Sidestepping the usual discussion of Israel as an embattled nation, [the book] focuses instead on the invincible ingenuity of the Israeli people, and their vast technological contribution to the global economy…

…as Start-Up Nation makes clear, Israel today is one of the most highly educated and technologically advanced nations on Earth, with one of the planet’s fastest-growing economies.

The time has come for world Jewry to see Israel as the place where the limitless potential of the Jewish people is finally being made manifest. All we needed was for people to get out of our way, and just look at how we thrive. And we prosper not as a self-absorbed nation but as a people who make vast contributions to all of mankind…

Many a Jew has wondered aloud why the Arabs got all the oil and Israel got none. What could God have been thinking in making despots and dictators like the Saudis and Libya’s Muammar Gaddafi so insanely rich, while Israel has to struggle for every shekel it earns?

Only now to do we see the truth. Oil is the greatest curse ever to befall the Arabs.

By simply digging a hole and having money flow from the ground, the Arab states had little incentive to build universities or a hi-tech industry. And when the day comes – and it will – when the world finally finds an alternative energy source, these despotic regimes will collapse, returning to the sand from which they arose.

This isn’t rocket science. All of us know at least one rich friend whose kids don’t have to work, and who consequently became indolent. Israel has had to struggle for everything it has. No country has ever been more unjustly reviled or more continuously attacked.

Conversely, no country better inspires the world to ponder the infinite capacity of humans to rise from the ashes of despair and build a shining state on a hill.

While Rabbi Boteach is correct on a macroeconomic level, the high-tech industry on a societal level here is more complicated than he knows. There are indeed positive aspects, but there are also negative ones.

In the twentieth century, the American economy generally had stable, long-term growth because of the existence of large, national, and global companies whose purpose was to generate long-term profits and jobs by providing new products and services over time. But, as I have noticed in the several Israeli  companies where I have worked, the nature of start-ups is inherently different.

When I was working as a marketing manager, I overheard a conversation between a new hire and the chairman of the board. The chairman told the coworker that the exit strategy was to sell the company’s innovation to Google as soon as possible. The coworker rightly asked, “So, what will happen to me? Will I be out of a job?” The board chairman laughed, gave a dismissive answer, and changed the subject. (By the way, our contracts specifically stated that employees would receive no money from any sale of the company.)

As Shlomo Maital, a business columnist for The Jerusalem Report, asks in a recent interview with several Israeli business analysts (the article is not available online):

Israel’s business model was based on selling its brains, as start-ups, at inflated prices. These baby companies were “adopted” and their knowhow shipped overseas, before they could mature and create well-paying jobs and incomes for middle-class Israelis. Why has Israel failed to grow global companies in the past 10-15 years?

The interviewees responded by saying that the government needs to invest more in areas including alternative energy. But the major problem is that Israelis are a people with no patience for anything — including work life. The idea behind start-ups is not to build companies that will exist for the long-term but for the owners to get rich as quickly as possible. A classmate from my M.B.A. program once told me a story: A start-up CEO was told by a venture capitalist that the company could get $100 million if it offered an IPO the following month but that the firm could get $500 million if it waited for one year. The CEO, of course, chose the first option.

Another company for whom I worked would routinely fire employees just before three months or one year had elapsed to avoid salary increases or severance pay as mandated by our contracts and Israeli law. The stated reason for each firing, of course, was something false related to work performance. Start-ups frequently have little cash, and their existence depends on receiving future investment. So, in response, they must watch every single cost.

Smaller companies have many advantages over large ones including the ability to be quick and nimble rather than slow and bureaucratic, but they are generally more chaotic. Positions, job descriptions, and even the number of employees can change on a day-to-day basis. A long-term, stable career does not exist in this environment, especially when the owners and upper management have no patience and constantly worry about costs.

Israel has the fourth-highest level of income disparity — also known as the gap between the rich and the poor — in the world. It is not hard to understand the cause. Israel’s high-tech culture creates a few multi-millionaires whose only resulting contribution to the local economy is their increased consumer spending. Their companies and technologies are sold to Western countries, who then receive the later economic benefits. Lower-level employees move from start-up to start-up when one is either sold or bankrupt, rarely moving into upper management and receiving high salaries because the owners typically hold those positions on a day-to-day basis as well. Most other Israelis — those who are less educated or members of minority communities like Israeli Arabs — work in low-paying jobs in the blue-collar, service, or tourism industries.

Rabbi Boteach correctly notes that Israeli start-ups do benefit the world and provide the country with good branding, but Israeli society in general does not always see the benefits.

Elsewhere: The Freakonomics blog interviews the authors of “Start-Up Nation.”

Stratfor Updates

For policy wonks and international-relations enthusiasts, Stratfor Global Intelligence is a political dream-come-true. I usually agree with their analyses, but they are still insightful when I do not. (Stratfor is a group of hard-core realists who sometimes discount the role that irrational ideology plays in the international arena.)

Here are the group’s reports from the last several weeks (sometimes these links go to advertisements before the actual content):

• The United States and Ballistic Missile Defense in Eastern Europe
• Misreading the Iranian Situation
• The Western View of Russia
• Libya: A Hero’s Welcome
• Obama’s Foreign Policy: The End of the Beginning
• Confidential Informants: A Double-Edged Sword
• Iraq Endgame

Enjoy!

Geography is Destiny

Robert Kaplan, writing in Foreign Policy, writes that geography has always laid the foundations for conflict throughout the world in the past and present. The article is your assigned reading for today.

Attacking Iran

David Samuels writes that Israel will definitely attack Iran’s nuclear facilities and that it might just be good for the world:

…Destroying a respectable number of Iranian centrifuges will end Iran’s march to regional hegemony and eliminate Israel’s chief rival for America’s affections while also allowing Israel to gain the legal and demographic benefits of a Palestinian state with a minimum of long-term risk.

Israel’s version of a nuclear grand bargain that brings peace to the Middle East may be messier and more violent than what the Obama administration imagines can be accomplished through sanctions, blandishments, and the invocation of Barack Obama’s magic middle name. But who can really argue with the idea of trading the Iranian nuclear bomb for a Palestinian state? Saudi Arabia would be happy. Egypt would be happy. Bahrain, Kuwait, and the United Arab Emirates would be happy. Jordan would be happy. Iraq would be happy. Two-thirds of the Lebanese would be happy. The Palestinians would go about building their state, and Israel would buy itself another 40 years as the only nuclear-armed country in the Middle East. Iran would not be happy.

Sounds sensible to me.

Iran is Dying

The ever-excellent Spengler reports some astonising findings on Iran:

Iran is dying. The collapse of Iran’s birth rate during the past 20 years is the fastest recorded in any country, ever. Demographers have sought in vain to explain Iran’s population implosion through family planning policies, or through social factors such as the rise of female literacy.

But quantifiable factors do not explain the sudden collapse of fertility. It seems that a spiritual decay has overcome Iran, despite best efforts of a totalitarian theocracy. Popular morale has deteriorated much faster than in the “decadent” West against which the Khomeini revolution was directed…

First, prostitution has become a career of choice among educated Iranian women. On February 3, the Austrian daily Der Standard published the results of two investigations conducted by the Tehran police, suppressed by the Iranian media.

“More than 90% of Tehran’s prostitutes have passed the university entrance exam, according to the results of one study, and more than 30% of them are registered at a university or studying,” reports Der Standard. “The study was assigned to the Tehran Police Department and the Ministry of Health, and when the results were tabulated in early January no local newspaper dared to so much as mention them.”

The Austrian newspaper added, “Eighty percent of the Tehran sex workers maintained that they pursue this career voluntarily and temporarily. The educated ones are waiting for better jobs. Those with university qualifications intend to study later, and the ones who already are registered at university mention the high tuition [fees] as their motive for prostitution … they are content with their occupation and do not consider it a sin according to Islamic law.”

There is an extensive trade in poor Iranian women who are trafficked to the Gulf states in huge numbers, as well as to Europe and Japan. “A nation is never really beaten until it sells its women,” I wrote in a 2006 study of Iranian prostitution, Jihads and whores.

Prostitution as a response to poverty and abuse is one thing, but the results of this new study reflect something quite different. The educated women of Tehran choose prostitution in pursuit of upward mobility, as a way of sharing in the oil-based potlatch that made Tehran the world’s hottest real estate market during 2006 and 2007.

A country is beaten when it sells its women, but it is damned when its women sell themselves. The popular image of the Iranian sex trade portrays tearful teenagers abused and cast out by impoverished parents. Such victims doubtless abound, but the majority of Tehran’s prostitutes are educated women seeking affluence…

Second, according to a recent report from the US Council on Foreign Relations, “Iran serves as the major transport hub for opiates produced by [Afghanistan], and the UN Office of Drugs and Crime estimates that Iran has as many as 1.7 million opiate addicts.” That is, 5% of Iran’s adult, non-elderly population of 35 million is addicted to opiates. That is an astonishing number, unseen since the peak of Chinese addiction during the 19th century. The closest American equivalent (from the 2003 National Survey on Drug Use and Health) found that 119,000 Americans reported using heroin within the prior month, or less than one-tenth of 1% of the non-elderly adult population…

For the majority of young Iranians, there is no way up, only a way out; 36% of Iran’s youth aged 15 to 29 years want to emigrate, according to yet another unpublicized Iranian study, this time by the country’s Education Ministry, Der Standard adds. Only 32% find the existing social norms acceptable, while 63% complain about unemployment, the social order or lack of money.

Winston Churchill once said that Russia is an enigma of a country. Iran holds that mantle today.

Within the international community, there are two major sets of views on Iran. One debate is on whether Iran is primarily a rational nation-state that acts logically to pursue and preserve its interests or whether it is an irrational, revolutionary movement that aims to spread its ideals throughout the world no matter what the cost. The other question is over whether Iran is a weak, paper tiger that is nowhere as strong as it presents itself or whether it is gaining significant influence and prestige by reaching its tentacles out towards Hamas, Hizbollah, and other Islamist movements throughout the world. Liberals tend to believe that the first sets of points are correct; conservative think that second ones are closer to the truth.

I could cite dozens of studies and articles proving each point to be correct. The truth is that no one knows.

Still, if Spangler’s information is correct, then Iran is indeed a revolutionary movement that holds to its ideals even if it means that the government is unable to maintain a viable, functioning country. However, it would also mean that Iran is weaker than American and Israeli conservatives believe. So those on both the left and the right are partially correct. And this might be the worst-possible combination.

A country in the midst of an implosion is like a wounded animal that turns even more aggressive when attacked. When this is combined with Iran’s inherent, irrational tendancy to export its ideology, the resulting actions will likely not bode well for the world.

When Nations Decline

Whenever I think about the United States, I cannot help but remember the following quotation from Scottish historian Alexander Fraser Tytler on the purported cycle that all countries and empires go through:

From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.

I am sure that someone, somewhere has compared this sequence to American history, but I cannot find anything. So I will pose some thoughts. As Matthew Parris notes, the United States might be in a period of decline.

The American colonies were in bondage under the British Empire. They gained spiritual faith and became very courageous. The colonies waged a war of independence to gain liberty. Over the ensuing decades of westward expansion, development, and industrialization, the United States gained an abundance of power, resources, and culture that became the envy of the world.

However, sometime in the mid-to-late twentieth century, Americans became complacent. They imagined that nothing — not the Soviet Union, not Japan, not China, and not Islamic terrorists — could ever harm the country. In the decades since the 1960s, Americans, particularly younger ones, became apathetic. They did not care that people were becoming increasingly materialistic. They did not care that the United States as a whole — from the federal government down to individual Americans — was falling deeper into debt as a result of living beyond its means. They became largely ignorant of world affairs. Americans did not care about the outside world as long as they could continue to live their comfortable lives like they had been living.

As a result, the United States became dependent on others. American depends on other countries, many of which are in the Middle East, for oil. America depends on Latin American countries for cheap labor. America depends on China and Japan to finance the debt held by the federal government. America depends on other countries, mainly China, for many consumer products. Whenever someone depends on another, that person becomes his slave — and then the cycle falls back into bondage.

If my hypothesis is correct, then perhaps Americans are finally becoming emboldened to help themselves again. Perhaps the inspiration and hope surrounding President-elect Barack Obama is the modern version of spiritual faith. If this is true, then perhaps the United States will once again develop the courage to liberate itself.

Addendum: If you believe that this cycle is an accurate depiction of the life states of a country, where would Israel be located? (Or any other countries with which you are familiar?)

2025

What will the world look like in seventeen years? See here for the U.S. Department of National Intelligence’s answer.

OPEC, Iran, and Oil

The Middle East is feeling economic stress as well:

For many of the financially strapped nations of the Middle East, the oil-rich countries of the Persian Gulf have served for years as an economic lifeline, providing jobs for their citizens, who in turn sent millions of dollars back home; tourists, who filled their hotels when Westerners were reluctant to visit; direct investment; and the kind of checkbook diplomacy that has helped stabilize an often volatile region.

Suddenly, that lifeline appears frayed, dangerously so for countries like Egypt and Jordan, as the energy-rich nations find themselves pulled into the global financial crisis and undermined by dropping oil prices. Across the Persian Gulf, stock markets are down, causing panic among investors. Even in the boomtown of Dubai, United Arab Emirates, the once-mighty real estate market has cooled as access to credit has tightened.

OPEC, of course, is a cartel that knows America and the West’s greatest weakness — their addictions to oil. But when OPEC countries cut production to raise prices, they are mainly doing so to prop up their own faulty economies because oil has actually been a curse rather than a blessing for the Middle East. Since oil-producing countries have relied primarily on oil to boost their economies, they have not invested in education and infrastructure, along with other sectors that societies need to grow. When oil revenue falls, these governments will have nothing left. And it won’t be pretty. Countries that rely on oil — whether as an exporter or importer — will not survive as they are.

As Thomas Friedman notes today:

Have you seen the reports that Iran’s president, Mahmoud Ahmadinejad, is suffering from exhaustion? It’s probably because he is not sleeping at night. I know why. Watching oil prices fall from $147 a barrel to $57 is not like counting sheep. It’s the kind of thing that gives an Iranian autocrat bad dreams.

After all, it was the collapse of global oil prices in the early 1990s that brought down the Soviet Union. And Iran today is looking very Soviet to me.

As Vladimir Mau, president of Russia’s Academy of National Economy, pointed out to me, it was the long period of high oil prices followed by sharply lower oil prices that killed the Soviet Union. The spike in oil prices in the 1970s deluded the Kremlin into overextending subsidies at home and invading Afghanistan abroad — and then the collapse in prices in the ’80s helped bring down that overextended empire…

Under Ahmadinejad, Iran’s mullahs have gone on a domestic subsidy binge — using oil money to cushion the prices of food, gasoline, mortgages and to create jobs — to buy off the Iranian people. But the one thing Ahmadinejad couldn’t buy was real economic growth. Iran today has 30 percent inflation, 11 percent unemployment and huge underemployment with thousands of young college grads, engineers and architects selling pizzas and driving taxis. And now with oil prices falling, Iran — just like the Soviet Union — is going to have to pull back spending across the board. Fasten your seat belts.

This is one reason why Iran’s nuclear ambitions and threats against Israel have always seemed to be a giant distraction. They have bigger proverbial fish to fry. Ahmadinejad is raising the rhetoric against Israel and the West in order to solidify conservative support before the country’s next presidential election. And, because of the economy, people are not happy.

Total Recall

Another week, another product recall from China.

Many observers, myself included, have noted that the future of manufacturing will always be in China (at least until another low-cost competitor arises). Perhaps we are wrong. Many businesses have been moving their operations to China because the labor costs and government regulations there are so much lower, but the flip side is that the products are not as good.

If U.S. consumers increasingly stop purchasing products made in China — and if transporting goods from China to the United States becomes too expensive to be worthwhile because of the rising price of oil — then perhaps manufacturing will return to America one day.

Questions for the Candidates

In the first part of an essay e-mailed to subscribers, Stratfor founder George Friedman poses ten questions that Barack Obama and John McCain should answer:

If the United States removes its forces from Iraq slowly as both of you advocate, where will the troops come from to deal with Afghanistan and protect allies in the former Soviet Union?

The Russians sent 120,000 troops to Afghanistan and failed to pacify the country. How many troops do you think are necessary?

Do you believe al Qaeda prime is still active and worth pursuing?

Do you believe the Iranians are capable of producing a deliverable nuclear weapon during your term in office?

How do you plan to persuade the Pakistani government to go after the Taliban, and what support can you provide them if they do?

Do you believe the United States should station troops in the Baltic states, in Ukraine and Georgia as well as in other friendly countries to protect them from Russia?

Do you feel that NATO remains a viable alliance, and are the Europeans carrying enough of the burden?

Do you believe that Mexico represents a national security issue for the United States?

Do you believe that China represents a strategic challenge to the United States?

Do you feel that there has been tension between the United States and Israel over the Georgia issue?

I wonder what they would say.

The Storm Clouds are Gathering

Every American needs to read this. Right now.

Bye, Bye Suburbia

CNN reports on the decline of suburbs and exburbs:

While the foreclosure epidemic has left communities across the United States overrun with unoccupied houses and overgrown grass, underneath the chaos another trend is quietly emerging that, over the next several decades, could change the face of suburban American life as we know it.

This trend, according to Christopher Leinberger, an urban planning professor at the University of Michigan and visiting fellow at the Brookings Institution, stems not only from changing demographics but also from a major shift in the way an increasing number of Americans — especially younger generations — want to live and work.

“The American dream is absolutely changing,” he told CNN.

This change can be witnessed in places like Atlanta, Georgia, Detroit, Michigan, and Dallas, Texas, said Leinberger, where once rundown downtowns are being revitalized by well-educated, young professionals who have no desire to live in a detached single family home typical of a suburbia where life is often centered around long commutes and cars.

Instead, they are looking for what Leinberger calls “walkable urbanism” — both small communities and big cities characterized by efficient mass transit systems and high density developments enabling residents to walk virtually everywhere for everything — from home to work to restaurants to movie theaters.

Suburbs were built based on a single premise: Cheap oil for a car-based culture. No cheap oil, no suburbs. I’ve always liked living in cities and using public transportation. It’s cheaper and healthier.

Anxious Americans

Thomas Friedman points out the truth:

My fellow Americans: We are a country in debt and in decline — not terminal, not irreversible, but in decline. Our political system seems incapable of producing long-range answers to big problems or big opportunities. We are the ones who need a better-functioning democracy — more than the Iraqis and Afghans. We are the ones in need of nation-building. It is our political system that is not working.

What can be done?

Why My Generation is Pissed Off

Fourth in a series of essays

I’m 27 years old. The more I read the headlines every day, the angrier I become. The more I see my peers discussing the headlines of the day on popular Internet forums like Fark.com, the angrier I see them become.

At first I thought that this is the typical, over-dramatic angst that so many young people feel, but then I realized that we naturally outgrew those feelings after we had left our hormone-driven teenage years behind us. Instead, I think we all know that we have been screwed over. We see what the Baby Boomers have done to the United States, and we know that we will be the ones who pay the price. And the price will be huge.

—

We grew up seeing President Bill Clinton impeached after a political witch-hunt had forced him to lie under oath about a blowjob, but then we saw that no one had the courage to impeach George W. Bush after he misled the American people — or perhaps even outright lied to us — about the threat posed by Saddam Hussein and then caused the deaths of thousands of people our age in a mistaken war.

We saw Saudi Arabian terrorists kill thousands of our countrymen from a base in Afghanistan, but then the United States decided to invade — Iraq.

We hate that Osama bin Laden is still alive.

We were told that everyone needed to go to college to have a good life, so we gladly took out tens of thousands of dollars in student loans to get a bachelor’s degree. When we saw that we had no competitive advantage because everyone else had a bachelor’s degree as well, we took out tens of thousands of dollars in additional loans for a master’s degree. Now, we have tens upon tens of thousands of dollars in debt by the time we are thirty, but we see that plumbers and mechanics are earning more money than we do.

We are dismayed that people who stupidly took out mortgages that they could not afford are getting assistance from the government, but no one will ever help us with our student loan payments. In fact, the governement even amended bankruptcy laws so that student loans are now prevented from being erased in bankruptcy proceedings.

We have jobs for which we probably didn’t even need the college degrees in the first place.

We were gullible children at the age of eighteen when our universities allowed predatory credit card companies to give us numerous credit cards, which we then proceeded to use stupidly. Now most of us have thousands of dollars of credit card debt in addition to our student loan debt.

We are harassed by our parents and grandparents, who ask when we are going to get married, buy a house, and have children – but we are saddened because we know that we won’t be able to afford them for years, if not decades.

We work for companies that are cutting our health insurance, no longer offering pensions or retirement plans, and constantly thinking about shipping our jobs to India or China, and we will probably never have Social Security because the program will be bankrupt.

We see the Baby Boomers — our collective parents and grandparents — selfishly screwing over their collective children and grandchildren through lobbyist organizations like the AARP that are not allowing entitlement programs to be saved by being reformed.

We see that Baby Boomers are refusing to retire and allow us to obtain higher-level positions in companies so we can now afford homes, families, and student-loan payments.

We see the United States going bankrupt in our lifetime because of its ever-growing national debt, the skyrocketing cost of the war in Iraq, and the $40 trillion in future debt owned to entitlement programs.

We hate that our idealistic country must suck up to despotic regimes just because we are addicted to their oil. We hate that our government has done nothing significant to wean the United States completely away from oil, even though it will likely run out or be significantly rarer in our lifetime.

We want our politicians to have serious debates on the important issues that the United States is facing, but instead they focus only on trivial bullshit like lapel pins and whether a candidate had his hand over his heart during the Pledge of Allegience.

We are saddened that we fake news programs like “The Daily Show” are more insightful than the evening news, cable television, and many newspapers — the media outlets that are supposed to search for the truth and stand up to those in power.

We hate that foreigners always equate us with an idiot like George W. Bush whenever we travel abroad. We hate that 23% of Americans still think he is doing a good job. Who are these people?

We are sickened by the fact that the media is obsessed with reality television, entraping pedophiles, and celebrity hijinks rather than addressing the dire issues that are facing the United States.

We are the most diverse generation that has ever existed in the United States, but we are dismayed that older Americans are still suspicious of other races, genders and religions — and we have seen this discrimination in areas ranging from the current presidential election to the pervasive discrimination against non-Christians in the United States.

We are disheartened that government officials are always criticizing violence and sex in movies, television and video games when the most immoral actions are always occurring in the White House and the halls of Congress.

We wonder how much the climate will change in our lifetimes — and those of our children – as a result of global warming and the lack of radical, substantive action to prevent it.

—

I write this essay not to whine about my generation’s plight. Every generation — from the Great Depression in the 1930s to World War II in the 1940s to the Cold War in the 1950s to Vietnam in the 1960s to stagflation in the 1970s to the recession of the early 1990s — has faced its share problems. But we seem to be facing so many problems in so many different areas that it can feel overwhelming — and, moreover, it seems that our parents’ and grandparents’ generations are doing little to help us by solving these pressing issues.

This is why young people are overwhelmingly supportive of Barack Obama for U.S. president. All of the politicians in living memory have done little to help my generation, so we are looking for someone as completely new and different as possible. More than any other candidate, he symbolizes drastic change on all levels. Plus, Obama exudes hope and optimism — and my generation needs that more than anything.

Prior essay: In Defense of Free Trade and Globalization. Related: The Upcoming Generational War

Where’s the Vision?

Former Democratic presidential candidate Gary Hart also realizes the challenge that the United States is facing:

Noting the power of “custom and fear,” and “of orthodoxy and of complacency,” [Arthur] Schlesinger believed that “the subversion of old ideas by the changing environment” would give a new leader the best chance to create a new cycle of reform and innovation.

No individual can entirely determine the architecture of a historical cycle. But much of the next one will be defined by how we grapple with a host of new realities, ones that reach beyond jihadist terrorism. They include globalized markets; the expansion of the information revolution into places like China; the emergence of new world powers including India and China; climate deterioration; failing states; the changing nature of war; mass migrations; the proliferation of weapons of mass destruction; viral pandemics; and many more.

The primary responsibility of a leader – whether the CEO of a business or the president of a country — is to form and articulate a vision, then inspire his subordinates to execute that vision. The United States needs such a leader.

I’m not sure many Americans realize that the United States is at a turning point. The importance of this election cannot be emphasized enough. The United States is facing major problems as a result of its national debt, reckless spending, and the future costs of entitlement programs; a population, infrastructure, and education system that is unprepared to compete in a globalized world; a failure to combat the hatred that many Arabs and Muslims feel towards the country; and an unwillingless to admit that there is no future in relying on oil (whether foreign or domestic). Among many other problems.

This is the main reason that I support Barack Obama for president. Although I agree with most of his stances on the issues — the major exception being his seeming endorsement of protectionism and his skepticism of free trade — but Obama’s ability to articulate a grand vision and inspire the American people is second to none.

Of course, he has limited experience in government — but that is much less important than people think. Obama, like any good CEO, would (hopefully) hire qualified and knowledgeable Cabinet secretaries and advisors who would execute the vision that he has communicated to the American people. But the most important thing is for the American people believe in their country and remain optimistic about the future. I’m always getting a sense that Americans are increasingly distressed and anxious even though I’m all the way over in Israel right now.

If Ronald Reagan could give people hope in 1980, Obama can do it in 2008.

A Gathering Storm

TEL AVIV — Israel might be preparing to attack Iran, with or without U.S. assistance:

Joint Chiefs Chairman Admiral Mike Mullen leaves Tuesday night on an overseas trip that will take him to Israel, reports CBS News national security correspondent David Martin. The trip has been scheduled for some time but U.S. officials say it comes just as the Israelis are mounting a full court press to get the Bush administration to strike Iran’s nuclear complex.

CBS consultant Michael Oren says Israel doesn’t want to wait for a new administration.

“The Israelis have been assured by the Bush administration that the Bush administration will not allow Iran to nuclearize,” Oren said. “Israelis are uncertain about what would be the policies of the next administration vis-à-vis Iran.”

Israel’s message is simple: If you don’t, we will. Israel held a dress rehearsal for a strike earlier this month, but military analysts say Israel can not do it alone.

As you may recall, Israel allegedly destroyed a Syrian nuclear reactor earlier this year. And neither the Israeli media nor the U.S. media had received any leaks prior to the attack. Whenever Israel wants to do something, no one finds out in advance. So, this is obviously a leak. But why?

Israel and the United States want to show the Iranian government that they are not scared of a possible conflict. They want Iran to be scared. After all, look at the speed and ferocity with which the United States demolished the Iraqi military in 2003. The European governments recently froze Iranian assets in European banks, and the United Nations might approve tougher sanctions. Essentially, the West and Israel want Iran to blink first, and they are absolutely serious. Why else would Syria, an Iranian ally, suddenly decide to pursue peace with Israel? They see the seriousness of the situation, and they don’t want to be on the losing side of a war between Iran and the West. As I wrote in a prior post, Syria’s leaders are pragmatic realists above all else.

Outside of American neoconservatives in the United States and Israeli far-right Likudniks, no one actually wants a war. But they need to show that they will do whatever it takes to make Iran stop supporting Hamas, arming Hizbollah, and threatening Israel with destruction. If Iran does not blink, then its nuclear facilities — and possibly more — will be bombed.

Spinning Out of Control

Am I the only one who feels this way?

Water Wars

The cause of many conflicts in the future will not be oil; it will be water.

Ahmadinejad’s at it Again. Yawn.

TEL AVIV — A concerned relative e-mailed this news article to me:

Iranian President Mahmoud Ahmadinejad predicted that Muslims would uproot “satanic powers” and reaffirmed his prediction that the Jewish state will soon be wiped off the map, the Agence France-Presse news agency reported Monday.“I must announce that the Zionist regime (Israel), with a 60-year record of genocide, plunder, invasion and betrayal is about to die and will soon be erased from the geographical scene,” Ahmadinejad said.

First, there’s one thing to understand about Jews and Arabs in the Middle East: People here are usually all talk and no action; they talk a big game, but they rarely follow through. Whenever people get into a fight in a bar, it never comes to blows — sure, they’ll yell, scream and curse at each other, but that’s where it tends to end. (Almost all of the physical crime that has occurred since I moved to Israel has been committed by Russian and Ethiopian immigrants, not natural born Israelis.) People here release their anger with words — often accompanied by the most vile insults imaginable — and not with fists.

In the Middle East, pride is very important. In Israel, the worst thing that a person can be is a “friar” (a “sucker” in Hebrew). Part of the reason for Ahmadinejad’s taunts against Israel and the United States is the fact that Iran feels like it receives no respect (whether the country deserves respect is another matter entirely). So Iran wants to increase its prominence in the Middle East and the world by making threats and touting its purported strength, which it expresses through its export of oil and its support of Syria, Hamas and Hizbollah. These statements are an example of Iran puffing its chest out to prove its strength.

Second, there is an element of politics involved. Iran’s economy is in terrible shape, and Ahmadinejad will be facing a re-election campaign (though it will be against an “approved” crop of candidates) at a time when many people there believe that he has done little to improve the country domestically. For Ahmadinejad, bashing Israel and the United States is always a popular way to garner support from hard-liners and religious fundamentalists.

It is also important to distinguish rhetoric from policy. In U.S. politics, Republicans make speeches that will inspire their conservative base, and Democrats will do the same for their liberal base. Well, in Arab and Muslim countries in the Middle East, rhetoric usually involves threats of utter destruction (against Israel, as well as other Arab and Muslim countries). It really gets quite boring after a while. But it sounds significant to American ears because our politicians, of course, never talk like that.

Third, Ahmadinejad does not make major foreign policy decisions – that area is the purview of the supreme leader, the Ayatollah, who may disagree with the president (but we don’t really know). It may be an accurate analogy to compare it to a U.S. secretary of defense making statements about the elementary-school education in the United States.

As I wrote in a recent post, Iran is much more complex than both extreme doves and hardline hawks would like to believe. There is cause for concern, but is frequently exaggerated.

Quote of the Day

“Core inflation is of no intrinsic interest, unless you happen to be someone who doesn’t eat, or drive a car, or use air conditioning.”

– London School of Economics professor Willem Buiter in the Wall Street Journal on how inflation is usually higher than what the U.S. government’s official statistics state

Supply, Meet Demand

Things are not looking good for countries that depend on oil:

The world’s top oil producers are proving unable to put more barrels on thirsty world markets despite sky-high prices, a shift that defies traditional market logic and looks set to continue.

Fresh data from the U.S. Department of Energy show the amount of petroleum products shipped by the world’s top oil exporters fell 2.5% last year, despite a 57% increase in prices, a trend that appears to be holding true this year as well.

Now, what happens when demand increases and supply falls?

Losing All Our Chips

Thomas Friedman notes that the United States lacks, well, everything:

Here’s hoping that once the primary silly season is over, the McCain and Obama camps will stop jousting over whether to talk with our enemies — which we must — and will start focusing instead about how we and our friends get more chips to bargain with — which we lack.

The United States indeed has very little leverage, but I’m not sure whether its possible to get any in the near future.

America has been the dominant country in the world for decades because of a superior combination of hard power (military might) and soft power (economic and cultural influence). The U.S. military has been second-to-none. The U.S. economy has been the largest in the world. Everyone throughout the world knows American television, music, and movies. Here in the Middle East, everyone wears blue jeans — a distinctly American product.

However, this paradigm is shifting rapidly. The U.S. military is so overextended because of Iraq and the War on Terror that I doubt we could defeat Canada (if we ever needed to do so). China is becoming the world’s largest consumer market, and the Asian economies are speeding ahead while the United States is trying to avoid a recession and facing bankruptcy in the coming decades when the bill for the Baby Boomers’ entitlement programs becomes due. Oh, and a further spike in oil prices will probably harm the United States a little. But at least the world’s teenagers still watch MTV.

Prince Had it Wrong

Tonight we’re gonna party like it’s 1979.

$200 a Barrel

America hasn’t seen anything yet.

Seeing the Future

Once again, Thomas Friedman gets it right:

There has been much debate in this campaign about which of our enemies the next U.S. president should deign to talk to. The real story, the next president may discover, though, is how few countries are waiting around for us to call. It is hard to remember a time when more shifts in the global balance of power are happening at once — with so few in America’s favor.

The world is rapidly changing from a unipolar world to a multipolar one. Other countries are rising while the United States is stagnating or even falling. The economies of China and India are skyrocketing upwards, while America teeters on the brink of a recession. In a world in which demand for resources is rising while supply is falling, the countries that can provide oil, natural gas, and coal — like Saudi Arabia, Iraq, Iran, Brazil, and Russia — will become much more powerful until alternative energies are found. Money is power, and these countries will continue to become wealthier as the prices of these resources continue to rise. (Remember the law of supply and demand?) Once the countries in the European Union can reform their economies, that region will also rise to become an economic power that can rival or surpass the United States.

Again, I must ask: Which presidential candidate is going to be blunt and honest with the American people? Which candidate is going to address — and propose solutions to — the fundamental problems that are plaguing the United States? The upcoming presidential election should be about more than silly lapel pins.