Dei'ah veDibur - Information & Insight

A Window into the Chareidi World

29 Sivan 5761 - June 20, 2001 | Mordecai Plaut, director Published Weekly








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Shema Yisrael Torah Network
Shema Yisrael Torah Network

Opinion & Comment
Economics and Hashgochoh

Modern economists can measure the economy pretty well, at least in general terms, but they cannot always explain it.

They know that the Israeli economy grew like crazy in the first three-quarters of 2000, then contracted significantly in the fourth quarter of 2000, and that the signals have been mixed since then. Unemployment is up, but economic activity is also mildly up. Inflation is still under control, although it has picked up a bit in the last month. (This is not worrisome; it is now where the Bank of Israel wants it to be, after the rise.)

The key question is, why has this happened?

The most obvious cause is the Arab violence that began towards the end of the third quarter of 2000 and has continued since. Now it may be ending, but was it the main cause of the drop in economic growth?

The main growth engine of the Israeli economy was its hi- tech companies. Dozens, probably hundreds, of companies started up to develop new ideas that showed tremendous promise. Some, such as Amdocs and Checkpoint, became significant companies whose stock may have been overpriced, but they are certainly here to stay at some price. Others are still in developmental stages, but they are real ideas and real technology, and not just marketing gimmicks like Priceline and and many other American companies, many of whom (like no longer exist and others (like Priceline) which are mere shadows of their former selves and are no longer worth billions of dollars or expected to take over the world.

When the American stock market bubble burst starting in March 2000, it was bound to have an important effect on the Israeli economy and it is clear that it did. Though the Palestinian violence obscured this effect somewhat, it now seems clear that the bust on Wall Street had a more devastating effect on the Israeli economy than the guns in Netzarim.

It did seem clear that the violence brought down Israeli tourism and construction, both of which dropped sharply with the start of the Al Aqsa intifadah. However, new information that was recently released showed that there is a significant worldwide slowdown in travel and tourism. Referring to the American industry, the New York Times wrote, "The hotel business looks as if it has fallen off a cliff." This is small comfort for the thousands in Israel who have lost their jobs in the tourist industry, but it again calls into question the common explanation for the Israeli tourist slump. Perhaps at least part of it should be attributed to the worldwide fall in tourism, and not to Arab violence.

Again, the conventional wisdom and what seemed obvious to everyone, may not be true at all.

These observations make it easier to believe, as the Ramban said, that the Torah sees the world really as a series of hidden miracles. Hashem intervenes to ensure that things unfold according to His plan, and generally, if we go in His ways, He will bring us rain and generally meet all our needs. This is the important principle that we must keep in mind.

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