Neoconomics: Conscription and War as Wealth

by , March 28, 2011

Start-Up Nation: The Story of Israel’s Economic Miracle is a 2009 Council on Foreign Relations book brimming with anecdotes, assumptions, and advice.  Dan Senor and Saul Singer explain Israel’s entrepreneurial successes as products of Israeli national character through pithy quotes, high-tech case studies, and selective histories. The pair recommends America become more entrepreneurial by replicating Israel’s conscription based national service model.  But the authors’ foray into the economics of national entrepreneurship and innovation utterly ignores the demand side of this equation — Americans who increasingly view Israel more as a liability than asset — at their peril. 

To understand Start-up Nation‘s ideological framework, it is important to understand the biography of the book’s primary advocate and campus barnstormer Dan Senor.  The former American Israel Public Affairs Committee intern has previously credited AIPAC in his career trajectory, "whether I was learning the ins and outs of Washington with my fellow interns or attending briefings on Capitol Hill, my internship at AIPAC prepared me for my work in politics." In 2003 the Harvard Business School graduate worked as civilian spokesperson in CENTCOM HQ in Qatar and later for the Coalition Provisional Authority in occupied Baghdad.  Senor co-founded a neoconservative think tank, the Foreign Policy Initiative with William Kristol and Robert Kagan "that promotes continued U.S. engagement — diplomatic, economic, and military — in the world and rejection of policies that would lead us down the path to isolationism; robust support for America’s democratic allies…"  Perhaps tellingly, little of this biography appears on the book’s jacket, which trumpets Senor’s experience as an investment banker.  Co-author Singer was an advisor to Congress before he moved to Israel.

Start-up Nation is peppered with accounts of how Israeli entrepreneurs leverage personal contacts made as battle tested conscripts in Israel’s army, navy and intelligence services.  Top telecommunications service and equipment vendors spring all but fully formed from Israel’s elite intelligence services while Israel’s other armed services purportedly provide an experience "much better than college." We learn that Israel was "largely a barren wasteland" before being transformed by the entrepreneurial vision of national CEO David Ben-Gurion.  Palestinians, the Nakba, and Arabs in general don’t much figure in Start-up Nation except as "terrorist infiltrators" the nemesis of Israelis "kidnapped by terrorists" or to provide the menacing, isolating, encircling armed presence over which Israelis must constantly innovate to prevail.  But Arabs are never a potential market — past, present, or future.

Central to Start-up Nation‘s explanation for entrepreneurialism is the effect of "chutzpah" described as an Israeli trait of questioning everything in a manner bordering on insolence and insubordination.  The Israelis needed to improvise and operate creatively at the lowest ranks of the armed forces to beat Egypt and other adversaries in various armed conflicts, resulting in a smaller officer corps and ability of lower level conscripts to collectively throw out leadership that fails to perform.  This, according to the book, has created a culture of harsh "debriefings," irreverence, and intolerance for mediocrity that migrates into the private sector.  Multinational corporate executives visiting subsidiaries or on tour in Israel are likely to face a corporate culture of unnerving questions such as "why are you the boss?  How come I’m not your boss?"

However, Start-up Nation airbrushes one vital and enduring truth — when Israel faces sovereign barriers to foreign trade routes, weapons, or technology; it tends to break other country’s laws and steal what it thinks it needs.  Ever sensitive to Israel’s righteousness, members of the massive Haganah arms theft and smuggling ring in the US in the book were merely David Ben-Gurion’s "emissaries" to America, not felons violating US arms export laws.  Theft of French Mirage jetfighter plans stolen to build the Israeli Kfir were justified to correct Charles Degaulle’s arms embargo, a "betrayal by a close ally."  Al Schwimmer, a felon convicted for violating US arms export controls that went on to become a player in the Iran-Contra scandal, is a "swashbuckler" in Start-up Nation. 

Curiously, the book abides by Israeli military censor protocols when discussing Israel’s nuclear arsenal, referring to a "nuclear capability" while coyly suggesting clandestine entrepreneurial funding and covert operations "has reportedly made Israel a nuclear power."  Start-up Nation hero Rafael Eitan’s role stealing highly enriched uranium from the US and Shimon Peres’ newly discovered (by another wing of the Council on Foreign Relations) offer to sell nuclear tipped Jericho missiles to apartheid South Africa go unmentioned in Start-up Nation, since they present unsavory (though representative) examples of entrepreneurial activity of the clandestine variety.  The implications and benefits of Eitan’s Lakam economic and nuclear espionage network, operational over decades in the US with American alumni such as Jonathan Pollard and Ben-Ami Kadish, also brooks no deep introspection in Start-up Nation. 

In public discussions of Start-up Nation, Dan Senor makes clear his core assumption is that "the West owes Israel" while focusing on how new Israeli businesses will cash in this chit by selling high value added exports into already competitive Western markets.   The incredible boon of early, ongoing, and total access to the US military and consumer marketplace (which accounted for the leading share, up to 38%, of Israel’s total exports over the past five years) is a demand-side factor that goes entirely unmentioned (and unthanked) in Start-up Nation.  The 1984 joint Israeli-AIPAC covert operation to purloin and leverage still-classified US industry secrets in order to win coveted market access is still an embarrassing secret unknown to most Americans.  The resultant bilateral agreement is the subject of ongoing complaints by US exporters that can’t overcome Israeli non-tariff trade barriers and floating infant industry tariffs, after a quarter century of trying.  Israel’s top exports to the US still more resemble those of pirates than innovators sailing winds of discovery into new markets.

In 2010 Israel’s second largest export (at $5.3 billion) to the US after gem diamonds, cut stones, and other baubles ($7.7 billion) was pharmaceuticals.  US drug makers have been long incensed over Israeli theft of patent medicine clinical dossiers submitted as a requirement to enter Israel’s market.  The Ministry of Health passed them on for use in "at risk" Israeli manufactured generic drug launches in the US and Israeli copycat drugs made for export to world markets.  Buttressed by an army of lawyers, Israeli generics producers can capture “80% of [US] innovators market…through patent challenges” according to industry analysts.  Israel, for years placed on a punitive US Trade Representative "Special 301 Watch List" for patent violations is since 2010 on probation (PDF), promising to pass laws in sync with developed country intellectual property norms and to stop undermining US industry innovations.  

Perhaps the major error of omission in Start-up Nation is that Israel has long benefited from demand subsidies created by "memorandums of understanding" quietly negotiated and signed with the Pentagon for Israel to provide services and equipment to US armed forces, gain access to the US military procurement system, and weapons purchase "offsets" and joint development agreements passed by Congress that create jobs in Israel rather than America.  None of this demand would exist absent a vast network of legal and illegal bribery*campaign contributions, favors to politicians, foreign policy conducted outside the purview of elected government, election law violations, embedded propaganda infrastructure, and unlawful activities for which Israel’s US lobby is almost never held accountable.

What makes the neoconservative economics of Start-up Nation so galling is the authors’ refusal to account for these massive non-market subsidies and distortions.  Adding insult to injury, the book recommends that the US now implement its own conscript-based "national service" in order to replicate the camaraderie, social networks, and national sense of purpose that allegedly propel Israel’s innovation society.  With the US unable to commit further troops to conflicts erupting across the Middle East, it’s highly suspect — though not surprising — that leading neoconservative advocates are subtly calling for the return of conscription, but would it truly be good for America?

As a major and well-publicized work, Start-up Nation has no less damage potential than such previous neocon manifestos as A Clean Break or Rebuilding America’s Defenses.  Unlike its ideological forebears, the dangerous assumptions behind Start-up Nation have not yet wreaked havoc on America’s social fabric, armed services, and treasury.  Start-up Nation‘s single redeeming quality is its loud and persistent call for irreverence and chutzpah.  This is an arm that concerned US taxpayer and stakeholders in Middle East peace should immediately take up against flawed "neoconomics." 

The drive to normalize Israel’s state of perpetual conflict into a "comparative advantage" deserves a broad and contemptuous challenge.  "Why should America follow Israel’s conscript-based model, because there aren’t enough Americans already in uniform deployed in the Middle East?"  "Do gun sights really provide market insights that international internships and business development that respect rule of law cannot?"  "After years on the dole, doesn’t Israel now owe the West something, such as a bona fide effort to make peace with its neighbors and the return of captured territories?" 

American thought leaders should also ask hard questions.  If the US continues to subsidize this particular start-up nation, is it only exchanging venture capital for guaranteed perpetual conflict?

Read more by Grant Smith