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Welcome back to voter Nomics, where politics and markets collimb. This year, voters around the world have the ability to affect markets, countries, and economies like never before, so we created this series to help you make sense of it all. I'm Stephanie Flanders.
I'm Adrian Waldridge, and I'm Alegristratton.
In this week's show, perhaps unsurprisingly, we are focusing on the Middle East, where the horrific loss of life and creeping escalation of the conflict between Israel and its enemies had been taking all the daily headlines this past twelve months. But beneath the surface, it's arguably the collision between politics and economics that will determine where the region heads next.
And one big question coming out of all this that we're going to be talking about in various ways is how the events of the past twelve months are inflaming tensions not just in Israel but in neighboring countries and whether that could produce another Arab spring. One of our guests, Eugene Candell, former head of the Israeli Economic Council and economic advisor to Prime Minister Benjamin NT. Yahoo between two
thousand and nine and twenty fifteen. We're going to get his thoughts on Israel's economic and political trajectory and if he still thinks there is any chance of Israel achieving its goal of being a true regional economic force, which it might well have hoped to become eighteen months ago when we were talking about normalization of relations with Saudi
Arabia and anything that followed from that. In a minute, we'll be getting our on the ground view from Bloomberg reporter Sam Dagger, who's based in Dubai and reade a fascinating piece in the last few days about the dilemma
facing Arab governments. Some of them are still prioritizing those close ties with the US in Israel, but that's in the face of increasingly vocal swaths of their population who are turning towards groups and politicians that they see as standing up better to the Israeli government and defending the
rights of Palestinians. We're going to get to Sam in a minute, but Adrian, I mean one thing that struck me when we decided to focus this show on the Middle East, but often when we talk about what's happened in the last twelve months. It tends to be through the prism of things going on in our countries or other big events around the world, not least the election. We tend to talk a lot about what does it mean for Michigan and how is it potentially challenging leaders
in Europe. And I don't feel like we've thought very much about what it means for the sort of underlying living standards and economic conditions of people in the Middle East, not justin Gaza, but what the future strategy is for all these countries that were hoping that they were going to draw a little bit closer to Israel.
Absolutely, and I think we tend to think about the sort of the Iranian access of influence. We're not focusing anywhere near enough on Saudi Arabia and its economic ambitions and extraordinary achievements, really.
And I think that's one of the things that I'm interested to talk about to Sam. It was Saudi government that has made a very big play for economic development, and it still seems to be quite keen on having relationships with Israel be part of that.
I think your your opening point is right, Steph, which is the conditions for people living in these countries in the Middle East, and the conditioners were ripe for the Arab Spring, which is many, many years ago, and now that we have to assume that they will be even more ripe for you know, overthrowing revolution and so on, because people are feeling even more like they don't see the economic opportunities and that the future is even less
clear for them. So I think it will be fascinating to hear from Sam about the conditions on the ground. I was reporting them at least in twenty five twenty oh six, around the time of great optimism, when there was lots of you know, the franchise and the vote being given to more people in Arab nations. So there was a great deal of opt that then withered away when Rafi Careri, who was the leader in Lebanon, was assassinated.
So you have these these ebbs and flows in the Middle East, and it's hard to see how it's particularly higher, but at the moment, you know, there's been a lot of discussion around the past year about whether the conflict potentially between Benjamin Etnia, who's personal objectives were staying in office, avoiding various court cases, and the sort of long term interest of the country and whether he's undermining the sort of future security of the nation in order to try
and protect his position. But you know, of course, the corollary to that is he's undermining the economic future of Israel as well.
Absolutely, if you go back to before October the seventh, I mean, there was a very general optimistic mood around the place, and an optimistic mood which is partly on the fact that the Israeli economy was doing extremely well, but also on the idea that Israel would forge close relations with Saudi Arabia and other sort of economically vibrant forces in that region. What it's all been modified in various significant ways now.
Gulf nations certainly that there isn't really a plan B. You know, they were building, they were vesting their continued sort of global heft in part on being able to sort of assume away the Palestinian problem and build their relations with Israel. Anyway, the loads of discuss we should get onto someone who knows even more about it than the three of us, which is Sam Daga. Sam, thank
you very much for joining us. You cover a lot of countries in the region, primarily Saudi Arabia, But I know that you've also been roving quite widely, and you wrote I thought a great story recently about the dilemma facing Israel's Arab neighbors, which we've touched on just there, but maybe just spell that out for us.
Sure, Thank you very much, Stephanie and everyone. I mean, I will start with Jordan, where I was a week ago, and I could tell you like Jordan literally and figuratively sits at the heart of the ever shifting sands of the Middle East, as the US Institute of Peace said in a report last month. Today its population of eleven million, sixty percent of those are of Palestinian origin, including King
Abdullah's wife, Queen Rania. Later this month will mark the thirtieth anniversary of the peace treaty between Israel and Jordan, and the bilateral aid that Jordan depends on from the US is largely, you know, contingent upon maintaining this treaty. Jordan is central to this US vision of a region in which Israel is integrated economically, militarily. Jordan is also reliant heavily on aid from the oil rich countries of the region like Saudi Arabia and the UAE, and more
importantly I mean for these countries. Jordan is actually the last piece of the puzzle in this sort of Iranian arc of influence in the Middle East, the so called Axis of resistance. It is the only country where Iran does it have real influence, either through the government or through militant groups like Hesbelan Lebanon or the or the militias in Iraq. So it is absolutely crucial for these countries.
October seventh and the aftermath has really been a huge dilemma for Jordan because there's real pressure from the population itself to sever all ties with Israel, to renounce the treaty, to actually ask US troops to leave. This is what people on the streets are demanding. And then last month, the Islamic Action Front one the most votes parliamentary elections that were held there. It is the king that appoints the government. It's the king who actually can dissolve the
parliament at any time. But he's under tremendous pressure and we see that in the rhetoric of Jordanis leadership. You had the King of Jordan last month addressing the UN General Assembly railing against Israel's what he called terror in Gaza.
At the same time as participating in that effort to prevent the Iranian missiles from getting to Israel one hundred percent.
They say, quote, we will not allow any alien objects to come through borders. I mean, that's the language they use.
How sustainable is this tension between you know, the street on the one hand and the policy of the regime on the other hand.
It is really under pressure at the moment, and Gulf states, particularly Saudi Arabia and the Arab Emirates, are really worried about this because they feel like there's this almost combustible mix between this rage on the street toward what's happening in Gaza and now Lebanon, coupled with real economic grievances there.
So it sounds like, Sam, everything you're suggesting would indicate a second Arab spring.
No, I mean, we have to be careful, very straightforward.
It doesn't sound like it sounds like a recipe for people rising up. But I think you don't think it's that straightforward.
This is what a lot of experts are saying, and this is also what a lot of officials in Riyad
and Abu Dhabi are worried about. I spoke to people who are close to the leadership here, who meet with officials on a regular basis, and who say that it is a real concern at the moment because again of what I just mentioned, This this mix between you know, the real rage on the street over what's happening in Gozla and Lebanon and the rest of the region, and this also now what many are calling a reawakened consciousness towards the Palestinian cause, and also the sense among you know,
large segments of the populations across the Arab world, not just in Jordan, that we may be suspicious of Iran and its motives, we may not like a lot of these groups that Iran you know, funds and backs like has Balan Habas, but hey, they're the only ones standing up to Israel. I mean, that's kind of the narrative
on the street. And also you've got real economic issues in countries like Jordan, where you have unemployment well over twenty percent, with youth unemployment alone like around forty percent according to I believe World Bank figures.
I mean, you tell us, but it is not necessarily only new, is it. I mean, there's been high levels of unemployment for a.
Very long time.
Absolutely but in terms of like how how all of this is being seen from Abu Dhabi and Riad is what this part of the world needs more than anything else is economic prosperity and development, and not democracy and free speech and resistance, which is iron narrative.
When we talk about the Hora Spring, I think partly of the liberal element of that, which is, you know, the demand for demography and democracy, free speech and rolling back sort of autocratic dictators. But isn't this new incarnation much more sort of Islamacist in its in its inspiration, I mean, driven much more by anger and religious further than than any liberal elements.
And not really, not really, because there are a lot of liberal elements, including people I've spoken to, you know, in Jordan elsewhere, who are saying, we don't agree with the Islamists, we don't share their ideology. But again, it's the sense of this camitment to the Palestinian cause that's kind of been reawakened all over the region.
Also, going back to the Arab Spring, what's happened since then? I mean, I guess it's coming up for fourteen years in December, but you've had the sort of reassertion of autocracy and authoritarian regimes, most of the places which had previously seen more democracy, whether in Bahrain, Egypt, Tunisia that the Tunisian populist leader was re elected last week, but with not a very sort of lively democracy behind him.
And then you have those are the sort of Saudi UAE backed countries, but you also have leban and Syria, Yemen on the Iran side, and I guess the problem is that none of them, those authoritarian regimes have been able to deliver economically in a way to shore up support, and that it feels like what you're saying is that all of that has just paved the way for this because there's nothing tying the Arab street to the regime in the way that they had hoped there would be
with this kind of economic success.
Yeah. Absolutely, And I would just you know, ask Stephanie that in the countries that you mentioned that are seen as being within sort of the sphere of influence of Iran, like Lebanon, like Iraq, like Syria, like Yemen, I mean, these countries have not fared any better economically. I mean Lebanon has faced its worst economic crisis ever, I mean since its creation. It is a bleak picture all around.
The most expansive economic vision of courses come from Saudi Arabia, and that's the one that we've perhaps heard most about outside the region because money is coming out of Saudi Arabia. But also there's these very grand schemes that Muhammad bin Summan has for the country. Is there a serious challenge out of all this for Saudi Arabia or is the regime there really immovable?
I would say there is, and they would admit to it themselves in private conversations. I mean, people who are close to the royal court, they feel there is a real risk here, particularly, you know, given what I just described, this kind of reawakened interest and consciousness, you know, toward you know, the Palestinian cause, including in Saudi Arabia itself. And I wrote a piece in May I believe about
how the government was over there. The security forces and the intelligence services were actually arresting people who are posting anything relating to the Israel Hamas conflict that they are that they do not approve of. That's their way of asserting control. But a lot of people would argue that's not sustainable because while Vision twenty thirty has made a lot of progress, particularly when it comes to women, unemployment, to certain social changes in Saudi Arabia. It has made
a tremendous progress. But you know, based again on some one dozen trips that I've made to Saudi Arabia in over the past couple of years, this vision has not reached beyond like the big the big cities Riyad and Jeddah. I mean, if you go to some of these other sort of places, uh, it's really a bix bag. And and people, people do have grievances, economic grievances, even in Saudi Arabia. So the leadership is aware of that.
We have this huge event coming in in the film of the American election. Can you give any sense of what impacts either of the two results might have on the on.
Just toasted a couple of minutes.
You know, how is that going to play out in this region?
God, you're the other spot. Okay. We know that that a lot of the leaderships in the Gulf States had had enjoyed, you know, very good, very good and warm ties with with the Trump administration. If you remember that famous first visit to to Red the Sword exactly. But I mean, and here's the caveat.
I mean, you had the Secret Service is not going to let him near any swords.
But the big caveat here. I mean in terms of like Saudi Arabia's experience, you know during that period, it is like when you had, you know, that huge attack on Saudi oil facilities for which the Huthis and Iran
were blamed. I've seen both being blamed. I mean, the Houthis are this militant group that Saudi Arabia itself was fighting directly, you know, starting in twenty fourteen after it seased power in Yemen, you know, taking over the capital Sanna so and back then, you know, from a Saudi perspective, you know, Trump did very little to respond to that, right, so that kind of made you know, the Saudi leadership and also by extension, the leadership here, you know, rethink
everything and say, like, we really cannot have all our eggs in one basket and rely on the US. And hence you've seen this this pivot towards China and Russia, which has kind of alarmed you know, the Biden reministration, particularly people you know in the National Security Council. And that's when we saw this this kind of extended hand
to Saudi Arabia. We were on the cusp of this of this grand deal whereby you know, uh, Saudi Arabia was going to get potentially potentially again we we we don't know all the specifics, but potentially you know, this this very solid defense fact with the United States, this this agreement to to develop nuclear technology, this new strategic relationship with the United States. It returned for normalizing ties with with Israel, and all of that came to a halt.
So and we could do this all day, it doesn't It does sound like we should probably talk to you again at the end of the year, after we or maybe the beginning of next year when we know, when we know hopefully who won the US president to election new the next president is going to be, and maybe how you're feeling about that question for for the region. But thank you so much for this. It was fascinating, my pleasure.
I really enjoyed it, and I really do hope we do it again.
Thank you, And now we can talk to Eugene Candel in Jerusalem, previously head of the National Economic Council and economic advisor to Prime Minister Binyaminnett and Yahoo between twenty nine and twenty fifteen. He's been many other things, including the CEO of the startup Nation, central economics professor at Hebrew University, and the co founder of Israel's Strategic Futures Institute. Eugene,
thank you very much for joining us. Obviously, particularly in the last few days, we've focused enormously on the human and psychological cost of the past twelve month. Because of the focus of this podcast, I'm wanting to ask you how costly has this period been for Israel's economy and indeed like its long term economic model.
Well, you know, Israeli economy is very resilient. There's a military conflict. If you look at the Israeli history of let's say stock market to exchange rates or growth statistics, and you look at annual statistics, you would not know that Israel had several wars, whether it's in two thousand and six, twenty twelve, twenty fourteen, you would barely detectiven the global financial crisis. So the economy is very resilient.
But at the same time, this war is different from the previous military experiences that Israel had because it's much longer. It's probably the longest war that we ever had. It is much more difficult because we have to fight on multiple fronts, and so the cost of this war is significant for the economy going forward. Will have to figure out how to deal with it.
I hear what you say about the resilience of this radio economy, which is apparent, but a lot of people have emphasized to me that it's in the periods of the relative peace, when at least there's been a sort of stable status quo in the conflict. It's in that period where Israel has really come into its own as
a tech powerhouse, has been hugely dynamic. I'm interested in how that part of the economy kind of holds onto its dynamism and how keen it is to stay in Israel in an environment when there is so much uncertainty and when so much money is being shoveled into the war effort.
Well, there are a couple of things what you call peace period. We now understand that it was a period of build up by our enemies to try to destroy us, which obviously failed, But it was to some extent period for us to build our capabilities, and I think we've
shown them to the world in the last months. Of what we can do when we set our mind to it, we create the correct policies, and if we bring back the the dynamism and the hope that that we just need to pull together and get out of it, we can We can definitely do it, and they will be in the forefront.
The startup immunity is presumably very mobile and very interlinked with Silicon valleyes full of people who can will work anywhere in the world, but certainly in the United States.
Is that a problem that is definitely a problem, that's a threat. So far, however, most of their community, instead of leaving, they came back from where they lived, or much of their people came back and joined the military force. And then of course those that live here, a lot of them were drafted in the into the reservist duty. And the application for the reservist duty at the beginning of the war was one hundred and twenty percent, so twenty percent more people that were not even called came
because they flew back from wherever they were. So we start from a strong position. The question whether we will continue with a strong position is that question, or whether we can pull together as people and whether our government will create right policies that will allow israel economy to grow much faster.
What you's asking about the manpower side of things, which is, you know, the political coalition that netting arrests on is very the Orthodox community is very well represented. How do you deal with the fact that the Orthodox community doesn't, as far as I can say, you know, take part in the military, take a big part in the economy, and it's getting bigger as a percentage of the population.
It is one of the internal threats that we have to come to terms with. And the problem is not this government or the government. The problem is structural.
We have.
A structural demographic problem of large population that designed to jump into the safety net of the welfare state together rather than individual and unfortunately the welfare state safety is not designed for you know, a million and a half people jumping into it together and reproducing the record rate. So we will have to deal with that. This war made it plain and clear that the things cannot go
forward as they were progressing until today. It is still this government cannot really do much about it because it hinges on the coalition partners. But it's obvious to everybody, including the members of the coalition, that going forward has to and has to change. We have to create conditions in which, on the one hand, they do not collapse economically.
On the other hand, they going forward, they face the same basic conditions as they face in the UK, or in the US or in Belgium, where these populations live and thrive, and nobody forces them to be something different. Yet nobody allows them to be with you whatever they want and base, which is what we go love.
There was a future that was mapped out for Israel within the region a year and a half ago, say, as of a year and a half ago, which involved we talked about it earlier in the show, normalization of relations with Saudi Arabia, deepening of the normalization treaty with the UAE, becoming a sort of a regional economic power, and having a more stable future in the region because of those economic ties. Do you see any prospect of
that now? And I'm wondering or as a country, is the path being charted now entirely military, entirely about self defense? And if so, who's going to join with Israel regionally in that?
I think you're placing these two things as contradicting each other, and I think that they actually support each other. I want to remind you that when Iran was shooting ballistic missiles on in April, Saudi Arabia Angel was shooting down They want friendship with us and we want friendship with them. And the collaboration, by the way under the table has been happening for many, many years. And the fact that.
Iran has been trying to and Commas we're trying to attack us so early is because we were very close to signing an agreement with Savi and so the idea was to derail. We cannot sign an agreement with Saudy as if we don't exist, we're continuously being under threat of annihilation.
You mentioned earlier that one of the questions was about whether or not this government would be able to take the decisions and push through policies that could help strengthen the economy and the basis for that sort of particularly that the tech sector and startup nation. Do you see this government being able to make those investments, take those decisions or did you think any government could in this kind of environment.
If you ask me whether this is the best go best coalition for this type of scenario, I would definitely tell you that it's not whether you ask me whether there is anything we can do about it, the answer is no. Because this is a democratically elected government which has another two years on its clock until it has to go to elections.
Do you think this government will last the full time this coalition?
It is real.
A year ago, no one would have bet on that. So I'm interested that you say that in passing Well.
Actually, my view was that this government will survive for most of its term, even after October seventh, because there were no you know, legal forces that could bring it down, and the members of the coalition were not definitely were not interested to go to the electorate right after this disaster. It right now, I think there are two possible ways
of this government going to elections. Ay that wanting the small right wing parties will bring it down because it will not want to go to the to the elections because they haven't done anything that they promised, or that the Prime Ministry decides that it's a fortunate time for him because of various successes on the military, to go for an election. That's that's what I think might happen. Otherwise, I think it will survive till till the end of.
Its term eusine. Thank you very much, Yes, thank you very much.
Absolutely well.
That's it for this week's voter nomics from Bloomberg. Thank you for listening. This episode was hosted by me Sephanie Flanders with the Legro Stratton and Adrian Wildridge. It was produced as effort by Samasadi, with production support from Chris Mark Lou and Isabella Ward and sound design by Moses Ander. Brendan Francis Newnham is our executive producer and Sage Bowman is Head of Podcasts. With special thanks this week to Sam Dagger and Eugene Candell