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by Martin Sherman


As the dollar dipped below the NIS 4 mark, it shattered another forlorn fabrication of the Israeli Left - namely, that in order for Israel to prosper economically, it must concede politically and reach a peace settlement with the Palestinians. However the general indifference the political establishment -- on both side of the ideological spectrum -- displayed toward this event, served to underline the two major features that characterize Israeli politics:

- The intellectual dishonesty of the Left - which renders it incapable of admitting error;


- The intellectual disability of the Right - which renders it incapable of exposing and capitalizing on this dishonesty.

Just how disingenuous the Left has been in promoting its political agenda can be gauged from the following examples:

'New Middle East' fantasy

However in spite of the manifest bankruptcy of the Left's political prescription, the Right has been totally incapable of exploiting this to its advantage. Quite the opposite. Instead of totally discrediting -- indeed delegitimizing -- this dangerously dogmatic and deluded doctrine, the Right, inexplicably, began to embrace it. Instead of seizing on the undeniable failure of the Left's policies of territorial withdrawal, instead of making them an object of abject ridicule and consigning them to the historical ignominy, scorn and irrelevance which they so richly deserve, the Right (or at least its elected representatives) began to implement measures that that were even more drastic than those proposed by their left-wing rivals.

So there is little wonder that the Right has been just as remiss in refuting other misleading myths and mendacious mantras which the Left employed to foist its political proclivity on a gullible public, including the now patently preposterous claim that without political agreement, economic prosperity is impossible. This was a powerful theme invoked immediately after the Oslo Accords were signed -- and resonated strongly with the general populace, eager to seize the seductive El Dorado-like fantasy of "New Middle East".

The prevailing realities of course make nonsense of the claim. As the prospect of a peace settlement seems more remote than ever, the economic prospects have never been rosier. The GDP per capita (in dollar-terms) rose above $20,000, surpassing the average for the EU and approached $30,000 (in terms of purchasing power parity - PPP); the balance of payments began to show a surplus for the first time in the country's history; inflation is low; the budget deficit is under control; and foreign capital is flowing into the country with investors eager for a stake in the economy, driving the value of the shekel up dramatically against the major currencies of the world. And yet... and nary a "peace process" in sight.

Incalculable damage

Of course, had the Right shown any signs of intelligent life over the last decade and a half, it could quite easily have dispensed with this enticing but insidious fiction. For it could never withstand the scrutiny of facts. According to Finance Ministry figures, in the "dour" three-year period (1990-92) preceding the 1993 Oslo Accords under the Shamir government, the average GDP growth rate was over 6.6 percent, whereas in the euphoric three-year period (1994-96) the growth rate was barely 6.1 percent.

In fact, if one looks at the decade as a whole, the growth rate of the entire post-Oslo (1994-1999) period was only 4.5 percent, significantly lower than the average for the decade (1990-99) of 5.2 percent and certainly far below the 6.6 percent for the pre-Oslo years (1990-92.) One cannot but wonder why the right-wing leadership did not force-feed the public on the truth and left it (pardon the pun) exposed to the unfounded propaganda of their rivals.

Moreover while it is true that much of the pre-Oslo growth was fueled by the wave of immigrants from the Former Soviet Union, this was equally true (if not more so) for the post-Oslo growth. Also, it should be recalled that much of the growth under the Rabin-Peres administration (1992-1996) with Shochat as finance minister, was artificially fueled by huge budget deficits that began to jeopardize seriously the nation's economic stability by the end of its term.

Thus if we deduct from the post-Oslo growth rates (a) the contribution of the continued immigration and (b) the artificial effect on growth due to the government's excessive budgetary deficit, there seems precious little left to ascribe to the "peace process" as a catalyst for the economy.

By contrast, the present economic success cannot be attributed either to large surges of immigration or budgetary permissiveness. Thus, the fact that it is taking place in conditions in which even the most ardent "peaceniks" are beginning to despair of any prospect of peace, it is especially damning to the thesis that economic prosperity can only be achieved via political settlement.

The Left's obsession for a policy of "Land for Peace" has wrought incalculable damage on the nation, gravely imperiling the State and People of Israel as well as the very ideal of Zionism itself. It has tried to railroad the electorate by promoting its worldview with fanatic zeal and a most "cavalier" attitude towards the truth. For this history will undoubtedly judge it harshly. However the jury is still out on what it will condemn more severely: The inexcusable sins of commission of the Left, or the inexplicable sins of omission of the Right.

Dr. Martin Sherman is a political scientist at Tel Aviv University with degrees in geology, physics, finance and political science.

This article was published May 16, 2007 on Ynet News and is archived at,7340,L-3399580,00.html

Readers' Comments And Interaction With The Author

2. Political Scientist not economist
Eric, Tel Aviv (05.16.07)

How is the fact that the Dollar is at a low against all currencies any indication that Peace is not good for the Israeli economy?

The underlying premise here is that Israel is doing well regardless to the peace process, and the proof is the Shekel / Dollar rate. If this was true the Shekel would be at a high against the Pound and Euro too. Since this is not the case the article is without a point.

13. #2 Political Scientist not economist
Martin Sherman (05.16.07)
You write: "The underlying premise here is that Israel is doing well regardless to the peace process, and the proof is the Shekel / Dollar rate".

Wrong!! The proof that "Israel is doing well regardless [of] the peace process" is the undeniable fact that ...Israel is doing well, regardless of the peace process.

This is reflected inn the balance of payments, capita GDP, low inflation and interest rates, high foreign investment ... AND the strength of its currency against all major currencies.

For the Shekel's current strength against the Euro see:

For the Shekel's current strength British Pound see:

18. Dishonest
Joshua, Jersey CIty, NJ (05.16.07)

When a purported "scholar" starts his article by attacking the integrity of "the left" or "the right" you know that it is substituting a political screed for analysis.

Yearly economic indicators go up and down, and are subject to a variety of factors. But the Oslo Accords, although not without problems, opened Israel to a huge number of markets that it had trouble penetrating beforehand, in particular that of China. Even the Arab boycott is now largely symbolic, and any Arab businessman who actually cares about doing well finds ways around it to do business with Israel.

Then there is of course the peace deals with Egypt and Jordan, which even when "cold" allow the free flow of goods and prevent blockages and all out warfare that would wreck the economy (and no, the month long hostilities in Lebanon does not come close to the actual wars that Israel used to have to fight for its existance.

Peace is good for the economy. If the author wants to go back to the good old days of the 60s and 70s, when Israel was boycotted, blockaded, and under siege from actual armies, then that's his choice. But that doesn't make him rational.

20. # 18 Joshua and Dishonesty
Martin Sherman (05.16.07)


1. Israel established diplomatic ties with China and India in early 1992 under the Shamir government well before the Oslo Accords.

2. The collapse of the Oslo process has done nothing to impede the burgeoning trade with these nations.

Was it ignorance or dishonesty that led you create the impression that arises form your talkback?

21. More dishonesty from Dr Sherman
Joshua, Jersey City, NJ (05.17.07)

Diplomatic relations were started just before (not "well before") the Oslo accords, but after the Madrid Conference, which was the first step that set the stage for the Oslo accords. It was only when Israel made gestures indicating it would accept land for peace that the diplomatic isolation fell apart. And trade quickly rose after the Oslo accords.

Why didn't trade collapse when the Oslo process fell apart? s Oslo was very good for Israel in that it was a one-way ratchet. Once ties are established, it's harder to break them. That's why the peace treaty and relations with Egypt have remained normal even when public opinion in that country overwhelmingly turned against Israel.

When Israel was willing to try the peace process, it did quite well. It reaps the economic and diplomatic benefits of demonstrating that it's a good neighbor, even when the peace process with the Palestinians itself didn't work very well.

No one can credibly state that Israel's economic and diplomatic standing did not increase when it offered to make peace. If this is what Tel Aviv University is presenting as a "scholar" then it's reputation as a world class university is in deep, deep trouble.

22. # 21 Scholars and reputation
Martin Sherman (05.17.07)

1. Oh, so now it's Madrid and not Oslo. Soon we'll be running out of capitals... and excuses.

2. As you probably know Shamir went to Madrid on the basis of overt rejection of the "land for peace" idea (I was a ministerial advisor to the govt. at the time). Moreover the Palestinians were not allowed an independent delegation to the conference where they were represented by the Jordanians. As you probably also know no real progress resulted from the Madrid Conference -- which is why out of desperation the Rabin government embarked on the ill advised Oslo path -- "well after" (see 3. below) the establishment of relations with India and China.

3. I suppose that "well before" and "just before" are a matter of opinion. However as a matter of fact, both China and India had established diplomatic relations under the intransigent Shamir government 20 months before the Oslo Accord. Is 20 months "well before" or "just before"??? Let's let the readers decide

4. As far as academic reputation is concerned, surely the plethora of scholars who endorsed a policy (Oslo and its derivatives) that failed so disastrously and whose "expert" assessments proved so spectacularly unfounded, must have greater aspersions cast on their professional competency. Surely they must be considered to have brought greater discredit to the reputations of both their disciplines and institutes with which they are associated, than those whose words of caution proved so accurate and well-founded. Or do you recommend that we totally sacrifice factual correctness on the altar of political correctness??

24. So I guess...
Joshua, Jersey City (05.17.07)

...Dr. Sherman would prefer the years of embargo, diplomatic and economic isolation, a third world economy, the need for economic assistance, and actual warfare where Israel lost soldiers by the thousands.

With respect to Oslo itself, the good doctor ignores the numerous nations that established relations, and economic ties with Israel only after Oslo. Oslo did not lead to peace with the Palestinians, although it has set a framework by which a final deal will eventually have to be set. More importantly, it solidified Israel's diplomatic and economic presence. Solid enough that it can handle the relatively low-intensity warfare it faces and still have a prospering economy.

Peace is obviously better for Israel than war for its long term economic prospects. That doesn't mean it's an economic basket case now. But that's also because despite Dr. Sherman's cries of Oslo being a miserable failure, that Israel remains militarily strong and secure.

I understand Dr. Sherman's puerile need to lash out at "the left" and "peaceniks." He was an advisor to what is acknowledged to be one of the most dishonest and unsuccessful administrations in Israeli history. This kind of juggling the #s would never pass a peer review even among sympathetic professors. So he is relegated to drafting opinion pieces where he can fudge the facts.

27. # 24 Fudging the Facts and Peer Reviews
Martin Sherman (05.17.07)


1. Which facts would those be:
- the growth rates in the pre- and post-Oslo? periods
- the figures on the current economic performance?
- dates on which Indo-Israeli and Sino-Israeli relations were established?
These can all be easily verified. But why bother if politically correct myth is more important than factually correct figures?

2. As for your "... would never pass a peer review", you are probably right. Would those "peers" be the "erudite experts" who promised peace and prosperity in the wake of Oslo?? Or those "professional prodigies" who predicted that the Disengagement would bring stability security? Or the "learned luminaries" who assured us that once we left Lebanon, we could forget the Hizbolla?? One can but wonder how Bernard Lewis would weather their "reviews".

3. "...Sherman's puerile need to lash out at "the left". I suppose you did notice I was hardly more complimentary to the Right. Why so selective? Or is "fudging the facts" a natural reflex.

4. " ...was an advisor to what is acknowledged to be one of the most dishonest and unsuccessful administrations in Israeli history." Interesting. Acknowledged by whom?? Or is that a politically correct axiom not to be disputed by facts. Hmmm, let's see. Was that the administration that brought a 6.6 % growth rate in the last three years of its four-year term? The administration under which Israel established diplomatic relations with India and China (about 40% of humanity)? The administration under which the foundations were made for the (by-and-large) successful absorption of the Soviet immigration with all its far reaching strategic significance for Israel? The administration under which Palestinian terror was less than half than that in the post-Oslowian "peace" era? Or is that "fudging the figures/facts" too??

35. Somewhere out there...
Joshua, Jersey City (05.17.07) can always find statistics which, if massaged the right way, can support even an asinine claim like Dr. Sherman's.

Under his argument, Olmert must be the best PM EVER! Because Israel's growth rates have been high during his tenure. For the first time, Israel did not post an accounts deficit. Warren Buffett just dropped billions of dollars into the country, and companies like Google are expanding their R&D centers. Of course, I'm waiting to see how Sherman can explain this was all due to the enlightened polices of the Shamir government.

The peace process has normalized Israel's relations with the world as a whole, even when steps with the Palestinians have been rocky. This is of course not the ONLY reason Israel's economy has done well, but it has given the country a diplomatic, economic, and cultural presence in the world that is not easily reversible (and has not been reversed) even when relations with the Palestinians have soured.

Dr. Sherman's yes men are also laughably inconsistent. Danny, I'm amazed how you can say "Post 1967, the entire Eastern Block cut off relations." and then, one sentence later, maintain that "Israel's highest international standing was in the immediate aftermath of 1967 and has been going downhill since 1977."

In the 50s through the 70s, Israel had a benign public image as the plucky underdog. But that did not translate into high international standing. Many countries, and not just the Arab states, refused to recognize the country. Multinational corporations took the Arab boycott seriously and would not do business with Israel. The economy was an absolute basket case, with poor growth and hyperinflation. And militarily, Israel had won several wars but was constantly under siege from several hostile neighbors.

Today, there is a small segment of both the left AND the right which is hostile to Israel (far left radicals, and paleoconservative type reactionaries). Nevertheless, outside the Arab and Muslim world Israel is unanimously accepted and recognized, the economy is doing well, and although hostilities exist, it is nothing like the full fledged war that Israel previously endured (and when it's actual existence was an iffy proposition). The peace process has, in part, helped solidified Israel's standing.

Instead of looking at the facts over time, Dr. Sherman dishonestly looks at a few years of GDP in isolation and measures it against one facet of the process, the Oslo accords.

Finally, it should be noted that Dr. Sherman does not actually cite who he claims on the left is "dishonest." He just creates a bunch of straw men and claims that the left, collectively, endorses these principles.

Please Ynet, if you are going to print right wing ideologues, at least put some quality control in place. This column was nothing more than a rant. (Although I think it is pretty cool that the author decides to participate in talkback).

36. # 35 One last time
Martin Sherman (05.17.07)

When Joshua,

Since you have been reduced to name calling, I take it you have run out of arguments -- which were never really much in evidence before either. But just for the fun of it -- one more time

1. No, I would not attribute the current success directly to the Shamir government . But I am surprised that YOU don't. After all, it was you that designated Israel's participation in the Madrid Conference the source of all things good. And the decision to participate was ... Shamir's.

2. The success however does validate my "asinine claim", as you put it i.e. that prosperity is not predicated on progress in the peace process

3. Straw men on the Left. Yes it is true that I don't make specific mention of any Left figures (but neither do I do so regarding the Right -- which doesn't seem to bother you). Moreover I can't think of a single significant individual on the Left whose behavior and/or rhetoric differed substantively from what I wrote. Can you?? Or are just prone to calling any generalization, however valid, " a rant"

4. But if you want specifics, perhaps this will help. Although they clearly are not representative of the entire Left wing, three of the most prominent (some would say almost iconic) figures on the Left are Yossi Beilin, Amos Oz and Yair Lapid. Here are some pronouncements from them on the evacuation of Lebanon, the Oslo Accords, and the Disengagement -- either just prior to, or just after, these events. I believe these quotes speak volumes for their political insight and/or integrity (or lack thereof)

Oz on Lebanon:

The minute we leave south Lebanon we will have to erase the word Hezbollah from our vocabulary, because the whole idea of the State of Israel versus Hezbollah was sheer folly from the outset. It most certainly will no longer be relevant when Israel returns to her internationally recognized northern border.
Amos Oz in "Try a Little Tenderness" (Interview) Ha'aretz, March 17, 2000

Beilin ofnOslo:

...the ultimate test of this agreement will be a test of blood... If it becomes clear that they (the Palestinians) cannot overcome terror - this will be temporary accord and...we will have no choice but abrogate it...And if there is no choice, the IDF will return to the places which it is about to leave in the upcoming months (sic). Yossi Beilin on the Oslo Accords, Maariv 26-11-1993

Lapid on Disengagment :

Disengagement ... is our last chance to live normal lives Yair Lapid, Yediot Aharonot 24.6.05. [He of course does not live in S'derot -- MS]

Would an embarrassed OOOPS be in order????

5. I could of course go on and on but we have to draw the line some where

31. Mr Sherman's admirers are probably too dumb to remember that
Apartheid, Boston USA (05.17.07)

terrorism didn't increase until Israel responded to Intifada demonstrations with lethal violence. 140 Palestinians were killed before the first suicide bombing.

42. 39 the Israeli border policeman wass not stabbed he was shot
Apartheid, Boston USA (05.18.07)

He was not the first fatality. Five Palestinians were shot and killed while 200 were wounded by gunfire that day. The next day the entire world watched in horror as the Israelis shot Mohammedal-Durrah, aged 12, in his father's arms. But that was just a minor setback for the Israeli media machine.

45. # 31 # 42 Bostonian Apartheid
Martin Sherman (05.18.07)

You write: " ...probably too dumb to remember THAT TERRORISM DIDN'T INCREASE UNTIL ISRAEL RESPONDED to Intifada demonstrations with lethal violence. 140 Palestinians were killed before the FIRST SUICIDE BOMBING. " (My Emphasis)

Well I suggest you check your facts... and memory:

Rise in terror:

In the first three years after Oslo (1994-96) the were same number of Israeli deaths due to Palestinian terror as there were during THE ENTIRE DECADE AND A HALF preceding Oslo (1978-92), In 1993 itself, in the 9 months prior to Oslo (Jan-Sept) the number of deaths WAS LESS AND HALF that in the three months subsequent to Oslo (Oct-Dec).

Wouldn't you consider that a rise ???

First Suicide:

The attempts to carry out suicide attacks began almost immediately after the Oslo Agreements. The first successful one was in Apr 13 1994, at the Hadera Bus Station

Well I suggest you check your facts... and memory. Or have I said that before??

46. # 45 Apologies Correction
Martin Sherman (05.18.07)

I wrote

"In 1993 itself, in the 9 months prior to Oslo (Jan-Sept) the number of deaths WAS LESS AND HALF that in the three months subsequent to Oslo (Oct-Dec). "

That should be :
... MONTHLY AVERAGE number of deaths WAS LESS .... Apologies


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