Howard Epstein



It is plain that in the Russian Federation – successor to the communist Soviet Union (died 1991) – the leadership has fallen head-over-heels in love with Reaganomics. The Trickledown Effect appears to be method of choice to placate the masses in Russia – c144 millions of them (and declining). The theory is that the richer those at the top become, the more will trickle down to the not-quite-so-rich (like the abjectly poor) at the bottom.

So, how rich is rich and how is to be not quite so? Examining this in reverse order we can safely say (because we have our own recollections and the testimony of those we know who have travelled from Moscow to St Petersburg train or river-boat) that outside those two great, not to say opulent, cities, there are conditions in the Russian countryside unchanged in centuries: unpaved roads, wooden houses and minimal, if any, street lighting. Of course, one has not had the opportunity to test other public utilities in Russia, but the chances that in western Russia (the most developed part) there is a regional sewage disposal system as comprehensive and advanced as that of Israel (another world leadership accolade for the Jewish State, although not an obvious one) is as remote as the gulags which a certain G7 leader must be itching to restore. (Russia had been a member of G8 but was dropped in 2014 by reason of its annexation of Crimea.)


Now, as to those at the top, according to a report last week from the Organised Crime and Corruption Reporting Project (OCCRP), President Putin and his entourage have amassed a fortune of some $24 billion. OCCRP claim that it is not all in his savings account, but others, ranging from his former judo partners to his shoe-polisher, are nominally billionaires, yet without declaring to the Russian Federation revenue authorities that they are earning anything greater than a pittance (comparatively, in the case of some and literally in regard to others).

No matter. The thought of $24 billion trickling down to the Russian people (together with prosecutions for tax evasion for anyone who appears half threatening as a contender for the premiership) certainly appears to keep the Russian people quiescent and apparently content with what is being done on their behalf in the Kremlin.

Russia is, however, a fast-ageing country with none of the advantages of the Japanese who, absent an appropriately-sized younger generation to watch out for, or subsidise, the elderly are for once being innovative (and not imitative) in building robots to care for the old. There just is no money for such assistance for the overwhelming bulk of Russian seniors. Now, $24 billion, were it to be invested in creating industries that made something that someone in the West would want to buy (besides Kalashnikovs), might turn out to be a wealth generator for Russia. Apparently, the idea does not commend itself to the president (even when he alternates with himself as prime minister), so the masses will have to wait for a trickle of wealth to reach them from the top. Could take a while.

Then there is China, whose economic system was dubbed, by Professor Yasheng Huang, reader in political economy and international management at MIT’s Sloan School of Management, “Capitalism with Chinese Characteristics”. Employing that system, China has climbed from nowhere to number two, in terms of the world’s largest economies, in a generation. This is touted as the triumph of the command economy in the most regulated of capitalist systems. The great test is yet to come, however: now that wage rates in China are no longer the lowest available and places like Vietnam and Bangladesh can serve up industrialised cannon-fodder at a lower cost, China is seeing its GDP growth rates dropping steadily year on year.

Further, China has structural problems all its own. As a result of its one child policy, which led to countless instances of the infanticide of baby girls, not only are there far too few females to go round now for the boys, but also a burgeoning middle-class hankering after Audis is in no mood to invest in two children where one has sufficed in the past. Accordingly, the one child family problem will continue for at least another generation (with obvious risks for those unlucky enough to be born female). This does not bode well for the continuation of the Chinese economic miracle. Indeed, it is India, a proper, if far from perfect, democracy, that is slated to have the largest workforce in the world (larger than that of China and the USA together) well within the next decade. (India’s softer technique, of offering a transistor radio in exchange for effective birth control, may have been less effective but it was also less distortive of society.)

The Peoples’ Republic of China was established on 21 September 1949. India was established as a state independent of British rule on 15 August 1947. Sandwiched between them, the State of Israel was born on 14 May 1948. None of them was anything but frail and poor at the point of independence. Three generations  on, each is a powerhouse in its own way. Whilst India and China are fated to compete for some form of world leadership (and possibly, not for the first time, in a shooting war), Israel is the indisputable regional superpower in the Middle East, both militarily and industrially, and a world leader in many (perhaps a score of) hi-tech, military, medical and other fields.

By involving women as equals (except as regards pay levels) in every sector of the economy from the outset, eschewing doctrinaire social-engineering ideas and having fairly (though insufficiently) relaxed regulation of economic life (once the crimping Labour-dominated years were over), Israel has steadily been able to demonstrate that its democratic system works well. Two tables, with the same data, but in different orders of priority make this point:-


Note: the table is not comprehensive in that nations not relevant to the argument have been omitted. Nevertheless, Israel’s fifth place in terms of GDP per capita is correct for all purposes.

Both Germany and Israel, so close in terms of GDP per capita, have vibrant, export-led economies – but with a marked difference. Whilst Germany’s exporters benefit from a currency (the euro) that is heavily subsidised by the involvement of the much weaker co-members of the EU, Israeli exporters achieve their excellent results despite a stubbornly highly-priced currency (the New Israeli Shekel). It is not clear what would bring it down materially against the euro, dollar or sterling but one cannot avoid the suspicion that, were it to fall by, say, 15%, exporters would sell around 15% more of their wares by value. (Such success, if achieved, might be expected to strengthen the Israeli economy and, concomitantly but perversely, strengthen the shekel, too.)

China and India are export-led economies, like those of Germany and Israel and, of course, strong exports means the opportunity to amass reserves of foreign reserves. Of the following tables, that on the right is startling:-


So, whereas little (70 years-) old Israel – which has jumped from the wilderness to first place in terms of foreign-exchange reserves per capita – would get a gold star, the end-of-term report of Russia and China, would end with the words: “Must try harder”. That, of course, is a tall order for Russia, a kleptocracy, in which success is rewarded with confiscation.

Russia, it is increasingly  becoming clear, excels in one area of activity in particular: the manipulation of western democracies through the abuse of the technologies that they (in the West) have developed. For every life-enhancing app that has emanated from Silicon Valley, Seattle and Israel there is a perversion flowing from Russia. (Case in point: news is manufactured and media time for it bought as a commodity.)

Putin’s Russia is out to do down the West, not by fair means but foul. Instead of developing competing industries, Russia has teams dedicated to exploitation and subversion. Rather than seeking to raise standards, Russia is bent on undermining the progress that the West has made. Unable to forgive the West (really just Thatcher and Reagan, but that is another story) for the destruction of the Soviet Union, Putin seeks retribution through the destabilization of Western polities and economies. Europe, the UK and the USA have an insufficient grasp of this as yet but there is the hope that they will wake up in time to respond to Russia’s insidious, cynical and wholly nihilistic invasion.

Israel, which is not so directly in the firing line of Russian malevolence, has to turn a blind eye to it all and rub along with the Bear. Ever since the Russians filled the vacuum left by Obama in Syria, the dominant if unseen force in the region has been the Russian’s missile defence systems. The very fact that Israel Air Force warplanes have clearly been operating at will over Syria demonstrates that amongst Netanyahu’s greatest achievements have been, not only surviving the eight year Obama onslaught, but also the maintenance of a working relationship with Putin, and ensuring that there is a mutual respect between the two de facto neighbours.



Mention of Netanyahu reminds us of the allegations regarding the purchase of supernumerary German submarines. That story is not over yet (and may just be beginning) but with the news that the German Kriegsmarine just lost not only its rudder (in an altercation with some rocky reef) but also its last submarine, Israel is suddenly the world’s infinitely largest operator of U‑boats. Germany and the Jews have both come a long way since 1945.

Whilst Israel still has a little way to go to achieve the same GDP per capita as Germany, we should note that both operate along democratic lines, rooted in the rule of law, with freedom of movement of capital and people – and of the press.

There are lessons in this for the Chinese who lag far behind in terms of GDP per capita. But at least China has a well-diversified economy. The fortunes of Russia vary with commodity prices: the only exports they have that interest others are fossil fuels, where Israel will increasingly challenge them, and military (but not in the hi-tech arena where Israel excels).

In conclusion, therefore, looking again at the tables above, we see little in the new-style capitalist systems of Russia and China to entice Israel away from its path of development along democratic lines.

Coda: in the UK, the surprise news last week that the economy had grown in the previous quarter by 0.4% – about 1.5% in a full year – was seen as a triumph. The Israeli economy is expected to grow by 3.5% in fiscal 2017.

© Howard Epstein – October 2017

The author’s book, Israel at Seventy: In Weizmann’s Image is available now from Amazon in paperback or as a Kindle e-book

As Israel reaches its seventieth birthday, it is timely to consider the story of its indispensable founder, Chaim Weizmann. Statesman and scientist, it was Weizmann who saved the British Empire from defeat in World War I, kindled the hope for the return of the Jewish people to their ancient homeland, after an absence of 2,000 years, and was then instrumental in securing what was needed to establish the State of Israel and its future as a technological powerhouse. Weizmann may be said to be the world’s first 20th century – even 21st century – man. If any aspects of modern life became supremely important last century, and remain so in this, they are science & technology and networking. Weizmann’s chemistry, both in the laboratory and with a wide-range of key people, led to his four great political coups, each essential to the emergence of the State of Israel. In addition, he pulled off three crucial educational feats that secured Israel’s future and ensured its success – in his image. In the case of the political achievements, only Weizmann could have wrought them. In the case of the others, only he did. Despite these signature successes, today little is known of him and what he achieved. Why this should be so is revealed in a tale of rivalry between two political giants: Weizmann, the greater talent, but the older, and his nemesis, David Ben-Gurion.

Amazon USA – Paperback

Amazon USA – Kindle E-Book keywords=israel+at+70

Amazon UK – Paperback

Amazon UK – Kindle E-Book

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