WEBVTT - Will the Middle East War Lead to a Second Arab Spring? 0:00:03.160 --> 0:00:13.800 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:19.160 --> 0:00:23.040 Welcome back to voter Nomics, where politics and markets collimb. 0:00:23.320 --> 0:00:25.560 This year, voters around the world have the ability to 0:00:25.600 --> 0:00:29.319 affect markets, countries, and economies like never before, so we 0:00:29.400 --> 0:00:32.080 created this series to help you make sense of it all. 0:00:32.159 --> 0:00:33.880 I'm Stephanie Flanders. 0:00:33.520 --> 0:00:36.040 I'm Adrian Waldridge, and I'm Alegristratton. 0:00:36.680 --> 0:00:40.320 In this week's show, perhaps unsurprisingly, we are focusing on 0:00:40.360 --> 0:00:43.640 the Middle East, where the horrific loss of life and 0:00:43.760 --> 0:00:49.320 creeping escalation of the conflict between Israel and its enemies 0:00:49.680 --> 0:00:53.159 had been taking all the daily headlines this past twelve months. 0:00:53.360 --> 0:00:57.080 But beneath the surface, it's arguably the collision between politics 0:00:57.120 --> 0:01:00.760 and economics that will determine where the region heads next. 0:01:00.920 --> 0:01:02.760 And one big question coming out of all this that 0:01:02.760 --> 0:01:05.240 we're going to be talking about in various ways is 0:01:05.319 --> 0:01:08.080 how the events of the past twelve months are inflaming 0:01:08.160 --> 0:01:12.119 tensions not just in Israel but in neighboring countries and 0:01:12.280 --> 0:01:16.280 whether that could produce another Arab spring. One of our guests, 0:01:16.440 --> 0:01:19.640 Eugene Candell, former head of the Israeli Economic Council and 0:01:19.720 --> 0:01:23.560 economic advisor to Prime Minister Benjamin NT. Yahoo between two 0:01:23.600 --> 0:01:26.280 thousand and nine and twenty fifteen. We're going to get 0:01:26.319 --> 0:01:29.920 his thoughts on Israel's economic and political trajectory and if 0:01:29.920 --> 0:01:33.640 he still thinks there is any chance of Israel achieving 0:01:33.680 --> 0:01:38.039 its goal of being a true regional economic force, which 0:01:38.040 --> 0:01:40.479 it might well have hoped to become eighteen months ago 0:01:40.600 --> 0:01:43.959 when we were talking about normalization of relations with Saudi 0:01:43.959 --> 0:01:46.440 Arabia and anything that followed from that. In a minute, 0:01:46.480 --> 0:01:49.000 we'll be getting our on the ground view from Bloomberg 0:01:49.040 --> 0:01:51.680 reporter Sam Dagger, who's based in Dubai and reade a 0:01:51.720 --> 0:01:54.800 fascinating piece in the last few days about the dilemma 0:01:55.160 --> 0:01:58.680 facing Arab governments. Some of them are still prioritizing those 0:01:58.720 --> 0:02:01.640 close ties with the US in Israel, but that's in 0:02:01.680 --> 0:02:05.720 the face of increasingly vocal swaths of their population who 0:02:05.720 --> 0:02:08.320 are turning towards groups and politicians that they see as 0:02:08.880 --> 0:02:11.640 standing up better to the Israeli government and defending the 0:02:11.720 --> 0:02:13.720 rights of Palestinians. We're going to get to Sam in 0:02:13.760 --> 0:02:16.160 a minute, but Adrian, I mean one thing that struck 0:02:16.200 --> 0:02:19.320 me when we decided to focus this show on the 0:02:19.360 --> 0:02:21.640 Middle East, but often when we talk about what's happened 0:02:21.639 --> 0:02:23.079 in the last twelve months. It tends to be through 0:02:23.120 --> 0:02:25.240 the prism of things going on in our countries or 0:02:25.280 --> 0:02:27.320 other big events around the world, not least the election. 0:02:27.440 --> 0:02:28.760 We tend to talk a lot about what does it 0:02:28.840 --> 0:02:33.880 mean for Michigan and how is it potentially challenging leaders 0:02:33.919 --> 0:02:37.240 in Europe. And I don't feel like we've thought very 0:02:37.320 --> 0:02:39.480 much about what it means for the sort of underlying 0:02:39.800 --> 0:02:43.320 living standards and economic conditions of people in the Middle East, 0:02:43.520 --> 0:02:46.800 not justin Gaza, but what the future strategy is for 0:02:46.840 --> 0:02:49.040 all these countries that were hoping that they were going 0:02:49.080 --> 0:02:50.800 to draw a little bit closer to Israel. 0:02:51.280 --> 0:02:53.160 Absolutely, and I think we tend to think about the 0:02:53.280 --> 0:02:56.760 sort of the Iranian access of influence. We're not focusing 0:02:56.760 --> 0:03:01.560 anywhere near enough on Saudi Arabia and its economic ambitions 0:03:01.560 --> 0:03:03.640 and extraordinary achievements, really. 0:03:03.440 --> 0:03:05.079 And I think that's one of the things that I'm 0:03:05.120 --> 0:03:07.760 interested to talk about to Sam. It was Saudi government 0:03:07.800 --> 0:03:11.119 that has made a very big play for economic development, 0:03:11.200 --> 0:03:14.760 and it still seems to be quite keen on having 0:03:14.880 --> 0:03:16.400 relationships with Israel be part of that. 0:03:16.520 --> 0:03:19.360 I think your your opening point is right, Steph, which 0:03:19.400 --> 0:03:22.960 is the conditions for people living in these countries in 0:03:23.000 --> 0:03:25.720 the Middle East, and the conditioners were ripe for the 0:03:25.720 --> 0:03:28.720 Arab Spring, which is many, many years ago, and now 0:03:28.840 --> 0:03:31.359 that we have to assume that they will be even 0:03:31.440 --> 0:03:35.560 more ripe for you know, overthrowing revolution and so on, 0:03:35.680 --> 0:03:38.320 because people are feeling even more like they don't see 0:03:38.320 --> 0:03:42.160 the economic opportunities and that the future is even less 0:03:42.160 --> 0:03:44.240 clear for them. So I think it will be fascinating 0:03:44.240 --> 0:03:46.680 to hear from Sam about the conditions on the ground. 0:03:46.960 --> 0:03:49.560 I was reporting them at least in twenty five twenty 0:03:49.600 --> 0:03:52.880 oh six, around the time of great optimism, when there 0:03:53.000 --> 0:03:55.320 was lots of you know, the franchise and the vote 0:03:55.360 --> 0:03:58.400 being given to more people in Arab nations. So there 0:03:58.440 --> 0:04:02.400 was a great deal of opt that then withered away 0:04:03.480 --> 0:04:07.320 when Rafi Careri, who was the leader in Lebanon, was assassinated. 0:04:07.360 --> 0:04:09.760 So you have these these ebbs and flows in the 0:04:09.760 --> 0:04:12.600 Middle East, and it's hard to see how it's particularly higher, 0:04:12.640 --> 0:04:14.280 but at the moment, you know, there's been a lot 0:04:14.280 --> 0:04:17.599 of discussion around the past year about whether the conflict 0:04:17.920 --> 0:04:21.960 potentially between Benjamin Etnia, who's personal objectives were staying in office, 0:04:22.000 --> 0:04:26.880 avoiding various court cases, and the sort of long term 0:04:27.000 --> 0:04:30.160 interest of the country and whether he's undermining the sort 0:04:30.200 --> 0:04:32.400 of future security of the nation in order to try 0:04:32.440 --> 0:04:34.480 and protect his position. But you know, of course, the 0:04:35.760 --> 0:04:38.919 corollary to that is he's undermining the economic future of 0:04:38.960 --> 0:04:39.800 Israel as well. 0:04:40.040 --> 0:04:43.120 Absolutely, if you go back to before October the seventh, 0:04:43.120 --> 0:04:45.960 I mean, there was a very general optimistic mood around 0:04:46.279 --> 0:04:49.120 the place, and an optimistic mood which is partly on 0:04:49.160 --> 0:04:51.640 the fact that the Israeli economy was doing extremely well, 0:04:51.680 --> 0:04:55.400 but also on the idea that Israel would forge close 0:04:55.440 --> 0:04:59.360 relations with Saudi Arabia and other sort of economically vibrant 0:05:00.120 --> 0:05:02.800 forces in that region. What it's all been modified in 0:05:02.880 --> 0:05:04.160 various significant ways now. 0:05:04.279 --> 0:05:07.240 Gulf nations certainly that there isn't really a plan B. 0:05:07.440 --> 0:05:10.880 You know, they were building, they were vesting their continued 0:05:10.920 --> 0:05:14.240 sort of global heft in part on being able to 0:05:14.279 --> 0:05:16.880 sort of assume away the Palestinian problem and build their 0:05:16.880 --> 0:05:20.320 relations with Israel. Anyway, the loads of discuss we should 0:05:20.400 --> 0:05:23.000 get onto someone who knows even more about it than 0:05:23.080 --> 0:05:25.920 the three of us, which is Sam Daga. Sam, thank 0:05:25.920 --> 0:05:28.680 you very much for joining us. You cover a lot 0:05:28.720 --> 0:05:31.279 of countries in the region, primarily Saudi Arabia, But I 0:05:31.279 --> 0:05:34.080 know that you've also been roving quite widely, and you 0:05:34.120 --> 0:05:37.600 wrote I thought a great story recently about the dilemma 0:05:37.680 --> 0:05:41.279 facing Israel's Arab neighbors, which we've touched on just there, 0:05:41.279 --> 0:05:43.800 but maybe just spell that out for us. 0:05:44.160 --> 0:05:46.960 Sure, Thank you very much, Stephanie and everyone. I mean, 0:05:47.200 --> 0:05:50.599 I will start with Jordan, where I was a week ago, 0:05:51.120 --> 0:05:54.440 and I could tell you like Jordan literally and figuratively 0:05:54.960 --> 0:05:57.120 sits at the heart of the ever shifting sands of 0:05:57.160 --> 0:05:59.800 the Middle East, as the US Institute of Peace said 0:06:00.200 --> 0:06:04.240 in a report last month. Today its population of eleven million, 0:06:04.400 --> 0:06:07.800 sixty percent of those are of Palestinian origin, including King 0:06:07.839 --> 0:06:12.760 Abdullah's wife, Queen Rania. Later this month will mark the 0:06:12.800 --> 0:06:16.560 thirtieth anniversary of the peace treaty between Israel and Jordan, 0:06:17.320 --> 0:06:20.960 and the bilateral aid that Jordan depends on from the 0:06:21.120 --> 0:06:26.120 US is largely, you know, contingent upon maintaining this treaty. 0:06:26.240 --> 0:06:29.440 Jordan is central to this US vision of a region 0:06:29.520 --> 0:06:34.799 in which Israel is integrated economically, militarily. Jordan is also 0:06:34.880 --> 0:06:37.760 reliant heavily on aid from the oil rich countries of 0:06:37.800 --> 0:06:41.120 the region like Saudi Arabia and the UAE, and more 0:06:41.160 --> 0:06:44.039 importantly I mean for these countries. Jordan is actually the 0:06:44.160 --> 0:06:47.480 last piece of the puzzle in this sort of Iranian 0:06:47.960 --> 0:06:50.679 arc of influence in the Middle East, the so called 0:06:50.720 --> 0:06:53.799 Axis of resistance. It is the only country where Iran 0:06:54.279 --> 0:06:57.000 does it have real influence, either through the government or 0:06:57.000 --> 0:07:00.320 through militant groups like Hesbelan Lebanon or the or the 0:07:00.360 --> 0:07:03.960 militias in Iraq. So it is absolutely crucial for these countries. 0:07:04.320 --> 0:07:08.080 October seventh and the aftermath has really been a huge 0:07:08.120 --> 0:07:12.320 dilemma for Jordan because there's real pressure from the population 0:07:12.440 --> 0:07:16.880 itself to sever all ties with Israel, to renounce the treaty, 0:07:17.200 --> 0:07:20.040 to actually ask US troops to leave. This is what 0:07:20.120 --> 0:07:23.120 people on the streets are demanding. And then last month, 0:07:23.440 --> 0:07:28.000 the Islamic Action Front one the most votes parliamentary elections 0:07:28.000 --> 0:07:30.880 that were held there. It is the king that appoints 0:07:31.120 --> 0:07:34.360 the government. It's the king who actually can dissolve the 0:07:34.400 --> 0:07:37.360 parliament at any time. But he's under tremendous pressure and we 0:07:37.400 --> 0:07:40.080 see that in the rhetoric of Jordanis leadership. You had 0:07:40.080 --> 0:07:43.040 the King of Jordan last month addressing the UN General 0:07:43.120 --> 0:07:48.440 Assembly railing against Israel's what he called terror in Gaza. 0:07:48.520 --> 0:07:50.960 At the same time as participating in that effort to 0:07:51.040 --> 0:07:55.040 prevent the Iranian missiles from getting to Israel one hundred percent. 0:07:55.160 --> 0:07:59.360 They say, quote, we will not allow any alien objects 0:07:59.400 --> 0:08:02.320 to come through borders. I mean, that's the language they use. 0:08:02.560 --> 0:08:06.120 How sustainable is this tension between you know, the street 0:08:06.520 --> 0:08:08.600 on the one hand and the policy of the regime 0:08:08.640 --> 0:08:09.280 on the other hand. 0:08:09.480 --> 0:08:13.280 It is really under pressure at the moment, and Gulf states, 0:08:13.320 --> 0:08:17.239 particularly Saudi Arabia and the Arab Emirates, are really worried 0:08:17.280 --> 0:08:20.320 about this because they feel like there's this almost combustible 0:08:20.400 --> 0:08:24.520 mix between this rage on the street toward what's happening 0:08:24.560 --> 0:08:29.040 in Gaza and now Lebanon, coupled with real economic grievances there. 0:08:29.240 --> 0:08:32.760 So it sounds like, Sam, everything you're suggesting would indicate 0:08:32.760 --> 0:08:33.920 a second Arab spring. 0:08:34.880 --> 0:08:39.960 No, I mean, we have to be careful, very straightforward. 0:08:41.200 --> 0:08:44.960 It doesn't sound like it sounds like a recipe for 0:08:45.160 --> 0:08:48.200 people rising up. But I think you don't think it's 0:08:48.240 --> 0:08:49.040 that straightforward. 0:08:49.840 --> 0:08:51.880 This is what a lot of experts are saying, and 0:08:51.920 --> 0:08:54.760 this is also what a lot of officials in Riyad 0:08:54.800 --> 0:08:57.200 and Abu Dhabi are worried about. I spoke to people 0:08:57.240 --> 0:09:00.400 who are close to the leadership here, who meet with 0:09:00.440 --> 0:09:03.200 officials on a regular basis, and who say that it 0:09:03.280 --> 0:09:06.120 is a real concern at the moment because again of 0:09:06.120 --> 0:09:09.520 what I just mentioned, This this mix between you know, 0:09:09.559 --> 0:09:11.959 the real rage on the street over what's happening in 0:09:12.000 --> 0:09:14.480 Gozla and Lebanon and the rest of the region, and 0:09:14.520 --> 0:09:20.960 this also now what many are calling a reawakened consciousness 0:09:20.960 --> 0:09:25.360 towards the Palestinian cause, and also the sense among you know, 0:09:25.679 --> 0:09:28.319 large segments of the populations across the Arab world, not 0:09:28.480 --> 0:09:31.920 just in Jordan, that we may be suspicious of Iran 0:09:31.960 --> 0:09:34.000 and its motives, we may not like a lot of 0:09:34.040 --> 0:09:36.920 these groups that Iran you know, funds and backs like 0:09:36.960 --> 0:09:40.480 has Balan Habas, but hey, they're the only ones standing 0:09:40.559 --> 0:09:42.680 up to Israel. I mean, that's kind of the narrative 0:09:42.720 --> 0:09:46.320 on the street. And also you've got real economic issues 0:09:46.360 --> 0:09:49.640 in countries like Jordan, where you have unemployment well over 0:09:49.960 --> 0:09:54.480 twenty percent, with youth unemployment alone like around forty percent 0:09:54.600 --> 0:09:57.079 according to I believe World Bank figures. 0:09:57.480 --> 0:10:00.000 I mean, you tell us, but it is not necessarily 0:10:00.120 --> 0:10:01.960 only new, is it. I mean, there's been high levels 0:10:01.960 --> 0:10:03.719 of unemployment for a. 0:10:03.720 --> 0:10:04.360 Very long time. 0:10:04.480 --> 0:10:07.360 Absolutely but in terms of like how how all of 0:10:07.360 --> 0:10:09.520 this is being seen from Abu Dhabi and Riad is 0:10:09.600 --> 0:10:12.320 what this part of the world needs more than anything 0:10:12.360 --> 0:10:17.440 else is economic prosperity and development, and not democracy and 0:10:17.480 --> 0:10:21.440 free speech and resistance, which is iron narrative. 0:10:21.559 --> 0:10:23.720 When we talk about the Hora Spring, I think partly 0:10:23.760 --> 0:10:25.440 of the liberal element of that, which is, you know, 0:10:25.520 --> 0:10:29.400 the demand for demography and democracy, free speech and rolling 0:10:29.440 --> 0:10:34.359 back sort of autocratic dictators. But isn't this new incarnation 0:10:34.559 --> 0:10:38.839 much more sort of Islamacist in its in its inspiration, 0:10:39.120 --> 0:10:42.200 I mean, driven much more by anger and religious further 0:10:42.320 --> 0:10:44.320 than than any liberal elements. 0:10:44.520 --> 0:10:47.320 And not really, not really, because there are a lot 0:10:47.320 --> 0:10:51.719 of liberal elements, including people I've spoken to, you know, 0:10:51.760 --> 0:10:55.200 in Jordan elsewhere, who are saying, we don't agree with 0:10:55.200 --> 0:10:58.560 the Islamists, we don't share their ideology. But again, it's 0:10:58.559 --> 0:11:01.840 the sense of this camitment to the Palestinian cause that's 0:11:02.080 --> 0:11:04.880 kind of been reawakened all over the region. 0:11:05.160 --> 0:11:08.559 Also, going back to the Arab Spring, what's happened since then? 0:11:08.600 --> 0:11:10.600 I mean, I guess it's coming up for fourteen years 0:11:10.640 --> 0:11:15.000 in December, but you've had the sort of reassertion of 0:11:15.040 --> 0:11:19.120 autocracy and authoritarian regimes, most of the places which had 0:11:19.120 --> 0:11:23.880 previously seen more democracy, whether in Bahrain, Egypt, Tunisia that 0:11:24.040 --> 0:11:27.960 the Tunisian populist leader was re elected last week, but 0:11:28.160 --> 0:11:32.160 with not a very sort of lively democracy behind him. 0:11:32.280 --> 0:11:34.640 And then you have those are the sort of Saudi 0:11:34.840 --> 0:11:38.760 UAE backed countries, but you also have leban and Syria, 0:11:39.040 --> 0:11:43.160 Yemen on the Iran side, and I guess the problem 0:11:43.200 --> 0:11:46.240 is that none of them, those authoritarian regimes have been 0:11:46.240 --> 0:11:49.800 able to deliver economically in a way to shore up support, 0:11:50.080 --> 0:11:52.600 and that it feels like what you're saying is that 0:11:52.640 --> 0:11:54.679 all of that has just paved the way for this 0:11:54.800 --> 0:12:00.359 because there's nothing tying the Arab street to the regime 0:12:00.440 --> 0:12:01.960 in the way that they had hoped there would be 0:12:02.000 --> 0:12:03.400 with this kind of economic success. 0:12:03.880 --> 0:12:06.920 Yeah. Absolutely, And I would just you know, ask Stephanie 0:12:06.960 --> 0:12:09.760 that in the countries that you mentioned that are seen 0:12:09.800 --> 0:12:12.920 as being within sort of the sphere of influence of Iran, 0:12:13.400 --> 0:12:17.240 like Lebanon, like Iraq, like Syria, like Yemen, I mean, 0:12:17.280 --> 0:12:20.240 these countries have not fared any better economically. I mean 0:12:20.320 --> 0:12:25.000 Lebanon has faced its worst economic crisis ever, I mean 0:12:25.040 --> 0:12:29.800 since its creation. It is a bleak picture all around. 0:12:30.000 --> 0:12:33.480 The most expansive economic vision of courses come from Saudi Arabia, 0:12:33.520 --> 0:12:35.520 and that's the one that we've perhaps heard most about 0:12:35.640 --> 0:12:39.120 outside the region because money is coming out of Saudi Arabia. 0:12:39.160 --> 0:12:42.199 But also there's these very grand schemes that Muhammad bin 0:12:42.280 --> 0:12:46.480 Summan has for the country. Is there a serious challenge 0:12:46.800 --> 0:12:49.760 out of all this for Saudi Arabia or is the 0:12:49.840 --> 0:12:52.240 regime there really immovable? 0:12:52.520 --> 0:12:54.520 I would say there is, and they would admit to 0:12:54.600 --> 0:12:57.240 it themselves in private conversations. I mean, people who are 0:12:57.240 --> 0:12:59.680 close to the royal court, they feel there is a 0:12:59.720 --> 0:13:04.120 real risk here, particularly, you know, given what I just described, 0:13:04.160 --> 0:13:09.200 this kind of reawakened interest and consciousness, you know, toward 0:13:09.760 --> 0:13:12.760 you know, the Palestinian cause, including in Saudi Arabia itself. 0:13:13.120 --> 0:13:16.000 And I wrote a piece in May I believe about 0:13:16.040 --> 0:13:19.640 how the government was over there. The security forces and 0:13:19.640 --> 0:13:23.320 the intelligence services were actually arresting people who are posting 0:13:23.480 --> 0:13:27.559 anything relating to the Israel Hamas conflict that they are 0:13:27.960 --> 0:13:30.160 that they do not approve of. That's their way of 0:13:30.440 --> 0:13:33.720 asserting control. But a lot of people would argue that's 0:13:33.760 --> 0:13:38.480 not sustainable because while Vision twenty thirty has made a 0:13:38.480 --> 0:13:42.000 lot of progress, particularly when it comes to women, unemployment, 0:13:42.240 --> 0:13:45.440 to certain social changes in Saudi Arabia. It has made 0:13:45.480 --> 0:13:49.480 a tremendous progress. But you know, based again on some 0:13:49.679 --> 0:13:52.440 one dozen trips that I've made to Saudi Arabia in 0:13:52.440 --> 0:13:55.400 over the past couple of years, this vision has not 0:13:55.600 --> 0:13:59.520 reached beyond like the big the big cities Riyad and Jeddah. 0:13:59.559 --> 0:14:01.440 I mean, if you go to some of these other 0:14:01.559 --> 0:14:05.520 sort of places, uh, it's really a bix bag. And 0:14:05.840 --> 0:14:09.320 and people, people do have grievances, economic grievances, even in 0:14:09.360 --> 0:14:11.959 Saudi Arabia. So the leadership is aware of that. 0:14:12.440 --> 0:14:15.120 We have this huge event coming in in the film 0:14:15.160 --> 0:14:18.000 of the American election. Can you give any sense of 0:14:18.040 --> 0:14:23.080 what impacts either of the two results might have on 0:14:23.120 --> 0:14:23.560 the on. 0:14:23.840 --> 0:14:25.440 Just toasted a couple of minutes. 0:14:25.600 --> 0:14:28.160 You know, how is that going to play out in 0:14:28.200 --> 0:14:28.680 this region? 0:14:29.600 --> 0:14:34.640 God, you're the other spot. Okay. We know that that 0:14:34.840 --> 0:14:38.840 a lot of the leaderships in the Gulf States had 0:14:38.960 --> 0:14:41.600 had enjoyed, you know, very good, very good and warm 0:14:41.720 --> 0:14:46.000 ties with with the Trump administration. If you remember that 0:14:46.400 --> 0:14:53.800 famous first visit to to Red the Sword exactly. But 0:14:54.200 --> 0:14:55.520 I mean, and here's the caveat. 0:14:55.560 --> 0:14:58.280 I mean, you had the Secret Service is not going 0:14:58.360 --> 0:14:59.880 to let him near any swords. 0:15:02.240 --> 0:15:04.800 But the big caveat here. I mean in terms of 0:15:04.800 --> 0:15:08.480 like Saudi Arabia's experience, you know during that period, it 0:15:08.520 --> 0:15:11.200 is like when you had, you know, that huge attack 0:15:11.320 --> 0:15:17.320 on Saudi oil facilities for which the Huthis and Iran 0:15:17.360 --> 0:15:19.960 were blamed. I've seen both being blamed. I mean, the 0:15:20.000 --> 0:15:24.680 Houthis are this militant group that Saudi Arabia itself was 0:15:24.680 --> 0:15:28.240 fighting directly, you know, starting in twenty fourteen after it 0:15:28.320 --> 0:15:31.560 seased power in Yemen, you know, taking over the capital 0:15:31.600 --> 0:15:37.160 Sanna so and back then, you know, from a Saudi perspective, 0:15:37.280 --> 0:15:40.560 you know, Trump did very little to respond to that, right, 0:15:40.840 --> 0:15:44.440 so that kind of made you know, the Saudi leadership 0:15:44.480 --> 0:15:48.239 and also by extension, the leadership here, you know, rethink 0:15:49.080 --> 0:15:52.560 everything and say, like, we really cannot have all our 0:15:52.600 --> 0:15:55.400 eggs in one basket and rely on the US. And 0:15:55.480 --> 0:15:58.920 hence you've seen this this pivot towards China and Russia, 0:15:58.960 --> 0:16:03.120 which has kind of alarmed you know, the Biden reministration, 0:16:03.480 --> 0:16:08.120 particularly people you know in the National Security Council. And 0:16:08.160 --> 0:16:12.120 that's when we saw this this kind of extended hand 0:16:12.160 --> 0:16:14.720 to Saudi Arabia. We were on the cusp of this 0:16:15.280 --> 0:16:19.920 of this grand deal whereby you know, uh, Saudi Arabia 0:16:20.000 --> 0:16:23.000 was going to get potentially potentially again we we we 0:16:23.280 --> 0:16:26.280 don't know all the specifics, but potentially you know, this 0:16:26.280 --> 0:16:30.480 this very solid defense fact with the United States, this 0:16:30.480 --> 0:16:35.080 this agreement to to develop nuclear technology, this new strategic 0:16:35.200 --> 0:16:39.600 relationship with the United States. It returned for normalizing ties 0:16:39.640 --> 0:16:42.640 with with Israel, and all of that came to a halt. 0:16:43.040 --> 0:16:45.040 So and we could do this all day, it doesn't 0:16:45.080 --> 0:16:46.720 It does sound like we should probably talk to you 0:16:46.720 --> 0:16:48.880 again at the end of the year, after we or 0:16:48.920 --> 0:16:51.600 maybe the beginning of next year when we know, when 0:16:51.640 --> 0:16:53.680 we know hopefully who won the US president to election 0:16:53.800 --> 0:16:55.520 new the next president is going to be, and maybe 0:16:55.520 --> 0:16:59.640 how you're feeling about that question for for the region. 0:17:00.440 --> 0:17:02.720 But thank you so much for this. It was fascinating, 0:17:03.080 --> 0:17:03.640 my pleasure. 0:17:03.680 --> 0:17:05.600 I really enjoyed it, and I really do hope we 0:17:05.680 --> 0:17:06.120 do it again. 0:17:06.240 --> 0:17:15.440 Thank you, And now we can talk to Eugene Candel 0:17:15.680 --> 0:17:19.439 in Jerusalem, previously head of the National Economic Council and 0:17:19.520 --> 0:17:23.400 economic advisor to Prime Minister Binyaminnett and Yahoo between twenty 0:17:23.560 --> 0:17:26.480 nine and twenty fifteen. He's been many other things, including 0:17:26.520 --> 0:17:30.399 the CEO of the startup Nation, central economics professor at 0:17:30.440 --> 0:17:35.479 Hebrew University, and the co founder of Israel's Strategic Futures Institute. Eugene, 0:17:35.480 --> 0:17:38.560 thank you very much for joining us. Obviously, particularly in 0:17:38.560 --> 0:17:41.879 the last few days, we've focused enormously on the human 0:17:42.119 --> 0:17:45.720 and psychological cost of the past twelve month. Because of 0:17:45.760 --> 0:17:49.199 the focus of this podcast, I'm wanting to ask you 0:17:49.280 --> 0:17:54.320 how costly has this period been for Israel's economy and 0:17:54.359 --> 0:17:56.520 indeed like its long term economic model. 0:17:56.720 --> 0:18:00.920 Well, you know, Israeli economy is very resilient. There's a 0:18:01.119 --> 0:18:04.520 military conflict. If you look at the Israeli history of 0:18:04.680 --> 0:18:09.480 let's say stock market to exchange rates or growth statistics, 0:18:09.480 --> 0:18:12.080 and you look at annual statistics, you would not know 0:18:12.400 --> 0:18:15.760 that Israel had several wars, whether it's in two thousand 0:18:15.800 --> 0:18:20.120 and six, twenty twelve, twenty fourteen, you would barely detectiven 0:18:20.160 --> 0:18:24.480 the global financial crisis. So the economy is very resilient. 0:18:24.800 --> 0:18:28.399 But at the same time, this war is different from 0:18:29.080 --> 0:18:34.600 the previous military experiences that Israel had because it's much longer. 0:18:34.760 --> 0:18:38.080 It's probably the longest war that we ever had. It 0:18:38.160 --> 0:18:41.760 is much more difficult because we have to fight on 0:18:41.920 --> 0:18:45.560 multiple fronts, and so the cost of this war is 0:18:45.680 --> 0:18:50.520 significant for the economy going forward. Will have to figure 0:18:50.520 --> 0:18:51.600 out how to deal with it. 0:18:51.720 --> 0:18:53.560 I hear what you say about the resilience of this 0:18:53.640 --> 0:18:56.879 radio economy, which is apparent, but a lot of people 0:18:56.920 --> 0:18:59.159 have emphasized to me that it's in the periods of 0:18:59.200 --> 0:19:02.320 the relative peace, when at least there's been a sort 0:19:02.320 --> 0:19:07.359 of stable status quo in the conflict. It's in that 0:19:07.440 --> 0:19:10.640 period where Israel has really come into its own as 0:19:10.680 --> 0:19:14.840 a tech powerhouse, has been hugely dynamic. I'm interested in 0:19:15.440 --> 0:19:18.280 how that part of the economy kind of holds onto 0:19:18.320 --> 0:19:21.880 its dynamism and how keen it is to stay in 0:19:21.920 --> 0:19:25.399 Israel in an environment when there is so much uncertainty 0:19:25.440 --> 0:19:27.240 and when so much money is being shoveled into the 0:19:27.280 --> 0:19:27.800 war effort. 0:19:28.000 --> 0:19:30.960 Well, there are a couple of things what you call 0:19:31.080 --> 0:19:34.040 peace period. We now understand that it was a period 0:19:34.119 --> 0:19:37.640 of build up by our enemies to try to destroy us, 0:19:37.680 --> 0:19:44.240 which obviously failed, But it was to some extent period 0:19:44.400 --> 0:19:47.280 for us to build our capabilities, and I think we've 0:19:47.280 --> 0:19:51.200 shown them to the world in the last months. Of 0:19:51.320 --> 0:19:54.920 what we can do when we set our mind to it, 0:19:55.080 --> 0:19:59.480 we create the correct policies, and if we bring back 0:19:59.800 --> 0:20:04.080 the the dynamism and the hope that that we just 0:20:04.119 --> 0:20:06.399 need to pull together and get out of it, we 0:20:06.520 --> 0:20:09.119 can We can definitely do it, and they will be 0:20:09.160 --> 0:20:09.880 in the forefront. 0:20:10.160 --> 0:20:14.640 The startup immunity is presumably very mobile and very interlinked 0:20:14.680 --> 0:20:17.600 with Silicon valleyes full of people who can will work 0:20:17.640 --> 0:20:19.720 anywhere in the world, but certainly in the United States. 0:20:19.920 --> 0:20:22.960 Is that a problem that is definitely a problem, that's 0:20:22.960 --> 0:20:27.280 a threat. So far, however, most of their community, instead 0:20:27.320 --> 0:20:30.359 of leaving, they came back from where they lived, or 0:20:30.480 --> 0:20:33.560 much of their people came back and joined the military force. 0:20:34.119 --> 0:20:36.680 And then of course those that live here, a lot 0:20:36.720 --> 0:20:41.720 of them were drafted in the into the reservist duty. 0:20:41.840 --> 0:20:44.879 And the application for the reservist duty at the beginning 0:20:44.920 --> 0:20:46.800 of the war was one hundred and twenty percent, so 0:20:47.280 --> 0:20:50.040 twenty percent more people that were not even called came 0:20:50.800 --> 0:20:54.720 because they flew back from wherever they were. So we 0:20:55.160 --> 0:20:58.240 start from a strong position. The question whether we will 0:20:58.280 --> 0:21:00.800 continue with a strong position is that question, or whether 0:21:00.840 --> 0:21:04.160 we can pull together as people and whether our government 0:21:04.440 --> 0:21:08.800 will create right policies that will allow israel economy to 0:21:08.800 --> 0:21:09.600 grow much faster. 0:21:10.000 --> 0:21:15.160 What you's asking about the manpower side of things, which is, 0:21:15.320 --> 0:21:18.879 you know, the political coalition that netting arrests on is 0:21:19.560 --> 0:21:22.359 very the Orthodox community is very well represented. How do 0:21:22.400 --> 0:21:24.760 you deal with the fact that the Orthodox community doesn't, 0:21:25.280 --> 0:21:27.000 as far as I can say, you know, take part 0:21:27.040 --> 0:21:29.440 in the military, take a big part in the economy, 0:21:30.200 --> 0:21:32.600 and it's getting bigger as a percentage of the population. 0:21:33.040 --> 0:21:37.280 It is one of the internal threats that we have 0:21:37.400 --> 0:21:40.359 to come to terms with. And the problem is not 0:21:40.480 --> 0:21:43.480 this government or the government. The problem is structural. 0:21:44.119 --> 0:21:44.600 We have. 0:21:46.280 --> 0:21:51.119 A structural demographic problem of large population that designed to 0:21:51.320 --> 0:21:54.840 jump into the safety net of the welfare state together 0:21:55.080 --> 0:22:00.560 rather than individual and unfortunately the welfare state safety is 0:22:00.600 --> 0:22:04.040 not designed for you know, a million and a half 0:22:04.080 --> 0:22:09.040 people jumping into it together and reproducing the record rate. 0:22:09.160 --> 0:22:11.960 So we will have to deal with that. This war 0:22:12.160 --> 0:22:16.200 made it plain and clear that the things cannot go 0:22:16.640 --> 0:22:19.920 forward as they were progressing until today. It is still 0:22:19.960 --> 0:22:23.639 this government cannot really do much about it because it 0:22:23.800 --> 0:22:28.160 hinges on the coalition partners. But it's obvious to everybody, 0:22:28.200 --> 0:22:33.040 including the members of the coalition, that going forward has 0:22:33.119 --> 0:22:36.560 to and has to change. We have to create conditions 0:22:36.600 --> 0:22:41.160 in which, on the one hand, they do not collapse economically. 0:22:41.240 --> 0:22:44.720