Modern economists can measure the economy pretty well, at
least in general terms, but they cannot always explain
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 Pets.com and many other American companies,
many of whom (like Pets.com) 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
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