 back to my YouTube channel. This is Daniel Rosal. I am joined today by a guest who has a lot of relevant expertise in the area of socioeconomics in Israel. I've done videos recently about the cost of living here, the cost of housing, a lot of social issues, which I'm always complaining about, never received the attention that they deserve in Israeli elections, of which there have been plenty in recent years. So in order to get a bit of clarity on that, joined today by a professor, Dan Bendavid, who's a president at the Shoresh institution who do absolutely amazing work at furthering socioeconomic research. And they also have a terrific graph library on their website that anyone can access. Very interesting comparisons between Israel and other countries in the OECD. Dan is president at the Shoresh institution. He's also an economics professor in the Department of Public Policy at Tel Aviv University. And he recently contributed a very interesting five-part blog series to the Times of Israel, among many other accomplishments. So firstly, Dan, thanks for joining me. Thanks for inviting me. I want to talk firstly about, you've mentioned on the Shoresh website that you see there being three fundamental problems with Israel. Can you tell me what those are? Maybe in the way of background, why we focus on these issues. Shoresh was a, we established Shoresh eight years ago to focus on the fundamental root, Shoresh in Hebrew is root. The root determinants of where Israel is heading. What determines our long-run trajectories are very, very steady and very unsustainable long-run trajectories. The three primary problems are certainly not the entire list, but three of the problems that we focused on were first and foremost, level of education in Israel, the way that we're preparing our children for the future. The level of education in core subjects in math, science and reading is at the very bottom of the developed world. All 25 of the developed world countries are above us. The second issue is not only are we at the bottom, half of the children today in Israel are receiving a third world education, roughly half, and they belong to the fastest growing parts of the population. One group with roughly over a fifth, in fact, of the children are the Kharidim. Most of whom don't even study the material, don't take the international exams. They're not even the reason why we are formally below the entire developed world. Had they taken exam, we would have been, we would have had even a lower score, even though we'd still be at the bottom. They are over a fifth of the first grade children today in Israel. Another group with over a fifth of the children are the Arab kids, Arab-speaking children in Israel, and they score below not just the entire first world, but below many third world countries. In fact, there were 10 predominantly Muslim countries that participated in the most recent PISA exam given by the OECD, and our kids, our Arab children, scored below nine of the 10 Muslim countries. So the Arab kids in Israel and the Kharidim alone are nearly half of the children. To them, you can add the kids who grew up in the periphery, geographic periphery, social periphery, that are also getting a third world education. And these children belong to population groups that are growing the fastest in Israel, which makes this basically unsustainable. We're doing fine today economically. Again, last three months, the exception. But in general, we're doing okay in recent years, but the direction that we're headed is A, very, very steady, and B, it's unsustainable. And that basically causes us to be concerned about the future, and Shoesh was created to try and analyze what are these underlying issues. The third problem that we focused on is where's the money going? If we want to fix things, we need money. And in Israel, there are two main issues in this regard. A is that the pie itself isn't very big. The amount of money that we have, primarily because we have a huge shadow economy in Israel. A shadow economy is economic activity, legal and illegal economic activity that's not reported and therefore not taxed. And according to the World Bank and IMF, it's roughly about a fifth of GDP. So if we were to tax that at about a third of that amount, then we would be able to, I mean, if we were able to even reduce the shadow economy to levels of France, Canada, law abiding countries, not even eliminated completely, we would add enough tax revenue that would more than double all our expenditures on health. It would be much more than anything that we spend on primary secondary education or academic education and so on. So we would give us a lot more resources. That's part of the issue. The other part is where does the money go? And in this case, we have a major problem of non-transparency. The budget has thousands and thousands of budget items, but you can't really collect them in a way that can tell you who's receiving the money. And so all we can do is say, we look at the total amount, which is what it is, and we can also see where it hasn't reached in terms of the outcomes, education, infrastructure and so on. And the issues are problematic. So that issue is a create a bigger tax revenue, basically, which would also enable us to reduce the tax burden, at least on some of the people in Israel that are paying the taxes, while also having a lot more available to deal with the root issues that Israel need to deal with. You mentioned, Dan, in one of your Times of Israel, it's a five-part series. I'll put a link in the description for anyone who's interested. It's really worth reading. And I think in one of your pieces, you sort of talk about the 1970s as being this kind of real pivot point in Israel that the country was doing relatively well. It was obviously very new at that point. And it's sort of deflected. There is in one of your graphs on the Shores Institution site, you have a very interesting one that shows the extrapolated course of growth up to the 70s, GDP per capita growth, I believe, and it's less than that. You mentioned in your blog that it was sort of the started government policy favoring specific interests over the greater interest. Can you talk a little bit about that and also in terms of the income inequality growing since that point? First things first, the fact that we were a relatively young country or poor country doesn't mean that we should be growing faster. It may seem intuitive that a poor country, all it needs to do is copy information rather than invent it. I'm not even talking about illegally copying, but you don't have to invent the wheel. Just learn how to use the wheel. So on the face of it, poor countries should be growing faster than wealthier countries because they're just catching up. That's just not happening. I'm a growth economist. That's one of my areas of specializations. It's one of the first thing that we teach the students is to move that illusion out of the way. The average growth rates of very poor countries are roughly 2%. Average growth rates of wealthy countries, roughly 2%. The variability is much bigger for the poor countries because some of them are actually on track and others are poor because they're mishandled. The primary thing that affects a growth is basically policy. Israel, in that regard, was very unique. When it was created, on the one hand, finding wars where we didn't even know if we'd be alive at the other end of the wars, rationing food because people were inundating Israel with only the clothes on their backs, either Holocaust survivors or refugees from the Arab countries, and while rationing foods and building towns for these people and roads and so on, the founding fathers somehow found the wherewithal to create research universities and hospitals and the things that you need, basically, to move a country on a path to catch up with the other countries. And we were growing like crazy. We were growing very, very quickly until the mid-70s. We were catching up with the leading developed world countries. However, and that's a big however, what happened was that the same party was in power for basically 25 years until the Yom Kippu War. They became quite arrogant and increasingly corrupt in some cases, and people got tired of them once the Yom Kippu War was understood as a big debacle, basically a preparedness. Basically, we as the nation decided not just to throw out the water, but the baby with the water. And it was a process. It took us a few years after the war, but in 77, we basically threw them out and we began what cemented our new trajectory. We never recovered from the war and returned to our old path. We moved to a much shallower and a very steady path, a 50-year path, basically almost 50 years since the mid-70s, which is relatively slow growth. If you compare Israel's growth to the countries that were similar to us in the early 50s, we grew faster than them until the 70s. If you compare Israel to countries that were similar to us in terms of income per capita in the early 70s, we grew slower than most of them until recently. So we really moved from being leaders to the back of the pack in terms of countries that were similar to us at the beginning of the period. And the reason primarily that affected our growth path before the 70s and after the 70s, it has to do with national priorities. Where does the money go? If it goes to building the infrastructures that you need to grow, infrastructures are not just physical, not just roads and rail and so on, but also human capital, education. We built universities, good universities, that created basically the foundations for an entire high-tech sector. Nobody knew what high-tech would be. Nobody could guess what it would be, but we still had a Technion and a Hebrew University and Tel Aviv and Weizmann and so on around so that their graduates were able to capitalize on this in the 80s and 90s. So these foundations were built once upon a time, but since the 70s we neglected them. If you look at the investment in higher education, for example, the number of senior faculty per capita roles exponentially from 1948 from more of an independence until 1973, we nearly reached American levels within 25 years in terms of the number of faculty per capita. Since then it's just taken a freefall, falling by 60% steadily since the 70s. If you look at the number of beds per capita in Israel, hospital beds, they were relatively stable until 1977, the year of the pivot to national priorities. And ever since then they've been dropping like a rock so that we have one of the most congested hospital system in the world. People get sick as a result of it and so on and so on and so on. You can basically follow this in one area after the other, congested roads. They were, we had congested on the road. Number of vehicles per kilometer roads identical to the small European countries in 1970. Today's nearly three times that level, although we have many fewer vehicles per capita because we're poor and the vehicles cost more money. It's just a very severe lack of investment in the areas that benefit the national good. Instead, the money was diverted into other areas. Again, we don't have budget transparency so I can't tell you how much went here and how much went there, but we know just like we know from the outcomes where it didn't go. We also know from outcomes at least some of the directions that it did go. For example, the Haridim, the ultra orthodox were never in any government coalition until the pivot in 1977 ever since then. They've been in nearly all of the government coalitions and they have a price. And that price is actually tremendous. It's not just money. It's basically leave us alone, leave our children alone, let us deprive our children of a basic education core subjects, but also give us money. And the increase in money led to two primary things among the Haridim. One of them was basically a free fall in male employment. Israelis tend to think that Haridim males never worked in Israel. Well, actually in the late 70s over 80% were employed. And that fell to less than 40% over 30 years. And then when you look at fertility rates, fertility rates went from six children per family to seven children per family, just one decade, the 80s. And then they rose above seven in the 90s and early 2000. So we know where the money went. It went, that's one direction. Another direction was after the Six Day War, this began already in 1967. Israel grew. We developed Sinai, which we eventually returned. We developed the West Bank and Gaza, Gaza that we returned West Bank. I'm not going to go into all the politics and the story behind it, but clearly that cost money to build. And that came at the expense of the other stuff, of the stuff that benefited the national good. It went to sectoral interests and personal interests. You can see it in the caliber and the type of politicians and their interests that we have today. How many of them are thinking about the greater good and how many of them are thinking about their own very small electorate and nothing else? I think a common objection that people would have done when you say that, for instance, okay, our hospital network isn't where it should be. You mentioned, we've talked a lot about the OECD, the Organization for Economic Cooperation Development, which has 38 different countries in it. And I sort of wonder how fair do you think the comparison is between Israel and these other countries? Do you think it's fair that Israel can be compared internationally? Because people would object when we talk about stuff like the investment in education and all that, that it's because Israel has extraordinary defense costs. But based on what you're saying, it doesn't really sound like that's necessarily the full picture for why the money isn't going where it should. Defense has always traditionally been an excuse. We don't have enough leftover for civilian uses because we spend so much on defense. But one of the graphs in the graphs gallery on the Shoesh website that you can see is we net out defense spending. So we show public civilian expenditures, public expenditures, net of defense in Israel and in the OECD. And from the mid-60s until about a decade and a half ago, we were spending at least as much as the OECD average. And during the time of the pivots in the 70s and following in the 80s, we actually spent a lot more than the OECD civilian money, not defense. Defense is on top of that. So there was no lack of money to stop going in the directions that it should have been going. Let's put it this way. The relevant comparisons for Israel are developed world countries. All of the developed world countries are in the OECD. Not all of the OECD countries are developed. That's a different story. But when we show the comparisons, we compare Israel to all of the OECD countries and let the reader decide who he wants to compare to. But in general, not all of those countries are relevant, certainly. Only the developed ones are. And the reason the developed ones are is because we have the capacity to be at the top of the top. Our universities are cutting edge. Our high tech is cutting edge. Our physicians are state of the art. There is no reason why we shouldn't be at the top of the developed world and not floundering way, way below and falling further and further behind. Let's talk about income inequality. So income inequality measured by the the Gini coefficient with, you know, one being perfect inequality, but it's a measure of the level of income inequality in an economy. And what I thought was interesting from your graphs is we're seeing kind of the income inequality steadily catching up in Israel since the 70s. Just just as you say that pivot point occurred. And now it seems we have quite a high level of income inequality. The the figure I got was that we're about 10% less unequal than the US, which of course is very, very unequal as economies go. So there's a lot of sort of theories for reducing incoming inequality, bringing more people into high tech where there's significantly better conditions and salaries. Where is incoming inequality in Israel today relative to the OECD and how do you think it can be reduced? Actually, we can talk about income inequality and poverty. The way we measure poverty is a relative measure. So it's sort of income inequality. Because we look at the share of people below the poverty line and the poverty line is half of the median income. So it's a relative measure as well. And in both of these cases, Israel is kind of a study in irony. On the one hand, when you look at say poverty in in gross incomes, we don't have a problem. Poverty and income in gross incomes in Israel. In other words, in terms of what we are able to make, we have one of the lowest poverty rates in the OECD. However, what matters is not poverty and gross incomes of poverty and net incomes. And in terms of poverty and net incomes, we have one of the highest, if not the highest rate poverty rate in the OECD. In other words, we're sitting at both ends of the OECD and that only highlights how much we have control over the situation. In other words, what happened was the source of the issue is or the source of the explanation has to do with a natural experiment that Israel did in the past two decades. In the Intifada, 20 years ago, we had a huge recession in Israel, buses blowing up all over the place, restaurants blowing up, people getting killed all over the place, and the economy was was was tanking. It was in a deep dive. And we were hemorrhaging money and money was being taken out of Israel. We reached nearly five shekels to the dollar, $4.99 to the dollar in June 2002. And the government had huge deficits and high debt ratios. And it was clear that it needed to cut the budget. Actually, the finance minister at the time is our current prime minister, Netanyahu. And he did the right thing. He basically cut the budget. And while Sharon was taking care of Sharon, the prime minister was taking care of the terrorism, Netanyahu was taking care of the economy. And he slashed the budget, basically. And that included, among other things, cutting benefits. These benefits that had gone through the ceiling because of the Kharedim and all these other special interest groups were slashed. That led, among other things, it led to a drop in fertility rates among the Kharedim temporarily until the money started flowing again. It also led to an increase in the Kharedim male employment rates and female employment rates. But the biggest thing is that it induced people that had never worked or hadn't worked for years to start working for the first time. And that showed the conundrum that we have here. It wasn't that we had planned this, this was like an outcome of a natural experiment. We needed to save the economy so we slashed the budget and forced people to work. So we showed that it is possible to force people to work. But we left out the other part of the equation, which is giving them the skills to work and the tools to work in a modern economy. So basically, we had people that now began to work. So they are all of a sudden above the poverty line in terms of gross incomes, because they had no money before and now they have money. So it moves them above and things look better. But the money that they earned was so low because they still don't have skills that it didn't make up in many cases for what they lost in terms of benefits. And so in terms of net incomes, we have very high poverty rates and high inequality rates because the people who are working have been deprived of the basic skills to work in a modern economy. We have very lousy schools, as we mentioned at the outset of our talk, and a very bad follow-up in terms of vocational training and so on. Not to mention the other infrastructure to bring in what we call periphery, make them suburbs basically by a normal transportation infrastructure and so on. So these deficits basically inhibit the income or reduce the income potential of people who are now forced to work but are not earning very much, not earning as much as they could otherwise. Is this stand reflected in because I know one thing that people have mentioned a lot is that the per capita productivity in Israel has historically been very low. So is that figure a reflection of the fact that a lot of people were maybe brought into the workforce but weren't necessarily being very productive? What exactly does that per capita productivity number reflect? You raise an important point. One of the misconceptions in the public discourse, not just in Israel but across the entire developed world, is that either I'm using American terms of bleeding heart and liver all I care about is taking care of the poor and the impoverished and reducing inequality or I'm some crazy greedy capitalist all I care about is economic growth because you can't have both. So you need to find an optimum between the two. That's the way most people think. That's what driving a lot of the policy decisions and it's simply incorrect. I mean it is correct if we're dealing with symptomatic solutions. In other words, I have poor people. How do I help them? Give them money. How do I raise the money? I need to raise taxes. If I raise taxes, I inhibit the desire to work and to invest. That hurts growth and therefore either or. But dealing with the root causes of poverty and inequality means giving people the tools to work in a modern economy, giving them a better education, giving them the conditions of surrounding environment, connecting them with infrastructure and so on so that they can easily make it to where the jobs are and so on. That clearly helps them out. So you're going to have less poor people as a result of that. But in addition, it helps growth because you have now included a lot more people in the economy with better skills and a better ability, higher productivity, which leads to faster growth. Think of an engine. You have all the cylinders of the engine and we're running on fewer and fewer cylinders because we're not including everybody. We're not doing them a favor by including them. We need them. We need them to start running this engine. Just to give you an example from the opposite direction, taxes. When we look at income taxes, half the population in Israel today is so poor, they pay no income tax. They don't reach the bottom rung of the income tax ladder. 20% of the population alone funds 92% of all the income tax in Israel. And that's steadily rising over time. It was 83% 20 years ago. So if we don't include them, it means more of a burden on the few who are holding up an entire country. So again, this is not altruism. We need these people. We need to give them the skills and tools to work in a modern economy. And by the way, one of the things that became very clear in recent months is that giving them a good education is not just giving them the tools to work in a modern economy. It also means giving them the tools to understand how a modern democracy works, what it means, what checks and balances are, what the difference is between majority rule and tyranny of the majority, which apparently most Israelis don't have a clue about. So all of these things are very important when it comes to voting. In a democracy, if you want to save the democracy, you need people to know what they're voting on and what kind of impact it's going to have on their future. An interesting study I've come across before, Dan, is that there's of course a huge amount of talk about high tech and recently that the foreign venture capital flows are already decreasing and we're seeing apparently money leaving Israel because of political uncertainty. And of course, the day before we recorded this interview, Moody downgrading Israel's international credit rating, which is going to have potentially other ramifications. But this very vaguely defied high tech sector, which I've struggled to get an exact definition of even from the CBS, but I think they said it's based on the percentage of workforce and R&D. But if we can just accept high tech to be the technology players that are in Israel, when you talk about giving people a better education to increase their workforce participation, does that mean just getting people into these very specific tech careers? What would you say for those who might say certain people just don't have an affinity for work in these industries? No, the whole point, it goes in the opposite direction. In other words, the way economic growth works is that productivity improvements drive economic growth, which means you have an increasing demand all the time, increasing demand for skilled and educated workers, people. You need more and more such people, not just for high tech for anything, instead of people who clean the streets with brooms, you have one guy driving this machine, not high tech, but it needs to have a driver's license. You have a garage mechanic who at least knows how to hook up a computer to the car, get all the diagnostics immediately, and he can do three times more vehicles in one day than he could have otherwise. Not everything is high tech, but you need some basic skills. What we need to do is increase the supply of people with those skills, which means drive down the supply of people that lack the skills. Clearly, not everyone can do all these things, but the moment that you drive out all the people who are able to, clearly they're going to be better off because they're going to have higher employment rates and higher wages. But the people that you left behind are also going to be better off because they're now competing with less others for the decreasing number of jobs available for such people. It's the only way to deal with it. Israel, what we're doing is not only inundating the workforce with people without the skills, by not giving them the skills in education and so on, but we're also importing hundreds of thousands of foreign workers from abroad who are unskilled and uneducated and basically just making a bad situation a lot worse. So we're doing the opposite of what we need to be doing. We need to move as many people out of the uneducated or less educated and unskilled categories into the categories where the demand is increasing. How do you say this paradox whereby, I mean, I think if we flash on the news at any given day, you read about sort of the amazing research being done at some of the Israeli universities, Hebrew University, constantly making amazing scientific discoveries, Israeli startups, a lot of very world-changing technology come out of here. So it seems like there is centres of excellence that are really thriving in Israel. Do you see the problems we're seeing in Israel more, so it's related really to sort of the primary school or does it extend throughout the education system all the way to postgraduate level? No, the problem is primarily in the primary schools and secondary schools. Primary schools are the feeder to the secondary schools or then the feeder to the higher education. Let me take a step back. One of the things that we know has a huge impact on scholastic achievement, not just in Israel, everywhere in the world is parental education. The more educated parents are, the more they can help directly their children. They tend to be wealthier so they can live in better neighbourhoods with better schools. They can buy tutors and so on. That exists everywhere. The question is, to what extent does the public education system combat that? In other words, how does it help those whose parents are relatively uneducated to overcome that deficiency and still make it into basically the high-tech and so on? In that regard, Israel, again, has one of the worst education systems in the developed world. We are one of the least capable of being able to do that anywhere. We're not even trying with Haredim or the children already. We're just sweeping that under the rug, but that's a group that's multiplying every 25 years. Every generation, the share of Haredim and Israel's population is doubling. That's an exponential function. We haven't even spoken about what's going on in that community, but that's just going to end date everything according to the Central Bureau of Statistics in 40 years after the children in Israel between the ages of 0 and 14 are Haredim. We're talking about things that we need to deal with while ignoring the elephant in the room here that's just going to destroy the entire room. First of all, it's going to destroy itself, but it's also going to destroy us in the process unless we get a handle on what's happening with Haredim. I was looking at the population density of Israel, which is already pretty high, especially when you compare it to comparable geographies that aren't just, say, city states like Hong Kong and Singapore. The projections, I believe, the population getting to where we are now, 10 million to 20 million relatively quickly, and then coupled with looking within the demographics and seeing such a Haredi population. Let me ask you what happens if we continue on our current trajectory. You wrote a blog post that said that a lot of people are comparing Israel to Hungary right now because it's a populist regime, but you said actually some kind of Jewish version of Afghanistan would be a better comparison. What is to be bleak for a second while you regard is the worst case scenario in which Israel does the opposite of everything you, Shoresh, other economists are suggesting. What could that look like within a couple of decades? The reason that most people tend to speak about Hungary and Poland and to some extent Turkey and Russia is because we're following what Harvard professor Danny Rodrick, who's a Turk originally, but he's in Turkish Jew, lives in the States for many, many years. He wrote as the populist authoritarian playbook, which has like four main steps that were followed by Hungary, Poland, Russia, Turkey, all of these countries. These steps are, so I don't get it wrong, capture the judiciary and media. Everything that's happening here is step number one. We have a whole channel 14 in Israel devoted to one person, Netanyahu, basically this is after he's already had a newspaper created just for him. Two is identified target the enemy of the people these are the leftist elites, the privileged, so-called privileged, who are disenfranchising second Israel. Commonly, this is broken into very simplistically Ashkenazi and Mizachim. Let me tell you, my mother was born in Baghdad, so I'm not exactly a pollock here, and my wife was born in Iran. There's a lot of racism here involved in disenfranchising, actually the part that actually went and studied and made something for themselves, put that aside. The third step is to create an alternative reality through control of the public narratives. For example, what we see today in Israel, the fact that the stock market is falling while it's rising in the G7 countries, other than England, it's been rising here, it's been falling ever since the government was elected, even though we had one of the strongest economy in the post-COVID years, in terms of growth and in terms of inflation and everything is going down. So what is the reason for that is because we're all crying. We economists are complaining that the economy is going to collapse, so everybody's withdrawing their money. It's not like foreigners cannot see what we're seeing. You cited Moody's, these are professionals who see the exact same things we do, they're not saying what they say because of us. The fact that we had last week and the week before terror attacks from within and missile attacks or rocket attacks from Gaza, Lebanon, Syria, so how do you shift the blame away from yourself? It's not because the police went nuts with Ben Ville and so on in Al-Aqsa and so on, but because the previous government made a gas agreement with Lebanon on territorial water. So it's clearly not related, but you shift everything to these alternative explanations and then finally the fourth one is to concentrate power and establish a one-man rule, which is exactly the direction they're going. So when you look at this, it looks like here we're fitting the model exactly, we're going exactly the direction of Hungary, Poland and so on, except that this is Israel. And there are two things going on here that didn't occur there. One is the demographics. The demographics are taking us not in the direction of those countries because again the population group that joined the fastest, the Khalidim was six children, six and a half children per family compared to two for secular Jews, or for the supremacist Jewish parties who are now in the coalition, they have four children, over four, between four and five children per family. The demographic direction is Afghanistan. These are very, very fundamentalist religious groups who are not tolerant of anything other than their own beliefs, their own groups, very racist towards everyone else. So we're not going to be stopping at Poland and Hungary. We're going to continue that direction. However, and this is a big however, we have something else here that those other countries didn't have, which is a very strong democratic foundation, at least in part of the country. And we're going out in the streets and we're making a ruckus like no one else has. None of these countries saw anything like what we're having today in Israel. And people are coming out of their comfort zones. So many of the things we spoke about during the past three quarters of an hour and things that we've been writing about, I've been writing about in Shosh for over 25 years, we are now at a point, basically, we're at the crossroads. We need to decide, where are we going forward? Are we looking right now at what the promo is or is this already the beginning of the full feature? This is what the movies that we're going to be, our children and grandchildren are going to be seeing. My hope is that enough people now understand what the future is going to look like, just because it was brought forward, the demographics aren't there yet, but they will be one day. But because we have a prime minister on trial for corruption that nobody else would touch with a 10-foot pole, the only parties willing to make a coalition with him are the fundamentalist parties, the Khaldim and the racist parties. So we're getting a taste of what the future is going to look like, to the extent that we can harness that energy, not just to turn back what we're seeing today, but also to flip the national priorities back to something that gives us a sustainable future. I'm hopeful that that's where we're going to end up. It's not a given. Things are still in a state of flux, but this is like our second war of independence. My parents were both in the first one. They were in the Palma, they were teenagers at the time when everything looked dismal and bad and all they had was hope and look what they created that generation. Right now we are looking at a situation where the government can do whatever it wants seemingly and yet look at how the energy that it's creating created out in the streets by so many Israelis and say no, this is not, we're not willing to take, let you take away our country, take away our democracy and move us in the direction of Afghanistan. It's not going to work. We'll see how it turns out. Stay tuned. So I don't know. Let me ask you, Dan, about one aspect of economics that really affects everyone and that is the cost of living, right? It's extremely high in Israel at once. I believe was that it was something like relative to salaries, which compared to, you know, the U.S. with this cost of living we often exceed was the highest in the OECD. Not that the cost of living was the highest, but that relative, the real income was the highest. Do you think, I mean, we've seen sort of a car for grocery store coming here recently, the Catalan just opened in my neck of the woods in Jerusalem. This is all from what I can see good news, foreign competition coming into the market. What are for those who haven't sort of looked this up? The root causes of what seems like a very absurd cost of living. And what do you think can be done to reduce it further over the long term? Putting aside the issue of housing, which is a story in and of itself, but in general, there are two primary problems here. One is a major lack of competition. This is a very small country, but like an island country in a sense, we don't have any developed world countries around us. We don't really have freedom of movement anywhere outside of Israel's borders unless on a plane or a ship, which raises the cost of bringing things here in the first place, but it also creates a situation where special interest groups have the ability to influence politicians in a small country and basically limit the inflow of goods. So we are pretty notorious in that regard. There has been some loosening of it, but still we have a standards institute instead of adopting U.S. standards or European standards saying, why do we need to replicate this and create our own? We have our own. So Hyde's ketchup, who invented ketchup, is not allowed to write on its ketchup, then it's ketchup. Okay, it's a condiment. It's not a ketchup. They're not allowed to write it because that's what the standards institute of Israel decided. So there are all kinds of barriers to entry here that we are far from having removed. That's one aspect of it. Another aspect, no less important, possibly even more important, is the productivity issues that we spoke about earlier. Our inability, basically, aside from high tech, which is super productive, the rest of Israel's economy, the productivity is way, way below the OECD. I mean, think about something that's very non-high tech. If the roads are all congested, which they are, twice the congestion three times, three times the congestion of a small European country, and I have a company and I need to move stuff from point A to point B, but my drivers are all sitting in traffic jams. So I need double the drivers and double the trucks just to move the same stuff. That means the productivity just fell by half. Their costs, their wages are going to fall by half, but my costs are rising. It's very difficult for me to sell things cheaply in that regard if I'm not unable to compete. So it's a combination of factors. Then you have things that are related to religious intervention, basically. Elal, which flew seven days a week until the 1970s, now basically has to compete with other airlines, even though we're tying one of its seven legs behind its back, it can't operate on one of the seven days. 14% of its income gone. Same thing with stores and with other companies. If you shut them down, force them to shut down rather than allowing some flexibility in terms of you guys can work on these days, you guys can work on these days as long as you have rest and so on. We are intervening in very, very major aspects of production, commerce, and so on that's raising prices. That's in general. In terms of housing, that's a whole different story and it's related to what you were talking about earlier, primarily. Israel's population is growing so fast. We are the third most congested country today in the OECD, but in nine years we're going to be the most congested and in 40 years we're going to be among the top 10 most congested countries alongside Bangladesh or Wanda, all these wonderful places that nobody really wants to live. But that's the kind of fertility rates that we have. We have third world fertility rates and again, these people are not receiving a first world education. It's just going to pull us down in terms of congestion, in terms of everything else. You're going to have more congestion on the roads, more congestion in the hospitals, more congestion in the classrooms, and so on and so on and so on. It's certainly for housing. A country that's the size of New Jersey where half is desert anyways or military training areas, you're very limited in where you can live. Talking about fertility in Israel is still a taboo subject and until we face that deal with it on, we're looking at a situation where housing prices have only one direction that they can go, which is that. To wrap up, Dan, if you were asked three policy recommendations that you think could be implemented in the socioeconomic area to charge a brighter future for Israel than becoming a Jewish Afghanistan, what would those three recommendations be? Two actually are not even in the socioeconomic realm, but they're necessary for doing the third one, which is first, we need to change your system of government. It's totally dysfunctional. We have a situation where regardless of who's the prime minister, the ministers that head the most important ministries, their objective function isn't to help the prime minister succeed, but to replace them. That doesn't work. That's A. B, we have no checks and balances here between the executive and the legislative right now, they're trying to get rid of the checks and balances with the judicial too, so that the executive controls. We need a system of government that A, the executive can actually work, but B, you have checks and balances with the other two branches of government. That's fundamentally important, where the box stops at the minister and the prime minister or president or whatever you want to call them, and these are people who actually understand something about the field of their cabinet ministry. That's number one. Number two is a constitution, basically to set these things in stone, and so it'll be more difficult for the next government after the next election to throw all this out and return us back to where we were. These two things are important, but all they'll do is buy us time given the demography, but that time is important for the third and possibly most important step, which is overhauling our education system. From the top down, everything, we need to completely upgrade our core curriculum for all of the children in Israel. Like I said, we're at the bottom of the developed world, that's even without including the Haridim. Clearly, we need to raise the standards so that the primary schools are going to be much better, and then the high schools are going to be able to teach at higher levels, and we can have more research universities rather than just non-research colleges and so on. Fundamental, that's the content aspect. Then you have the teacher issue. How do we choose, train, compensate teachers? We need to flip that on its head. Right now, while we have some teachers who are teachers who could do anything in any walk of life and are doing it out of conviction and a set submission, they're the exceptions to the rule. The rule is that our teachers have the lowest level of knowledge and math and reading than the teachers in any of the other developed world countries. How do we expect them basically to bring up our kids to the levels that we need? There's the issue of teachers, and third is the way that the system is run. It has today, by far, it surpassed the defense ministry as the highest budget item in the budget, but it's like throwing money into the sea. We're not getting anything out of it except a huge waste. Measurement and evaluation is like beyond these guys. They've been giving matriculation for dozens of years, but they're not calibrated. There's no way to know. Are we improving? Are we failing? What is the direction? You couldn't run a grocery store the way that the biggest budget item in Israel is being handled. It needs to be fixed. If we do that, let's put it this way, if we don't do that, then the trajectory that we're on will continue eventually. The demographics will just continue and we'll reach the place where Israel will collapse. But if we do fix it, then we're talking about a whole different Israel. In Israel, where clearly it's not just high-tech, everything is going to be at much higher productivity levels. It will lower living costs. It will change everything that we see here. But if we don't, just going back to the punchline here, if half the kids in Israel today are getting a third-world education, they belong to the fastest-growing parts of the population. When they grow up, if we don't change that, they will only be able to support a third-world economy. A third-world economy can't support a first-world healthcare sector, welfare system, but also not a first-world army. Without a first-world army in this neck of the woods, there will be no Israel. It's an existential issue. This is something that is not a luxury that we can, maybe we can deal with it or not. If we don't deal with it while we still can, which is right now, apparently our last chance, then there are going to be major issues that our children and grandchildren are going to face. Dan, thank you so much information across so many different domains and a lot of food for thought there for people interested in the, I would say the neglected discussion about literally everything regarding socioeconomics in Israel, because as I said at the very start of our conversation, one of my pet peeves is that I don't know how many elections there have been since I moved here eight years ago, probably too many, but I don't recall a single one in which there was really, this was a core part of a party's manifesto was taking cohesive stances on all these very, very key issues, as you just said, not just for creating a better equal of fairer Israel, but also ultimately for really tied to the very survival of Israel. So Dan, if people want to keep on top of you, I mentioned your five-part Times of Israel series, The Shorosh Institution, whose graph gallery I will put a link to in the description because for other people of strange inclinations who enjoy pouring over lots and lots of graphs, I think it's an amazing collection you have up there. Where else can people find out about your work, Dan? There's also in the Shorosh website in general, there's also a publication section. So people actually want to read explanations, what's underlying the graphs and the pictures. There are the studies that we do there. All of that material is there. There are videos and video clips of talks and so on. So there's a lot of information there and it's widely available, freely available and everything that we do is in both English and Hebrew. So there's no excuses for people not to get into it. We are trying to be a resource for anyone who cares deeply about the direction that Israel's headed. It's why we created Shorosh to affect the public discourse so that we will move from the superficial discourse to basically what are the root issues? What are the things that we need to deal with while we still can? Great. Dan, thank you so much for your time. It's been a pleasure speaking to you. Likewise. Thank you for having me.