The Dangers of the Peace-Prosperity Fallacy

Israel’s left-wing daily Haaretz isn’t one to cry uncle. “There will be no economic prosperity without peace,” it defiantly titled today’s editorial — published two days after Israel was admitted, by unanimous vote, to the club of the world’s wealthiest nations: the OECD.

“The link between the economic and political is clear,” the editorial asserted, serenely untroubled by the facts. “There can be no sustained economic growth without a substantive compromise with the Palestinians and Syria.”

The facts, of course, are that if sustained economic growth required peace, Israel could never have earned OECD entree: the country has been at war since its establishment in 1948, when it was attacked by five Arab armies. It fought conventional wars again in 1956, 1967, 1973, and 1982. It was bombarded by Iraqi missiles during the 1991 Gulf War. It fought asymmetric wars against terrorist organizations in the West Bank in 2002, Lebanon in 2006, and Gaza in 2009. And in between all the wars, it suffered nonstop terror attacks.

Some of these wars indeed produced temporary recessions. Yet the overall pattern has been one of, yes, sustained growth. Had it not, Israel would not today be the only one, out of dozens of countries established in the post-colonial upheavals that followed World War II, invited to join the OECD. It certainly wasn’t because its fellow OECD members love it so much: many routinely vote against it in other international forums.

But if Haaretz were merely spouting harmless nonsense, nobody would care. The problem is that this particular nonsense is deadly dangerous, because the editorial is right about one thing: “Israel’s economic status is conditional.” Wise choices by Israel’s leaders can facilitate continued growth; bad choices can reduce or even destroy it: look at Greece.

Yet for much of the past two decades, Israel’s leadership has been consumed with either pursuing an unobtainable peace or trying to contain the terrorist onslaughts that every such effort has spawned. The crucial domestic issues on which economic success in fact depends have consequently been neglected. Israel’s schools and universities are in free fall, which bodes ill for a country whose only natural resource is brainpower. And bureaucratic obstacles to doing business remain a fact of life.

Prime Minister Benjamin Netanyahu actually does care about domestic issues. As finance minister in 2003, he implemented economic reforms that produced five straight years of rapid growth, and his campaign for prime minister included detailed proposals for additional domestic reforms. But since taking office, he, too, has been consumed by the “peace process” — or rather, the crisis with Washington it has generated. Domestic reforms have fallen by the wayside.

And that is why the Haaretz fallacy is so dangerous. Roughly every other Israeli prime minister has, like Haaretz, viewed peace as essential to Israel’s survival and therefore devoted himself to fruitlessly pursuing it. Each of their successors has then had to devote himself to containing the fallout. And as long as this pattern continues, vital domestic issues will continue to be neglected.

Peace would certainly benefit Israel’s economy. But continued pursuit of a peace that is unobtainable could destroy it.