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The Reut Institute
Designing a Future
Av, 5770July, 2010
2
What is Reut?
• Established: 01.01.2004 • Objective: Providing Pro Bono Decision
Support to Government of Israel and its agencies
• Financing: Community of 3,000 people and 150 donors
3
Complex Challenges
Volatile Environment
Long term, Substantive Broad
View
Short, Unstable Tenures
Fragmented Parliament & Gov
Short Term, Populist, Sectarian conduct
Effectuate Change Model to EmulateTraining Future
Strategists
Why Reut ?
ISRAEL15 VisionTo Become One of the 15 Leading
Countries in Quality of Life
Av, 5770July, 2010
5
Heavy security burdenWeak education system
Low participation in work force
Danger of Collapse Large Gap in Quality
of Life
According to The Economist Israel ranks 38th in Quality of Life
Israel is 2nd in the world in theexport of Human Capital
Developed CountriesLeapfrogging is not
a luxury; it is a necessity!
Israel Must Leap
Gaps continue to widen
Israel
6
ISRAEL15 Vision: Becoming one of the fifteen leading countries in terms of Quality
of Life
This Vision requires a Social and Economic Leapfrog in order to close the gap in Quality of Life between Israel and other developed
countries
ISRAEL15 Vision
Rapid Growth
Change in the pace of
change
Inclusiveness
All citizens enjoy the fruits
of growth
SustainabilityPreserving resources for
future generations
7
Israel leapt between 1951-72
Since then, Israel has grown by 1.5% and has not closed the gap
0.
2.
4.
6.
8The Story of Israel’s Economy
US = 1
1950 1960 1970 1980 1990 2000 2007
Source : Professor Ricardo Hausmann
GDP Rate Compared to the US (1950-2007)
30% of the US
60% of the US
1985 Stability Plan
1950’s Immigrant Absorption
1990’s Immigrant Absorption
Globalization of Israeli market
The ‘Lost Decade’
1965-1967 Recession
9
Growth, Accelerated Growth, Leapfrog
Source: Prof. R. Hausmann et al., Growth Accelerations
Only 13 “Economic Miracles”
Leapfrog
Almost all countries experience Growth
0.
2.
4.
68.
Years
X X+8 X+25
Re
al G
DP
pe
r C
apita
%
Source:World Bank, Growth Report
Only 1 in 4 experience
Accelerated Growth
10
Central Brain, Elite
Task Forces
Public SphereA Shared
FutureSavings and Investment
Dedicated Elite
A pactUnique and
Global
The Public Sphere is Critical
Vision
Leadership and
Politics
Values
Institutions
Development Policy
Labor Market
11
Common Denominator for Countries that Leapt
Values
Future orientation
A variety of market economies
Pragmatism
Inclusiveness
Trust
12
Central Brain
Institutions
A Pact
Identifying
AnalyzingRelevancy
Trends &
Elite Task Forces
Ability to Execute
Decisions
Flexibility in the Market
13
New Deal in the Labor Market
Employers
Workers
Government
Workers agree to flexible labor markets in return for improvement
of Human Capital & safety net
Employers flexible to hire and fire in return for a commitment to keep to
employment laws
Government provides a safety net & training in return for improvement
in competitiveness
Protect the Worker not
the Job
14
National Development PolicyNational Development Policy
National asset:agricultural pioneering
Global trend: water shortage
Drip irrigation
Unique & global development policyIsrael’s regions have an unexploited global potential
15
7.752.530.9
32.271.6
6.953.8
23.6
31.3
49.8
5.162.7
11.3
30.4
94.9
4.860.613.731.5
60.6
6.156.519.934.2
346.3
שיעור הבלתימועסקים
שיעור השתתפותבכוח העבודה
שיעור הפערשיעור משפחות עניותבהכנסות
מספר משרות)אלפים( 2006
צפון דרום מרכז תל אביב Northממוצע ארצי South Center Tel-Aviv National Average
Unemployment Rate
Participation in Labor Force
% of Poor Families
Income GapsNumber of Jobs (thousands)
Growth in Israel is not inclusiveGrowth in Israel is not inclusive:: The Periphery regions are Lagging Behind The Periphery regions are Lagging Behind
Source: CBS, "Social and economic indicators" by districts in percentages, 2008.
16
The ResultThe Result: : Continuous Migration from the Continuous Migration from the PeripheryPeriphery
Source: Based on CBS providers, by district, 1984-2008 (in thousands.
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
84-586-788-9 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
הצפון המרכז תל אביב CenterNorthהדרום Tel-Aviv South
17
Import high-quality human capital
Israel is a small state: Uniform government policies
encouraging any type of employment
Distance is the main barrier
Change from the outsideOld strategy
Israel includes a number of distinct regions
focus on local population
accessibility is one of the main barriers
regional development policy based on unique assets
Change from withinNew strategy
Challenge: How to Develop Israel’s Challenge: How to Develop Israel’s Periphery?Periphery?
18
Regional LeapfrogRegional Leapfrog
How do regional leapfrogs occur in a globalized world?
Nature & Landscape History & Heritage
Local Expertise
Human Capital
Climate
When regional assets meet human capital
Health food
Western Galilee Unique AssetsWestern Galilee Unique Assets Compete with the Global Wellness Industry
WellnessScientists & Engineers
Olive Oil SecretsHealth Food
B&B Industry
Dance
Theater
Acre Walls
Manufacturers
Technologists and Researchers
ArtistsCentral Finland
Austrian Tyrol
Swiss Alps
Medical Tourism
Natural Therapy
Technologies
Creative Tourism
23
Israel is Not Talking Leapfrog
Policy Institutions
Domestic Industrial Policy
Labor Market: Pact for Growth
Unique & Global Development Policy
Local Government Ignored
No Vision
Local Government Necessary
Vision Necessary
Growth Leapfrog
Economics Multidisciplinary
Labor Market: conflict
24
Israel15: National Obsession
Leapfrog
Aliyah
Making the Desert Bloom
Redeeming the Land
ישראלישראל1515
25
On the ISRAEL 15 Vision:
“This is a very impressive document, based on clear thinking and a knowledge of the recent experience and writing about growth at various stages of development.”
Professor Michael Spence, Economics Nobel Prize Laureate, and Head of the U.N Commission on Growth and Development
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