Book Review: George Gilder’s Brilliant ‘The Israel Test’

Without defending some (or a lot) of its anti-growth economic policies, the easily-forgotten truth is that California is by far the most enterprising, entrepreneurial state in the most enterprising, entrepreneurial country in the world. Evidence supporting the previous claim can be found in the fact that 60% of the world’s venture capital investment annually flows to startups based in California, not to mention that if the Golden State were a country, it could lay claim to being the world’s 4th largest economy. When conservatives oddly politicize what booms as a “basket case” (and other pejoratives like it), they shrink themselves.

Israel as a standard of comparison for California

The great George Gilder has long recognized the herculean genius of California’s entrepreneurs, along with that of the remarkable investors who match west coast genius with capital. As he observed in his spectacular 2023 book Life After Capitalism, it’s not just the economic activity taking place within California that people should marvel at, it’s the surges in productivity that California-based innovation has long made possible outside the state. California is decidedly not an economic basket case, but the world economy would most certainly be a basket case without California.

Gilder’s past insights came to mind quite a bit while reading his highly informative, excellent and crucial new book, The Israel Test: How Israel’s Genius Enriches and Challenges the World. This essential read gives life to Gilder’s assertions about California’s economic impact on the world, an impact that is very much informed by technology and financial sectors well populated by Jews.

California thrives on a few genius inventors

For those who don’t know why California thrives despite certain policies normally inimical to success, they’ll understand better from The Israel Test. As Gilder makes plain on the book’s very first page, “we Americans still face our Israel Test, our humbling need to not only recognize our dependence on the genius of the Jews in the United States, but also to acknowledge our reliance not only for innovation but even for our national security on this diminutive and embattled Middle Eastern ally.” While the focus of The Israel Test is not California, what’s apparent is that Israel, like California with its sizable Jewish population, is similarly instrumental to global economic health and security. Yes, it’s increasingly true that the world economy would be a basket case without Israel.

In Gilder’s words, “Planetary prosperity depends on the outsized genius of a tiny minority of human beings.” More and more of this “vital few” (HT: Reuven Brenner) talent resides in Israel. Which is the purpose of Gilder’s book, one that should (and hopefully will) attain a large global audience. Particularly as Israel’s enemies spew hideous rhetoric of the “river to the sea” variety, those who know better need to understand that the words aren’t just ugly, not just sickeningly inhumane if acted upon, they would also be globally disastrous economically.

Israel as a technology incubator

Looked at through a U.S. economic prism alone, Gilder writes that “most of America’s preeminent technology companies” along with its healthcare giants “still depend on crucial inventors, engineers, intellectual prosperity, and laboratories in Israel.” Considering our military planes like the F-16, numerous inputs for the latter are crafted in Israel. Assuming an all-out missile attack on the United States, Gilder asserts that “Israeli technology will be the reason we likely survive it.” Despite this, the country suffers an “insidious spate of abusive nonsense detailing the alleged flaws – indeed the sins – of Israel.”

What’s odd is that the abusive nonsense directed at Israel frequently originates in the United States. Odder still, as Gilder conveys through brilliant Israeli entrepreneurs like Shaul Olmert (son of Ehud, former prime minister), is how much of the criticism of the country comes from Israelis themselves. Gilder laments that Jewish outperformance isn’t just financial, technological and cultural, that the Jews “outperform all rivals even in the arena of anti-Semitism.”

Looking at the U.S. alone, Gilder is of the view that “the United States has all too often failed the Israel Test” through its perception of “Israeli power, prosperity, culture, genius, and self-defense as a problem rather than a supreme global asset.” And a global asset it is. At the same time, it requires stress just how much of a local asset Israel is.

An under-appreciated prize

Gilder writes that before the Jews returned to Israel (1/6th of 1 percent of the total Middle East land mass), the land “scarcely counted as a desirable asset or a prize to be awarded to anyone before the Jews reclaimed it and made its economy valuable and its land capable of supporting life.” And it was surely not desired by Arabs who now make pushing the Jews into the sea from this tiny bit of land their modern raison d’etre. Major evidence required to make this claim can be found in what the land surrounding Israel looks like now, not to mention what Israel would look like if the Jews departed or were pushed out.

Which explains Gilder’s assertion that contra all the rhetoric about “occupation” and forced “settlements,” the “Jews were not occupying a nation,” rather “they were building one.” What they built has proven rather appealing to non-Jews, including Arabs. Gilder notes that “Arabs flourish in Israel as they do nowhere else.”At present, “Israel, Gaza, and the West Bank accommodate some 5.5 million Arabs, with a population density ten times that of Jordan.” Human migration is the purest market signal of them all, and the migration of Arabs into and around Israel signals the soaring economic opportunity that reveals itself wherever the commercially skillful take their talents. Genius, per Gilder, is “a source of wealth and opportunity for all.”

About those settlements

Which raises obvious responses to the frequent critiques of Jews and their “settlements.” To say these movements are negatives is like saying it would harm a limping U.S. neighborhood if well-to-do, upright neighbors moved in, or that a business district would be harmed if a McDonald’s, Whole Foods, or Apple Store showed up. Obviously not. Where prosperous people and businesses go, other thriving businesses and people frequently follow. Where the Jews go, vast improvement follows. Gilder writes this in more of a protective sense for Israel from guns and bombs, but when he writes that “Israel is not too large but too small,” it’s easy to apply the previous assertion to the wellbeing of the non-Jews in the region not fortunate enough to live in Israel.

Sadly, this view is not shared by Hamas, Hezbollah, the PA, and a myriad of other entities that have directed so much ugly rhetoric, violence and murder at Israel and its people. Even though the Jews have made enormously desirable what formerly wasn’t, Hamas et al obviously want the land back. Or do they? Considering the look of the lands abutting Israel, what a disaster for the various terrorists groups if the Israelis were to pull an Atlas Shrugged of sorts and leave.

Talk about discrimination

For now, Hamas and other terrorist organizations like it somehow frame Israel’s prosperous, world-enhancing existence as the problem for the region. Worse, they get help not just from Israel’s critics, but also its defenders. Gilder writes that “the central error of Israel’s defenders is to accept the framing of the debate by its enemies, whose idea is that peace depends on some marginal but perpetually elusive improvement in Israel’s behavior.” Which is something to think about given the Arab population within Israel itself.

While the Israelis live next to Arabs and Christians within Israel, while Arabs and Christians serve in the Knesset, Gilder notes that “the dispute over the settlements is an argument over whether Jews may reasonably expect to be permitted to live among Arabs anywhere.” Not now, it seems. It’s accepted as a “natural right” of Palestinians “to be squeamish about living anywhere near Jews.”

It brings us to the why (or the presumed why) behind the hatred. Religion doesn’t seem to suffice, which means it’s difficult to countenance the belief of some that “The Jew carries the burden of God in history [and] for this has never been forgiven.” Gilder references the latter as a good summation of what Joseph Telushkin and Dennis Prager (Prager writes the foreword to The Israel Test) believe, but it didn’t ring true and Gilder says as much. Such a view ascribes thought that’s hard to find behind all the hatred.

Maxim Gorky admitted the real reason – jealousy

More compelling is the explanation offered by Russian writer Maxim Gorky (and cited by Gilder) that anti-semites “dislike the Jew only because he is obviously better, more adroit, and more capable of work than they are.” Gilder seems to agree with Gorky. He writes that “The source of anti-Semitism is Jewish superiority and excellence.” Gilder and Gorky are difficult to argue with, but as Gilder himself notes, Israeli prosperity within Israel has been a magnet for Arabs. Which is important to stop and think about.

Bringing California back into the discussion, it’s an undeniable fact that the Jews largely created a film industry that has lured millions west over the decades. More modernly, the technology industry that is heavily populated by Jews similarly exists as a major lure for non-Jews. Perhaps oddest of all, consider how Iranians and Jews live peacefully around each other in Beverly Hills at the same time that Iran the country is very public about its desire to destroy Israel.

Lack of freedom

It’s all a long way of saying it reads as perhaps a little too simplistic to say as Israeli journalist (cited by Gilder) Caroline Glick does, that “The enviers hate Israel.” There’s got to be something more? The view here is that it’s rooted in a lack of freedom. Where people are free to live and work as they wish, all the while broadly free of the excessive tax, regulatory, trade, and monetary barriers to production, they prosper alongside the Jews all the while recognizing how much they gain from getting to work alongside such remarkable talent. Again, Jewish prosperity is a magnet for much bigger populations that aren’t Jewish.

It brings to mind a question once asked of an old boss: why was Hollywood giant Lew Wasserman so greatly revered? What was it about him? The reply was that Wasserman was “Michael Jordan” in the film industry. He made everyone better around him. The desire to be better resides within us all, but when government gets in the way with policy errors that limit the human ability to prosper, those most capable of outrunning government error are scapegoated.

Prosperity dulls the edge of hate

Considering the above argument through the prism of the United States, no doubt there’s anti-Semitism in the U.S. But arguably a major reason it’s not nearly as evident in the U.S. has to do with all the immense economic opportunity that exists stateside. Contrast this with Germany and the Holocaust. It’s seriously hard to imagine that Hitler ever attains power absent the gruesome devaluation of the mark in the aftermath of WWI that robbed so many of all that they’d worked for.

Where people are prospering, they don’t have time nor the inclination for racist or murderous thoughts, nor do they seek scapegoats. As in, if the world were freer and by extension more unequal (in a free society genius is rewarded the most) and prosperous, the bet here is that anti-Semitism and its frequently murderous offshoots would be much less evident. This viewpoint shouldn’t be construed as an attempt to excuse hideous, frequently gruesome behavior, but it is to say that prospering people are happier and less violent. Freedom is the fix for so much in the world, including anti-Semitism.

Jews can cope better

Conversely, opportunity suffocated unleashes anger and the desire for scapegoats. History is clear that Jews are routinely the scapegoated, and particularly because they’ve proven more capable of overcoming barriers to prosperity erected by governments. Gilder references Jewish fortitude with his discussion of what happened to the former Soviet Union under Gorbachev when “the bulk of Soviet Jews” were released. He describes what subsequently unfolded as the economic equivalent of “a frontal lobotomy” for the U.S.S.R. Yes, even where there was little to no freedom to prosper, Soviet Jews managed to prosper in a relative sense as Anya Gillinson anecdotally notes in her excellent new memoir, Dreaming In Russian.

It further speaks to the economic boom taking place in Israel now. The Soviet Union’s loss was the world’s gain; that, or parts of the world gained immeasurably from the unshackling of so much talent. Gilder writes that “the most precious resource in the world economy is human genius,” and a substantial portion of the Soviet Jews found their way to Israel once freed from the Soviet Union. Getting more specific, Gilder writes that “immigrants from the Soviet Union constitute fully half of Israel’s high-tech workers,” and that VC outlays in Israel soared “nearly sixty-fold from $58 million to $3.3 billion” between 1991 and 2000 subsequent to their arrival. This looms large in consideration of the fact that “Israel has become a center of innovation second in absolute achievement only to the United States.” Stop and think about it.

The Soviet Union mistreated its geniuses

In thinking about what the Soviet Union (or Russia) lost in concert with Israel’s gain, think back to the needless Cold War. Leaving aside the U.S.’s arms buildup, Ronald Reagan’s much greater insight, one that Gilder doubtless helped Reagan arrive at, was that economically, culturally and personally unfree people would be no match for free people and the fruits of their freedom. No argument there, but stop and contemplate if Gorbachev (and those who came before him) had recognized the towering genius that was within the U.S.S.R./Russia all along. Russia quite simply had the people to be a global economic (and military) powerhouse if they’d just set the genius residing with Russia’s borders free. It staggers the mind.

Lest we forget, Gilder believes deeply in a tee-shirt slogan spotted by his editor (Richard Vigilante) during an Israel visit, and which said “Don’t Worry America, Israel Is Behind You.” As he sees it, both the U.S. economy and its military would be substantially reduced without the existence of the same Israel that’s been so profoundly lifted economically and militarily by Jews from the former Soviet Union. It’s a long way of saying that when Vladimir Putin claims the collapse of the Soviet empire “was the greatest geopolitical catastrophe of the century,” he’s engaging in non sequitur. More realistically, the Soviet Union’s or Russia’s failure of its own Israel Test was right up there among the biggest Russian tragedies.

Extermination of genius

As for greatest catastrophe of the century, geopolitical or economic, it would have to be World War II whereby so much of the world’s genius was tragically exterminated. About this mass slaughter of Jews, Gilder is so very correct with his assertion that “the rest of the world has suffered even more in absolute terms by the loss of the vast potential of the six million Jewish victims whose only sin was being Jewish on the European continent in the twentieth century.” About Gilder’s oh-so-correct statement, one that he in no way wrote to minimize the suffering of Jews, let’s please allow it to exist as yet another indictment of a profession (economics) that makes astrology appear serious by comparison, and whose PhDs assert near-monolithically that the upside of World War II was that it ended the Great Depression.

It would be difficult to find a sicker and more ferociously obtuse viewpoint than the one held by the vast majority of “trained economists” about WWII’s (and war in general) allegedly positive growth implications. Nothing could be further from the truth, or more dangerous. As Gilder makes plain, “no one can be rich alone.”

Economists misunderstand Europe – and California

Oh well, according to economists Gilder is incorrect. So deluded are they by the GDP “gains “achieved via killing, maiming, wealth destruction, and the rebuilding of wealth destroyed, that they’ve somehow come to the conclusion that the latter ended the Great Depression, after which American producers were allegedly rendered better off by a supine Europe suddenly bereft of its vital few. Worse is that economists have spread their tragic misunderstanding of prosperity to high-level thinkers like Yuval Levin and Edward Conard at American Enterprise Institute who claim that what makes the 1950s so attractive to nostalgic Americans is that so much of the rest of the was destroyed. Adam Smith is no doubt looking down mystified.

What happened in Europe alone doesn’t just indict an economics profession that embarrasses itself in all sorts of ways all day and every day (those same economists also believe economic growth causes inflation), it also to some degree exposes American conservatism as less serious than its practitioners would like to believe. Think “Eurosclerosis” and the various pejoratives lobbed at Europe by conservatives in similar fashion to how they denigrate California. According to conservatives, the biggest driver of “Eurosclerosis” is excessive rates of taxation that deaden the incentive to work.

Europe doomed itself by killing its Jews, or chasing them away

About the good of lowering taxes all and every way possible, no argument against will be made here. Taxes are a price, or a penalty placed on work and investment. At the same time, conservatives shrink themselves yet again when they ascribe Europe’s relative lack of prosperity to “tax rates.” What has Europe less prosperous was anti-Semitism that revealed itself in the most murderous of ways. Absent it, stop and think how rich Europe would be today, and by extension how much better off the world would be.

Quoting Gilder the same way but a second time, “the most precious resources in the world economy is human genius.” It lifts us all, only for sickening envy (Gilder, Gorky, Glick) or a lack of freedom (Tamny, surely many others) to reveal itself occasionally in the form of anti-Semitism that shrinks the portion of the population most crucial to cultural, health, and economic progress.

What Gilder believes about the importance of the individually brilliant brought to mind quibbles on occasion. In particular, his chapter about Benjamin Netanyahu as the man that propelled Israel “into the modern world of finance” wasn’t as compelling as the book’s many other arguments. For one, capital always and everywhere finds genius as Gilder’s own VC stats for Israel (a sixty-fold increase between 1991 and 2000) indicate. For two, the previous surge was per Gilder himself a function of the arrival of brilliant Soviet Jewry.

Talent overcomes even the worst policy, including in California

This isn’t to say that Nethanyahu didn’t bring better, more pro-growth policies to Israel. If Gilder says he did, than he did. At the same time, and as overtaxed and over-governed locales like California and New York remind us, talent trumps policy by many miles.

More on Netanyahu, the book plainly went to print before the tragedy of October 7, 2023. No expert on Israel (I’ve never even visited), isn’t the primary job of the prime minister in Israel to protect the people from the many terrorists who mean it the worst of harm? If Netanyahu is so heroic, doesn’t he deserve the slings and arrows of the present, and much, much more?

Which leads to another quibble with Gilder’s analysis. He writes that anti-Zionists view Israel as a mistake because of “discrimination against Arabs, sorely maldistributed wealth and income, a runaway engine of west bank settlements that represent an imperial ‘occupation,’” etc. Maybe that’s the consensus view, but my problem with Israel is that as presently constituted, it places the most brilliant people on earth directly in harm’s way.

If California passes the Israel Test, does Israel itself pass it?

The above had me wanting to ask Gilder while reading his spectacular book if Israel itself passes the Israel Test? By Gilder’s own estimation, many of the best and brightest within Israel share the negative views of the country held by some of its most ardent critics. That being the case, how can it survive? This is important precisely given Gilder’s own assertion that “no nation is more important to the survival of the United States and the world than Israel.” If true, or even if not true, is Israel itself passing the Israel Test?

About this question, in the aftermath of 10/7 I found myself arguing with Jewish friends that Israel must cease wasting Israeli lives on these wars. What is gained? Gilder argues that “conspicuous weakness is a prime cause of war,” and that’s long been the right’s consensus. But what good did the latter do the U.S. in Iraq and Afghanistan? And seriously, what good has it done Israel? Its military superiority well established time after time (think 1948, 1967, 1973, and many times since), the killers keep coming.

Should Netanyahu have simply walled off Gaza and had done with it?

Back to the argument made, I wanted Netanyahu to not respond, to let the hideous videos of heinous Hamas acts travel around the world in concert with intense quiet from Israel. I then wanted Netanyahu to announce that there would be no invasion of Gaza given an aversion to wasting even one more precious Israeli life on a war that never ends. That instead, Israel had hired the Wagner Group to man the country’s borders. If the Arabs can’t be asked to live among Jews, they would henceforth no longer be allowed to work with Jews inside Israel. In concert with the arrival of Wagner, a wall would be built with the money saved by not going to war yet again with people who value life much less than the Jews do.

None of what’s been written is meant as yet another apology for Israel’s alleged mis-behavior. Not at all. At the same time, it’s a stab at what your reviewer imagines to be realism: the Arabs will never give up. Since they won’t, it’s time to put to bed the right’s mantra about “conspicuous weakness” as the “prime cause of war.” Let’s replace it with government is always and everywhere incompetent, and governments are populated with too many people too eager to go to war. It’s not working.

The Jews are not accustomed to war

Beyond that, by Gilder’s own admission Israel is heavily populated with Shaul Olmert-types who are remarkably brilliant, but who are uncomfortable with Israel vis-à-vis those who surround it and who mean it harm. The mention of Olmert once again isn’t an expression of agreement with him, but it’s a comment that he arguably represents a growing portion of the Israeli population eager to innovate over engage in endless war. Though militarily quite skillful, the Jews aren’t a warring people, period. Worse, they’re up against people with less to live for, and who are seemingly willing to wait them out.

Three quarters of the way through The Israel Test, Gilder cites a speech given by Nobel Prize winning Israeli game theorist, Robert Aumann. At a presentation of his that Gilder attended in Toronto, Aumann observed that, “over history many peoples have been expelled from their homes. Only the Jews have been expelling themselves, their own people. From their own homes and synagogues, towns and farms. From Sinai, from Gaza, from the West Bank, from Jerusalem, only the Jews.” Aumann’s observation is the counter to the assertion that the Israelis should just take their genius elsewhere, and far away from the Arabs. Aumann makes a hard-to-argue-with case that the Jews have been compromising for way too long, and it’s beyond wrong to ask them to move again.

If the Arabs wanted peace, they could have had it long ago

At the same time, and per Gilder, “if the Arabas or Iranians desired peace, they would have long ago achieved it.” Absolutely. Which is telling. Peace isn’t the goal, and it’s something to keep well in mind in concert with Gilder’s correct assertion that “the survival of the Jews is vital to the triumph of free economies.” In that very real sense, it’s difficult to conclude from this remarkable book anything other than that the United States and Israel are failing The Israel Test, and that their ongoing failure threatens the rest of the free world.

This article was originally published by RealClearMarkets and made available via RealClearWire.