Israel's economy – what is its source of strength?

There are glimmers of understated suggestions that members of the Israeli government are challenging the country’s sacrosanct Defense structure.

And, there are indications that this effort is being assisted by the American government’s touted effort to give Israel a “Qualitative Military Edge” or QME (see our earlier post from last week here) by allocating some $30 billion dollars a year.  

The QME program began in 2007, but — significantly –became part of American law in late 2008 (just before Operation Cast Lead, as blogger Paul Woodward has just noted on his own blog, War in Context, and also on the mondoweiss blog. The U.S. State Department gave a big promotional push to the QME program last week, as we noted in our post last week, just before U.S. Special Middle East Envoy George Mitchell arrived back in the region what may have been a fifth round of indirect talks, which concluded over the weekend (Mitchell is due back in Washington on Tuesday).

The Governor of the Bank of Israel, Stanley Fischer, told journalists in Jerusalem today (Monday) that the formulation of the country’s new budget, now in the process of being approved, turned on the relative roles of defense and education — with the defense allocation was decreased and the education budget was increased.

He also noted that a ten-year program of American support for the defense budget started just after Israel’s “Second Lebanon War” in July and August of 2006.

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Number of Israeli millionaires nearly doubles

According to the new World Wealth Report (2009) just released by Merill Lynch, the number of millionaires in Israel as hnearly doubled.

Only Hong Kong and India had a higher increase, the Jerusalem Post noted here .

The number of Israeli millionaires increased by more than 42 percent — from 5,900 to 8,419 — while the global average increase was just 17.1 percent…

Merill Lynch has been reporting on the State of the World’s Wealth for the past 13 years. Its 2009 report (using data from 2008) can be read in full here .

It also reports that “the U.S. [which still has 2.5 million millionaires], Japan [which has 50 percent of the millionaires in Asia] and Germany together accounted for 54.0% of the world’s High New Wealth Individuals [HNWI] in 2008, China became home to the fourth largest in the world, and the U.K. dropped to fifth place.

After that come France, Canada, Switzerland, Italy, Brazil, Australia, and Spain…

Business and Businessmen in Palestine – a glimpse into the views of Yasser Abbas

Excerpts from an interview with Yasser Abbas in Ramallah – 18 December 2008 – by Marian Houk – Part 3
Other excerpts:
Part 4: Separation of Powers in Ramallah
Part 2: Fatah and Hamas – what’s the problem?
Part 1: Fatah and Hamas – and the Abbas family house in Gaza

Question (Marian Houk):  Let me start by asking you what you do here, what your business is?

Answer (Yasser Abbas):  Well, I’m a civil engineer by profession.  I manage a group of companies called, mainly, the Falcon Holding Group that represents a few companies that deal with construction management, contracting, trading, and insurance – basically, that’s it – in Palestine and outside Palestine.

Q: Do you spend most of your time here, or are you mostly outside?

A: No, I’m most of the time outside. [But] I’m based in Palestine.  My family is here.  If you want to call where’s my home – home is Palestine for me, and that’s where my main business originally originated.  That’s where my family lived.  That’s where my kids went to school, and one of them is still in school.  My wife is around always, all the time.  [In the second part of this interview, published yesterday, Yasser Abbas also said: “the second company I established in my life was in Palestine, in Ramallah, 1996, when Mahmoud Abbas was not the President, not the Prime Minister.  He was Secretary-General of the PLO.  I decided to open a company, and to go and compete like any other company in the market.  And there you go, it happened.  And from 1996 until 2000, we had those rosy years that we’ve never seen back again.  Everybody was working.  So we went and started bidding, and we started making relations with international companies coming from outside, like any other engineering office.  So, that’s the way I started, and that’s the way I do business here, in Palestine.  I can claim that all my projects that I take are competitive bidding.  Nobody has any privilege to me, personally, to come and tell me, ‘I will give you this’, or ‘I will give you that’.  Nobody has any power to do so.  I have no power over anyone, and I mean anyone, to tell them, ‘This project is mine, nobody touches it’.   Or, ‘I have a concession on such-and-such sector, and nobody touches’.  I don’t have that.  I challenge, I challenge, though you, publicly, anyone – anyone – who can come to me and point his finger at me to tell me, ‘I, or we, or such-and-such agency or ministry, gave you the job’, or ‘I have a concession on any sector of this economy’.  I challenge him. ]

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Conference on the Economic Crisis set to begin at UNHQ in NY

A UN Conference on the World Financial and Economic Crisis and its Impact on Development begins at UNHQ/NY today, after three intensive weeks of pre-conference diplomatic negotiations.

According to the spokesperson for the President of the UN General Assembly, “We have a total of 126 participants and 21 in the group of Heads of State and Heads of Government, including vice-presidents [including Iran’s first Vice-President].  We have three deputy prime ministers, we’ll have 32 ministers, that is one more than last week, 27 vice-ministers, 36 chairmen of delegations and still we have five delegations to confirm the level of participation”.  In addition, the spokesman indicated, “several parallel events” are taking place.

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Investors: Newspaper industry future is dismal. Watchdog: press freedom is slipping. Are these phenomena related?

Investor Warren Buffett said at a meeting of shareholders of a big American company (Berkshire Hathaway Inc.) over the weekend, according to a report on Yahoo Finance that “the future of the newspaper industry is dismal:’For most newspapers in the United States, we would not buy them at any price … They have the possibility of going to just unending losses’. As long as newspapers were essential to readers, they were essential to advertisers, he said. But news is now available in many other venues, he said. Berkshire has a substantial investment in Washington Post Co. Buffett said the company has a solid cable business, a good reason to hold on to it, but its newspaper business is in trouble”. This report can be read in full here.

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Now, the Nobel Economics Prize goes to NY Times columnist

Journalists normally are honored by something like a Pulitzer Prize, but today the Nobel Economics Prize went to New York Times columnist Paul Krugman.

A headline in the Israeli press pointed plausibly to one possible explanation, stating pointedly that: “Bush critic wins nobel economics prize”.

The Associated press reported from Stockholm that “Krugman has been a harsh critic of the Bush administration and the Republican Party in The New York Times, where he writes a regular column and has a blog called ‘Conscience of a Liberal’. He has come out forcefully against John McCain during the economic meltdown, saying the Republican candidate is ‘more frightening now than he was a few weeks ago’ and earlier that the GOP has become ‘the party of stupid’.”

Economics prize committee member Tore Ellingsen said that “Krugman is not only a scientist but also an opinion maker”

The AP reported that Krugman told a news conference in Stockholm by telephone from the United States that some of his research was linked to currency crises and related issues. Commenting on the current global economic meltdown, Krugman said: ” ‘This is terrifying’, comparing it to the financial crisis that gripped Asia in the 1990s. ‘I had never thought that in my lifetime I would see anything that resembles the Great Depression, but this in fact does’ ”

AP said that “In contrast to his treatment of U.S. financial officials, Krugman has praised leaders in Britain for their response to the global financial crisis. In an Oct. 13 column in the New York Times, Krugman wrote that British Prime Minister Gordon Brown and Chancellor Alistair Darling ‘defined the character of the worldwide rescue effort, with other wealthy nations playing catch-up’. Whereas U.S. Treasury Secretary Henry Paulson rejected a ‘sort of temporary part-nationalization’ involving governments giving financial institutions more money in return for a share of ownership, the British government ‘went straight to the heart of the problem … with stunning speed’. Krugman said the major European economies have ‘in effect declared themselves ready to follow Britain’s lead, injecting hundreds of billions of dollars into banks while guaranteeing their debts … And whaddya know’, Krugman continued, ‘Mr. Paulson — after arguably wasting several precious weeks — has also reversed course, and now plans to buy equity stakes rather than bad mortgage securities’.”

The Nobel committee indicated that the prize was awarded to Krugman this year not for his NYTimes columns but rather for his analysis of how economies of scale can affect trade patterns and the location of economic activity, according to the AP report. “The Nobel citation said Krugman’s approach is based on the premise that many goods and services can be produced at less cost in long series, a concept known as economies of scale. His research showed the effects of that on trade patterns and on the location of economic activity … Krugman introduced his theory in 1979 in a 10-page article in the Journal of International Economics. It posited that because consumers want a diversity of products, and because economies of scale make production cheaper, multiple countries can build a product such as cars. A nation like Sweden can build its own car brands for both export and sale at home, while also importing cars from other countries. The article also outlined a new theory of economic geography. Krugman’s idea was that if two countries were exactly alike, except one had a larger population, real wages would be somewhat higher in the more populous country because companies there could make better use of economies of scale, creating a greater diversity of goods, lower prices, or both. Because this enhances the welfare of consumers in that country, its population would increase as more people moved there, which would lead to additional increases in real wages”.

The AP also said that economics prize committee member Tore Ellingsen added that “Krugman’s analyses tend to back free trade and his research gives no ‘support for protectionism’.”

The AP report can be read in full here

Israel-Iran dialectic

From Haaretz on Saturday 21 June:
(1) Oil prices jump after report of Israeli drill for Iran attack
Iranian cleric: Israel to receive ‘slap in face’ if it strikes; IAEA chief ElBaradei: I will resign if Iran is attacked.

“Friday’s spike was not the first caused by tensions between Israel and Iran. Oil prices soared $11 on June 6, after former Israel Defense Forces Chief of Staff and Transportation Minister Shaul Mofaz said in a newspaper interview that ‘if Iran continues with its program for developing nuclear weapons, we will attack it. The sanctions are ineffective. Attacking Iran, in order to stop its nuclear plans, will be unavoidable’. The chief of the United Nations nuclear watchdog said in remarks aired on Friday that he would resign if there was a military strike on Iran, warning that any such attack would turn the region into a ‘fireball’…” This full report can be read
here .

That ElBaradei threat will probably stop Israel right in its tracks …

One bad move, and there could be a big problem…

Bloomberg News reported today that “The International Monetary Fund cut its forecast for global growth this year and said there’s a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression”.

Bloombert said that it found this prediction in “a document obtained by Bloomberg News at a meeting of Southeast Asian deputy finance ministers and central bankers in Da Nang, Vietnam”.

The document also said: “The financial shock that originated in the U.S. subprime mortgage market in August 2007 has spread quickly, and in unanticipated ways, to inflict extensive damage on markets and institutions at the core of the financial system … “The global expansion is losing momentum in the face of what has become the largest financial crisis in the United States since the Great Depression.”

The full Bloomberg News stroy can be read here .

Report: food costs rising world-wide

“What’s rare is that the spikes are hitting all major foods in most countries at once”., the AP has reported today.

The story says that “In the long term, prices are expected to stabilize. Farmers will grow more grain for both fuel and food and eventually bring prices down. Already this is happening with wheat, with more crops to be planted in the U.S., Canada and Europe in the coming year. However, consumers still face at least 10 years of more expensive food, according to preliminary FAO projections. Among the driving forces are petroleum prices, which increase the cost of everything from fertilizers to transport to food processing. Rising demand for meat and dairy in rapidly developing countries such as China and India is sending up the cost of grain, used for cattle feed, as is the demand for raw materials to make biofuels”. This AP report can be read in full here .

UNGA President disappointed with attendance at meeting on finance for development

The spokesperson for the President of this annual General Assembly told journalists at UNHQ/NY on Tuesday that the President is, indeed, disappointed that there was not sufficient high-level attendance at the meeting that opened Tuesday.

The President’s “disappointment”, the spokesperson said, “reflects is the fact that he was expecting them, probably based on assurances, to be here at a high level. In fact, if you may remember the whole process of scheduling this particular high-level debate or dialogue, the original date was 22nd and 23rd of October. Then, because of the meetings in Washington of the World Bank and the IMF, this had shifted to 23-24 in order to allow for those meetings to conclude and to have finance and development ministers, central bankers here, and also high-level representation from the international, financial and other relevant institutions. We’re not talking about the financial institutions only but, for example, World Trade Organization, United Nations Conference on Trade and Development (UNCTAD), etc., the ones that are relevant for FfD [Financing for Development].  So, in that context, yes there was expectation for something higher, thus the expressed disappointment”.

Of course, there is a problem in explaining the purpose of the two-day High-level Dialogue on Financing for Development — just look at this jargon: “The two-day high-level event is a key element of the preparatory work mapped out by the Assembly to hold the Follow-up International Conference on Financing for Development to Review the Implementation of the Monterrey Consensus in the second part of 2008 in Doha. That Review Conference is supposed to assess progress made on the key elements of the Monterrey consensus, which, as you may remember, was adopted in 2002. The idea there is to reaffirm goals and commitments made and share lessons learned … The two-day Dialogue that we have here now is to provide impetus to preparations for the Review Conference and also to provide some substantive elements as to what that Review Conference is going to look like”.

That’s the way the UN talks — and it’s hard to sell that.
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