Obama to Palestinians: Stop violence!

You may think Obama's message was good news for Israel, you may think that all Israelis will benefit by ending violence. Here are some facts about Israel's economy to inform your opinion in a way that is upsetting to us Israelis.

Israel has put counter-terrorism at the center of its export economy and its economy has been booming since September 2001.

Let's call it trickle-down war economics.

Israel is the world's 4th largest arms dealer in the world, larger than the UK. Its technology sector, much of it linked to security makes up 60% of all exports.

Israel has become a shopping mall for homeland security technologies all over the world.

Nice Systems, Verint, Comverse, SuperCom, Check Point, New Age Security Solutions, Instinctive Shooting International etc are just some of the world's best and largest homeland security companies.

A call made to the New York Police Department will be recorded and analyzed by technology created by Nice Systems, an Israeli firm. Images captured in the London tube system are recorded on Verint video surveillance cameras, owned by the Israeli firm Comverse.

These are but two examples. When it comes to defense and security technology, Israel is the "Made in China" story. Not just cheaper, but also made by the best in the world.

In view of the above, I hope you can now begin to understand why, when the war with Lebanon started in August 2006, the Tel Aviv stock exchange went up. In the final quarter of the same year, which had also included the bloody escalation in the West Bank and Gaza following the election of Hamas, Israel's economy grew by a staggering 8%.

Conflict and violence breeds more conflict and more violence and the need for better security everywhere in the world.

The conflict in Gaza and the West Bank is free advertising for Israeli security firms around the world. They are considered the experts and there is good reason for that. "Made in Israel" means tested in violence and proven to work.

Do you really think it is in Israel's economic interest for the Palestinians and other extremists to end all violence? Perhaps it might be.

But in the short-term, the answer is probably negative. If Israel can diversify its economy in the long term, then peace might have a better chance.

The world thinks the main obstacle is illegal settlements in the West Bank. It is definitely an issue but an easier one to solve from an economic point of view than diversifying the economy away from homeland security and defense spending and exports.

If a political deal is made, some of the illegal settlements can be sold out or rented to the new Palestinian owners who will buy them or rent them with loans and economic aid. Lavish economic compensation can entice Jewish settlers to relocate. Some of them will and some will have to be forced out.

But changing the structure of the Israeli economy can take years and it is a far more difficult task because it affects the economic well-being of a larger segment of Israel's population. The sad truth is that the Israeli economy, in its current structure, has an incentive to sponsor violence, not end it. It profits massively from it.

So for the time being, I am not very optimistic that there is the kind of economic change in the horizon to usher the kind of peace we can believe in.

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