Israel's Internal and External Challenges

Modern-day Israel is a country characterized by dramatic contrasts. On one hand, Israel faces some of the world’s most-pressing political and social divisions. Furthermore, Israel’s foreign affairs are characterized by difficult relations with many of its neighbors, as well as with many countries further afield. Together, these factors would suggest that Israel has a relatively-underdeveloped and unstable economy. However, nothing could be further from the truth, as Israel is home to one of the most modern and technologically-advanced economies in the world, and one that has managed to generate more growth in recent years than most countries at Israel’s level of wealth and development.

?Israel's Never-ending Political Gridlock

Fortunately for Israel, its economy has remained strong despite the fact that its domestic politics are increasingly a mess. This was in evidence as Israeli went to the polls for the fourth time in the past two years to vote in parliamentary elections last month, and for the fourth time in the past two years, the result was inconclusive. This was due largely to the polarizing nature of Prime Minister Benjamin Netanyahu, whose domination of Israeli politics in recent decades has played a major role in the political stalemate that now grips the country.

In these latest elections, Prime Minister Netanyahu’s Likud Party and its allies won 52 of the 120 seats in the Knesset, while parties opposed to the prime minister won 57 seats. As a result, neither grouping is able to form a coalition government for the moment, with the prime minister’s bid to do so recently ending in failure. This is a similar result to what happened in each of the previous elections since 2019, and in each case, a government could not be formed, or a weak government was formed that had little chance of lasting long in power. A similar outcome is likely this time, with talk already centered on the likelihood of a fifth parliamentary election in short succession.

While Prime Minister Netanyahu and his struggles with corruption allegations are often blamed for this political stalemate in Israel, there are a number of other factors at play. For example, Israeli politics have moved dramatically to the right in recent decades. In the 1980s and 1990s, left-leaning political parties in Israel would often win close to half of the seats in the Knesset. In the latest elections in Israel, left-wing parties won just 13 of the 120 seats in the Knesset, with centrist parties winning another 25 seats.

In their place, religious and nationalist parties such as Shas, Yamina, Yisrael Beiteinu and others have all seen their support grow over the years. In these latest elections, parties that would be considered to be on the far-right of the political spectrum either due to their social conservative or nationalist views won 36 of the seats in the Knesset, while Likud, which many believe has moved more rightwards in recent years, won a further 30 seats. For now, this means more political gridlock, as most left-leaning parties, and some far-right parties, refuse to work with Prime Minister Netanyahu. However, it also suggests that once Prime Minister Netanyahu exits the political stage, the potential for a more right-wing coalition governments will exist in Israel.

Israel's Shifting Population

Demographic changes are behind many of these political and economic trends underway in Israel. In the early days of Israel’s existence as a modern independent state, the population of the country was extremely young, with a large segment of the population consisting of survivors of Nazi Germany’s persecution of Europe’s Jews. As a result, politics in Israel was rather more left-wing, as were the country’s economic policies.

Over time, further waves of migration, especially the one from the former Soviet Union, injected a higher degree of nationalism into Israeli politics. At the same time, Israel’s once-tiny Orthodox Jewish population grew exponentially thanks to its extremely high birth rates, adding a major social conservative and religious element to country’s politics. These demographic changes are now evident in the success of various nationalist and religious political parties in Israel, as well as the rightwards shift of some of its longer-standing parties, particularly the Likud party. These trends, coupled with the rising share of the country’s population that consists of Arab Israelis, suggests that the fragmentation of Israeli politics that has plagued the country in recent years is only going to worsen.

Israel's External Threats

Of course, much of Israel’s history has been dominated by its difficult relationship with many of its neighbors. Israel fought four major wars in its first 25 years as an independent country, often with most of its neighbors aligned against Israel. In recent years, Israel has lived in, by its standards, relative peace.

Nevertheless, its neighborhood remains very dangerous. The situation in Syria remains extremely unstable, despite the reduction in fighting in that country’s long-running civil war. In Lebanon, an economic collapse and a political stalemate could dramatically destabilize that country, threatening the stability of Israel’s northern border. Likewise, threats from a little further away, such as from Iran and various militant groups such as the Islamic State, remain a danger to Israel. All of these developments have pushed Israel into a tenuous alliance with Arab states that share the same fears about Iran and some of these militant groups. While these improved relations with countries such as Saudi Arabia and the United Arab Emirates are welcomed in Israel, they will do little to lessen the external threats that it faces.

Can Israel's Success Continue?

So far, Israel has defied the odds and become one of the most prosperous and modern countries in the Middle East, if not the world. Israel’s economy has generated more growth per capita than almost any other country of comparable size and living standards. Its position in many high-tech and high-growth industries is undeniable.

Nevertheless, many of the same threats the Israel faced in its early days as an independent country remain in place. Furthermore, many new threats have emerged, many of them coming from within the country itself. Demographic and political trends suggest that these internal threats will not disappear and are likely to worsen in the coming years. Externally, Israel’s position has strengthened thanks to the power of its armed forces and its close relationship with the United States, as well as its improving relationship with many of the US’ allies in the region. Still, much can go wrong, and Israel will have to continue to work hard at managing its internal divisions and external threats if it is to maintain the level of success that it has achieved thus far.

Michael Weidokal is an author and speaker on global economic and geopolitical issues, as well as the Executive Director of ISA (International Strategic Analysis), one of the world's leading global market intelligence and economic forecasting firms.

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