Israeli Prime Minister Benjamin Netanyahu has long prided himself on being both “Mr. Security” and “Mr. Economy.” As Mr. Security, Netanyahu (and many, if not most, Israelis) believed he was the only one who would ensure that Israel remained militarily strong and could bring about a historic rapprochement with the Arab world; as Mr. Economy, Netanyahu was widely credited with presiding over a period of sustained economic growth and a blossoming high-tech industry.
No one doubts that Mr. Security was among the casualties of the Oct. 7 massacre carried out by Hamas, but so was Mr. Economy. And in both cases, the losses are unlikely to be limited exclusively to Netanyahu the man. The fallout will affect Israel as a country and a society, perhaps for years to come.
During the Netanyahu era, Israel had come to see itself—not entirely without justification—as a world-class military, political, and technological power. The three were closely interlinked. Israel’s high-tech industry was the engine of economic growth that enriched the country. Its tech prowess opened doors to stronger ties with China and India, and it played a key role in normalization with Arab powers seeking access to Israeli innovation. Technology enabled Israel to multiply its military and intelligence capabilities far in excess of what its population or other resources would normally give it. Many Israelis acquired their tech skills in elite army units.
The Gaza border on the eve of Oct. 7 exemplified the military-technology nexus. The border region was lightly manned by troops; instead, the Israel Defense Forces (IDF) had developed an array of highly sophisticated tools to monitor Hamas activities inside the enclave and to prevent incursions. The latter featured an underground reinforced concrete wall with sensors to detect tunnels, a 20-foot-high steel fence, a network of radar arrays and sensors, and remote-controlled weaponry.
Hamas brought down the entire system with little more than off-the-shelf drones. Tractors then came in to tear gaps through the fence. The planning that went into the operation was done without the IDF intelligence gurus having a clue of what was in the works.
Arguably, this was an isolated failure of a military-technology nexus that has many credits to its name. But given the human cost of the debacle, reinforced by the gruesome images available online, the confidence that Israel had in itself and its technological capabilities has been quickly recast in the public mind as hubris, akin to Israel’s last big military debacle, the 1973 Arab-Israeli War.
Netanyahu, of course, had no personal hand in the technological failures and will no doubt try to place the blame on the defense establishment for the failure. But as prime minister, he cannot escape responsibility any more than then-Israeli Prime Minister Golda Meir could in the aftermath of the 1973 war. Just days after this month’s massacre, while people were still digesting the depth of the tragedy and in any ordinary crisis would be backing the country’s leader, a poll showed that only 21 percent of respondents thought that Netanyahu should stay on as prime minister after the war ends. If elections were held today, his Likud party would lose 40 percent of its Knesset seats.
He will inevitably be linked to the policy failure that allowed the massacre to occur because the tech-based approach to fighting Hamas reflected the defense-oriented policy advocated by Netanyahu, which was designed to contain Hamas rather than vanquish it. “We abandoned the residents of the Gaza border to the high-tech nation and forgot that we were in the Middle East,” one reserve officer told Haaretz.
There were some good reasons for that approach, but they were informed mainly by Netanyahu’s purely political strategy of keeping Hamas alive and kicking and ruling in Gaza. That way, there would be two Palestinian leaderships. The Palestinian Authority in the West Bank might aspire to a diplomatic solution, but it could never claim to speak for the Palestinian people or deliver peace so long as Hamas was in control of Gaza and pursuing its policy of violent resistance. Israel could thus justifiably say that it had no peace partner.
Objectively speaking, Israel’s capabilities and its capacity for innovation remain unchanged, but its reputation as the so-called start-up nation will almost certainly be diminished, and that is important. The idea that Israelis could do anything—from developing the Iron Dome air defense network or a next-generation laser-based missile-defense system to its pioneering role in navigation apps and lab-grown meat—will almost certainly now face a more critical attitude on the part of entrepreneurs, investors, and corporate partners.
Unfortunately, this is coming at an inopportune time. Globally, advanced technology is in the midst of a slump that is hindering the ability of Israeli start-ups to raise capital. The competition is intense for the money that is available. Meanwhile, the army’s call-up of more than 360,000 reservists, many of whom may be serving for an extended period, will disrupt an industry whose workforce is overwhelmingly young and male. The judicial reform that the Netanyahu government had been pursuing had already caused many newly formed companies to register abroad, an expression of how doubtful they were about their future in Israel even prior to Oct. 7.
Unless the war ends unexpectedly quickly and Israel avoids a two-front confrontation with Hamas and Hezbollah, the rest of the economy is also headed for a rough patch. Over and above the burden of so many workers in the reserves, Israel may very well face a period of frequent rocket attacks. The risk is strong that rising unrest in the West Bank will disrupt economic activity. Business and consumer confidence will fall. The government, which has been running a bigger-than-budgeted fiscal deficit, will be saddled with steep defense costs that will have to be covered by higher taxes or more borrowing at high interest rates in the absence of a massive infusion of economic aid.
Netanyahu’s reputation as Mr. Economy is largely undeserved. While he undertook important steps toward shrinking the public sector while working as finance minister two decades ago, he has since largely ignored economic policy. The economy grew on its own momentum, with little help from a series of ineffective and weak finance ministers.
The current officeholder may be the worst of the lot. Bezalel Smotrich, the leader of the far-right Religious Zionist Party, is more interested in his other role as a minister in the Defense Ministry, promoting the interests of Israeli settlers, than he is in economic policy.
Smotrich is not the kind of politician with the ability or dedication to deal with the economic challenges of wartime. Combined with soaring world energy prices, the 1973 Arab-Israeli military debacle pushed the Israeli economy into a long period of economic stagnation. The war undermined the self-confidence that had been engendered by Israel’s great victory in the 1967 Six-Day War. The Labor Party establishment that had led Israel since its founding and the quasi-socialist economy it had created never recovered from the blow. A scenario along the same lines may easily play out in the Israel of the 2020s—economic stagnation, sagging confidence, and rejection of the political leadership.
Netanyahu is not constitutionally built to extricate himself or the country from this sort of crisis. He is regarded as a great communicator, but his effectiveness has always been in explaining strategic challenges. Today, he is faced with a national tragedy, the likes of which Israel has not seen in half a century. His three speeches to the public since the conflict began have been received coldly (the last one even set off a short panic because he took the unusual step of broadcasting it on the Sabbath, leaving the impression that he would have something important to say, when in fact he didn’t).
Netanyahu has visited the conflict zone just once since the massacre and took a week before meeting with the families of the dead and kidnapped. It took him five days to form an emergency government, reportedly out of concern over sharing credit for any victories in the war against Hamas.
What will follow is difficult to say. Israelis are just beginning to deal with the trauma, and the death and suffering may continue for some time if the fighting drags on. If there is a “victory” in the end, in the sense of eliminating Hamas, it will be too pyrrhic to offset the wounds.
It would be nice to think that the events of Oct. 7 will cause Israel’s drift to the right to be reversed as its verities and leaders fall into disrepute.
Fifty years ago, the Arab-Israeli War discredited the elites and led to the rise of the right wing and settlement movement, accelerating a trend toward greater religiosity that had begun after 1967.
This time, counterrevolution doesn’t seem to be in the cards: The trauma is likely to strengthen the sense that the country is surrounded by implacable enemies bent on its destruction, and the notion that it is not the time for peace processes or dissent. The left offers no answers; the center is too squishy and pragmatic. When the war is finally over, Netanyahu will almost certainly depart from the scene, but Israel’s right is here to stay.
