What British and Israeli economic planners can learn together

“Easy money, cheap imports and strong confidence are no longer available”.

Thus wrote former top official of the Bank of England, Andrew Sentance, in the Daily Telegraph earlier this week, as he described the outlook for the UK economy. And he added that although the UK had enjoyed 25 years of near unprecedented growth until 2007, there were already clear signs back then that this golden moment was about to end.

And the connection to the Israeli economy? Let’s compare Sentance’s opening comment to what is happening to commerce and finance in the Holy Land.

Easy money: “Researchers have found that only 29% of venture capital investments in Israel during the first half of 2012 involved young start-ups.” For a country that has propelled itself into the OECD on the back of innovation,  that stat is a major red-lettered warning. If seed capital is drying up, where will the next level of growth spurt come from?

Cheap imports: It is generally accepted (except by populist politicians) that commodity prices are on the rise and that this will very quickly feed into consumer price indexes, globally. In Israel, there is a second issue. the shekel has been weakening in 2012 against many of its trading partners. For example, it has lost 7-8% of its value against the American dollar and Sterling. Even against the Euro, the shekel has failed to gain ground. All this means a lot more imported inflation.

Strong confidence: Over the past few weeks, I have stressed how the politicos and civil servants in charge appear incapable of making longterm decisions, which are devoid of self interest. These judgements are being challenged further, as defense officials are demanding more resources to meet the threats from Iran, Hizbollah et al. Where is the strategy of old?

Sentance observes that UK decision makers need to recognise that the paradigm has shifted. Former excellent solutions are no longer so relevant. Would Messrs Netanyahu, Steinitz and Fischer in Jerusalem please wake up before it is too late?

Explore posts in the same categories: Business, Israel

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