The Impact of Globalization on Israels Economy Society

The Impact of Globalization on Israel's Economy, Society and Space Israel Regional Science Association meeting Beer Sheva, 15. 4. 2008 Prof. Baruch A. Kipnis The University of Haifa

OUTLINES üAttributes of a globalized world üIsrael’s affiliation with the global economy üThe impact of globalization: § Socio-Economic influences § Spatial impact – a polarized spatial role of Greater Tel Aviv üDo we have a solution? 2 Prof. Baruch A. Kipnis

What is Globalization? Globalization is the most used, used the most misused, misused and the most confused word…. . (Dicken 2007) th century, ü The contemporary globalized world emerged during the mid 20 th but it roots date back to late 19 century and even before ü Globalization was made possible by the world’s sophisticated communication networks ü Globalization reveals a polarized geography of production, distribution, Investment and consumption ü Globalization encompasses many aspects of our lives: economy, social, culture, politics and other 3 Prof. Baruch A. Kipnis

The “Global Triad” - - the “Mega Markets” of the Global Economy Source: Dicken, 2007 4 Prof. Baruch A. Kipnis

A polarized economy of the “Global Triad” ü The Global Triad controls global production - - Industry, Producers’ services and FIRE In 2004 the Triad produced 86% of the global GDP ü The Global Triad controls the global commerce and distribution In 2004 the Triad commanded over close to 86% of the global exports ü The Global Triad assemble most of the ‘crisscrossing’ FDI In 2004 the Triad pulled 87% of the world’s FDI; it was the origin of 99% of the global FDI Source: Dicken, 2007 5 Prof. Baruch A. Kipnis

Israel’s Involvement with the Global conomy? Israel entered the Post Industrial age in late 1980 s Early 1990 s. The post-industrial employs specialized producer services that help integrate the global centralized management , primarily of its global economic ventures. Those who manage the global economy are: Those who manage the global economy are The ‘qinary’ sector - - Decision making and Control ’ sector The ‘quaternary’ sector - - APS ‘quaternary’ sector 6 Prof. Baruch A. Kipnis

The following factors have helped post industrial Israel to associate with the Global economy: üIsrael’s human resources: § § § its high educational capital the absorption, in the 1990 s of over one million immigrants its high-tech IDF, and its defense industries and R&D facilities üIsrael’s education, basic research and applied R&D infrastructure and institutions: § § § Seven Universities and a few public and private colleges hundreds of R&D laboratories and start-up firms High level of investment in R&D - - in 2004 Israel invested 4. 4% of its GDP in R&D, and between 1995 -2005 some $13. 3 billions spent on new projects, one third is foreign capital 7 Prof. Baruch A. Kipnis

The following factors have helped postindustrial Israel to associate with the Global economy / Cont. üIsrael’s advanced physical infrastructure systems: § § § modern communication air and sea ports advanced surface transport systems (rail system) üGeo-political and Geo-economic factors: § § the abolishment, since early 1990 s, of the Arab boycott Israel as a ‘bridge country’ between EC and NAFTA üIsrael’s spatial planning doctrine: § 8 since early 1990 a doctrine of ‘controlled concentration’, controlled concentration aiming at large urban agglomerations, was adopted (National Plan 31) Prof. Baruch A. Kipnis

The Impact of Globalization on the Economy and Society 9 Prof. Baruch A. Kipnis

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The Impact of Globalization on Israel’s - - National Accounts üIsrael’s foreign trade: § Israel balance of payments between 1990 – 2006: imports increased by 212% and exports by 292%. In 1990 Import minus Exports was $3. 4 Billions; in 2006 it was $1. 1 Billions. § In 2006 Imports from the ‘Global Triad’ was 66% of Israel’s total. Exports amounted to 84%. Yet, trade with neighboring countries, the Palestinians included, was minimal. Its future potential is very small. üIncrease in GDP § Between 1990 – 2006 Israel’s GDP increased by 183% reaching $199 Billion. GDP per/capita increased from $14, 500 in 1990 to $27, 950 in 2006. § According to IMD index, Israel’s competitive position in 2006 was 21 with 74. 3 points out of 100, an improvement of three places compared to 2005. 11 Prof. Baruch A. Kipnis

Structural Changes in the GDP, in Employment and in Occupation § Between 1995 and 2006 the contribution of Israel’s business sector to the GDP increased by 58%. The most important contribution was that of the FIRE and APS § A recent Economic report informed that a committee headed by the Director General of the Ministry of Finance plans to initiate a policy aimed at making Israel’ a Global Financial Center, and a mediator between the US and Europe and between them to the Far East. § A significant increase also took place in the Communication industry, in commerce and hospitality services. The latter reflect the accelerating demand for leisure by of the “post-industrial” Israeli society 12 Prof. Baruch A. Kipnis

Structural Changes in Employment 1990 -2005 The structural changes in employment and occupation are essential for the functioning of a globally oriented post industrial society. % % Industry Change Occupations Change All employed 67. 1 Growing industries All employed Finance and business services 180. 8 Commerce and food and hospitality services 108. 9 67. 1 Growing occupations Unskilled labor 367. 6 178. 8 Academicians Public and Community services 84 Managers 86. 1 Transport, storage and communication 77. 9 Construction and public works 67. 1 Declining industries Declining occupations Electricity and water 36. 6 Clarks Manufacturing 21. 7 Sales and services 57 Agriculture 20. 0 - Free and technical 55. 2 Personal services 59. 3 - Skilled in manufacturing 29. 6 Skilled in Agriculture 33. 2 - 13 61. 1

Globalization and Inequality ü Income disparities -- between 1990 and 2006 the income of the upper deciles increased by 50%. Income of lower and middle deciles declined. ü Percentages of households below poverty line in Tel Aviv, Ramat Gan and Rishon Le Zion are below the national average; Net disposable income per standard person was higher than Israel’s average by 17% in Rishon Lezion and by 38% in Tel Aviv. 60. 0 Income Distribution Between Deciles and Percent Change 1990 -2006 (Percentages) 50. 0 40. 0 30. 0 20. 0 10. 0 Upper deciles 14 2 3 4 5 1990 2006 6 % Change Prof. Baruch A. Kipnis 7 8 9 Lower deciles

Globalization and Inequality / Cont. Industry and Occupational Inequality § Hi-tech industry VS traditional industry: The first increased its traditional industry output and most of its production is for exports; the latter is declining and its product is for the domestic market. § Structural modifications in occupation resulted in increase of the ‘quinary’ and ‘quaternary‘ sectors as well as of ‘unskilled ‘quinary’ and ‘quaternary workers’, many are structurally unemployed, young persons and students, women, and new immigrants… 15 Prof. Baruch A. Kipnis

Globalization and Inequality / Cont. Spatial Polarization § Israel experiences strong ‘polarization’. The Nation’s ‘ hard core’ has polarization hard core upgraded its economy’ society and cultural assets. Slow ‘spread’ has spread extended the spatial stretch of the ‘core area - - ‘from Hadera to Gedera’ it is now ‘ from Zichron [Yaakov] to Asquelon’. from Hadera to Gedera from Zichron [Yaakov] to Asquelon Early spread processes have been observed in Haifa, mostly in hi-tech. § The trigger is the accelerated development of Israel’s rail network. § Commuters flows -- settlements along the rail line are major suppliers of labor, primarily of ‘white collar’ to the ‘hard core’. § Urban settlements next to train stations evolved into migrants’ preference nodes. The most attractive ones are those located at rail connecting points nodes between ‘direct’ and metropolitan lines, prominent are those in Tel Aviv (the hard core) and Binyamina. § The remote peripheries - - the Galilee and the Negev, evolved into the Nation leisure regions - -Israel’s “tzimer land” 16 Prof. Baruch A. Kipnis

Tel Aviv – A ‘World City’ Israel’s Anchor at the Global Economy The Hard Core of Israel’s National Territory “Big Head of a Country with a Shrinking Periphery” § Strong restructuring of economic function, employment and § occupations 17 Strong internal spatial adjustments Prof. Baruch A. Kipnis

Activity Nodes in Tel Aviv §CBD nuclei §CCD nuclei 18 Prof. Baruch A. Kipnis

The Ayalon CBD nuclei 19 Tel Aviv 2000 TLA LOOP Prof. Baruch A. Kipnis

Tel Aviv Center of Culture – a CCD in Postmodern style Golda Meir Center of Art The Opera of Tel Aviv Hakamerie Theater of Tel Aviv central Library Tel Aviv Museum of Art 20 Prof. Baruch A. Kipnis

Tel Aviv Skyline Ayalon and the Bursha The coastal hotels 21 Prof. Baruch A. Kipnis

Greater Tel Aviv’s Control over Israel’s Economy, Society and Culture Tel Aviv-Yaffo 5. 5% of Israel’s population The rest of Tel Aviv Metropolis is 38. 5% of Israel’s 22 Prof. Baruch A. Kipnis

Activity / Attribute In Tel Aviv. Yaffo (%) In the rest of the metropolis (%) In the rest of Israel (%) Head quarters of FIRE Lawyers’ offices Lawyers servicing the Global economy Accountanting offices Advertizing offices Specialized physicians 70 37 69 29 32 53 14 33 16 44 37 16 16 30 15 27 31 31 410 12, 501 293 2, 769 615 380 Hi-tech firms (total) Software houses Communication 16 22 24 54 57 65 30 21 11 630 358 140 Four and Five Star hotels 53 16 31 42 28 33 27 60 50 14 33 14 8 4 110 50 50 131 Persons influencing in the economy 58 (W) 34 Women influencing in the economy 59 (R) 22 38 (W) Israel wealthy people $100 millions + (R) 23 Prof. Baruch A. Kipnis (B) N

Distribution of VC by Origin and Region in $000 (1995 -2005) Region in $000 VC between 1995 - 2005 Foreign VC Tel Aviv 4, 824, 977 3, 190, 561 1, 634, 416 1. 952 Rest of Metro Tel Aviv 5, 142, 043 3, 294, 038 1, 848, 005 1. 782 Jerusalem 994, 314 594, 996 399, 318 1. 490 Haifa 405, 951 336, 302 69, 648 4. 829 Rest of Metro Haifa 1, 186, 013 698, 474 487, 539 1. 433 Inter Metro regions 456, 363 344, 925 111, 437 3. 095 The Remote Peripheries 256, 704 163, 840 92, 865 1. 764 13, 266, 365 8, 623, 137 4, 643, 228 1. 857 Total Source: Schwartz and Bar-El, 2007 24 Israeli VC Israeli/ foreign ratio

From polarized ‘Compact City’ Policy to a Spread ‘Polycentric City Network’ System How could one get there? ? ? The Impact of Israel’s Railroad Development 25 Prof. Baruch A. Kipnis

Rail Lines Development - - their Likely Catchments Areas and Their Latent Potential of Creating a Polycentric Region Or a ‘City Dyads’ Along the Israeli Coast Fan-shaped Catchments areas around Haifa and Tel Aviv the contemporary intensifying hard core of Israel’s ‘labor shed’. labor shed Jerusalem would intensify its role as complementary city with Tel Aviv when the new railroad line is operational. Beer Sheva, at present part of Tel Aviv ‘labor shed’ will emerge as an independent core upon the completion of the Ashqelon-Beer Sheva line. The region having the most promising potential to develop into a ‘City Dyads’ with Tel Aviv is Haifa. In this case Israel would have a ‘two anchors’ World City. 26

Thanks for your kind attention 27 Prof. Baruch A. Kipnis