Israel, ‘Startup Nation,’ groans under strains of growth, neglect
JERUSALEM » When the cosmetics salesman from Petah Tikva rolls his Toyota out of the driveway each morning, he does not worry about the Palestinians, President Donald Trump’s Mideast plan or tensions with Iran — the issues most of the world thinks of when it thinks about Israel.
No, Ronen Yom Tov just thinks about traffic.
And he has plenty of time: It takes him half an hour just to reach the highway 4 miles away.
“It’s one enormous jam with no end in sight,” he said.
That about sums up all of Israel. And it’s not just the traffic.
Even as Israel has matured from a small desert nation fighting for its survival into a regional power with an enviable high-tech industry, it has neglected the transportation, education and health care systems that experts say are vital to its prosperity.
As the country stages its third election in a year, major challenges in each of those areas have drawn precious little attention. Experts warn that without investing heavily, Israel’s ability to keep up with the rest of the advanced world faces a reckoning, and they question whether the country’s fractured political system is even capable of addressing such long-term problems.
“I don’t think that we’ve absorbed the fact that we’re no longer a couple million people growing slowly; we’re a nation of nearly 10 million,” said Jon Medved, chief executive of Ourcrowd, a tech investment company in Jerusalem. “We’re passing Sweden. And we’re not set up to deal with this.”
Politicians have begun to catch on: The main challenger in the election, Benny Gantz, promised to build two new hospitals; Benjamin Netanyahu, the embattled longtime premier, rushed to lay the cornerstone for one that had been promised since 2014.
But analysts say that Israel’s multiparty coalitions are too unstable and its ministers too shortsighted to embark on ambitious projects that will require tax increases now but only reap results far into the future.
And the problems are already here.
Thousands of patients are dying from infections in Israel’s hospitals, the most overcrowded in the developed world.
Billions of dollars in economic output — more than Israel’s yearly gains — are going up in fumes as motorists sit in traffic, with no other way to get to work.
And test scores show the schools are failing to prepare students for a modern workforce. The achievement gap between rich and poor children has only widened, and an accelerating brain drain is causing some of Israel’s most valuable scientists, doctors and innovators to take their talents overseas.
By some measures, the economy is going strong. Unemployment is at a record low. Wages are rising. And the tech sector is so successful it earned Israel the nickname “startup nation.”
Israel’s daunting challenges arise partly from its vitality: The fertility rate of 3.1 children per woman is the highest among advanced countries, contributing to a population growth of more than 200,000 annually.
“That’s a new city every year,” Medved said. “A city needs a hospital, right? A city should probably have a university, or a college at least. A city needs roads.”
Karnit Flug, governor of the Bank of Israel from 2013 to 2018, traced Israel’s neglect of vital civilian-spending needs to a belt tightening that began in the early 2000s, after the dot-com bust.
“They sort of got carried away with themselves,” she said. “The diet went on for too long.”
But investment in health, transportation and education had been declining since the 1970s, when critics say Israel began to prioritize tax cuts, welfare for ultra-orthodox Jews who study in religious institutions rather than work, and expanding settlements in the West Bank.
The 1970s now look like a crucial pivot point.
Hospital capacity, 3.3 beds per 1,000 residents in the 1970s, has fallen to 1.7 beds now. The number of senior research faculty per capita is half its 1975 peak. Congestion on the roads was about as bad as in Denmark or Belgium; it’s now 41/2 times worse.
Per capita economic growth also plummeted: After averaging more than 5% a year, it fell to about 1.8% in the 1970s, where it remains, according to Dan Ben David, a Tel Aviv University economist.
“There’s a huge iceberg ahead,” he said. “And we need to shift the entire course of the ship back to the trajectory that we once were on.”
‘No end in sight’
Israel’s traffic is the worst among advanced economies by a mile. The Finance Ministry said congestion costs the economy more than $10 billion a year.
For Yom Tov and his colleagues at a small cosmetics company, lost time and blown meetings — not to mention frayed nerves — cost the company about 10% of sales, he said, inching his Corolla forward on a drizzly morning.
Public transit, where it exists, is even worse: Lacking dedicated lanes, buses crawl, making riders wish they had walked. Those braving the trains commiserate over their inability to find parking at commuter lots, let alone a seat on jammed trains.
“People are standing above each other’s heads,” said Hadar Israeli, a lawyer who moved to Givat Binyamina, 40 miles north of Tel Aviv, from the Bronx in 2018 and said she misses the New York City subway.
Israel needs to spend billions to catch up to other advanced countries, studies show. But the projects underway — a first lightrail line in Tel Aviv, an expanded light-rail network in Jerusalem — only scratch the surface.
Easing a crucial railroad bottleneck in central Tel Aviv would require rerouting a river. Building a true subway system for Tel Aviv would be a mammoth undertaking, but the municipalities involved can’t even agree on forming a regional authority.
Planned projects, a comptroller’s report said last year, are “not expected to address the foreseeable problems in the foreseeable future.”
Israel didn’t think much about rapid transit until the 1990s and didn’t start investing earnestly until the 2000s. making matters worse, Israelis and their government have become addicted to cars.
The government gets about 15% of its taxes from the auto industry, one-third from imports, which are taxed at 60%. A host of subsidies encourage workers to buy or lease cars in lieu of compensation. “sometimes you don’t need a car,” said Yoram Ida, a transportation researcher at Sapir College. “But if you don’t have a car, you don’t get this incentive.”
The result is a car culture more appropriate to 1960s Southern California than to a cramped country that needs to build up, not out, said Moti Kaplan, a leading Israeli planner.
“We need the dream of Manhattan,” he said, “not the dream of Los Angeles.”