What makes countries successful

Why is the United States more successful than Brazil?

Why is Singapore more successful than Sudan?

Why is Israel more successful than Yemen?

“Success” can be a little hard to define, but you know what I mean. It is a combination of living standards, optimism about the future, personal safety, and a stable economy.

Many factors explain the gap between successful countries and less successful ones: religion, history, climate, geography, demographics. But one matters more than all the others: the political system.

That may sound like something from a lecture, but it is a practical truth about your life. Economists who studied incomes around the world found that more than half the differences among people can be explained by a single factor: the political system in the country where they live. Talent and hard work matter. Oil and gas help, too. But they come second.

In 1945, history conducted a political experiment: the Korean Peninsula was divided in two. The same people, the same language, the same land. Until the mid-1970s, living standards in the North and South were similar. Then their paths diverged. The South is a vibrant liberal democracy. The North is a dictatorship run by the regime’s cronies. The result? South Korea is one of the richest and most successful countries in the world. North Korea is poor, violent, and isolated. Income per person in South Korea is now 29 times higher than that in North Korea. Look up a nighttime satellite image of the two Koreas: the South glows with light. The North is almost entirely dark. An engineer in Seoul is no more talented than his cousin in Pyongyang. He simply lives under a different political system.

The explanation for this gap earned the 2024 Nobel Prize in Economics. The three winners, Daron Acemoglu, Simon Johnson, and James Robinson, demonstrated that countries do not fail or succeed because of their natural resources or the character of their people. They fail when the political system serves a small group close to those in power. They succeed when the system works for everyone.

The truth is that we Jews figured this out earlier. Three thousand years earlier. When the Israelites asked for a king, the prophet Samuel warned them about power without limits: “He will take the best of your fields and vineyards and olive groves and give them to his servants.” Taking from citizens. Giving to cronies. To this day, no one has written a more accurate description of a failed political system.

Successful countries have effective political systems that allow their citizens to thrive. The government is hardworking and honest. Institutions are strong and independent. Appointments are based on professional merit. Transparency and accountability are part of the institutional culture. Such a system helps citizens realize their potential and opens paths to success.

The Industrial Revolution began in England because its citizens enjoyed a measure of freedom and its parliamentary system constrained the king’s power. In 1689, England established that the king could not impose taxes without Parliament’s consent. In 1701, it established that he could not dismiss judges. Less than 70 years later, James Watt patented his steam engine. This was no coincidence. No one will spend years developing a machine if the king can take it away and give it to his cousin.

The United States overtook every other country because it was the first country in the modern era founded on the idea that government belongs to its citizens, rather than citizens belonging to their government. It pulled so far ahead that Mississippi, its poorest state, now produces more economic output per person than France.

Israel has been far more successful than any of its neighbors because it is also the Middle East’s only democracy. It grew rich from what its citizens had in their heads, rather than what lay beneath the ground. Israel’s high-tech industry emerged when the government established the Office of the Chief Scientist, gave grants to talented people, and then allowed them to grow without interference or taking their money. It did not call them at night and say: “Just give my nephew a job, and make sure your employees join the party.”

A worthy and successful political system is one in which corruption is exceptionally low. Senior officials concern themselves with the good of their citizens, rather than thinking only about themselves and their cronies. There is a healthy turnover in power. No party or ruler stays too long. People are chosen for senior positions because they have delivered results and have a credible vision for running things. Their purpose is to make the country work as well as it can.

Successful countries also have strong education systems that allow success to pass from one generation to the next. They create business opportunities and paths to advancement for young people. In most cases, they have strong militaries that give their citizens a sense of security, and meaningful international alliances that reinforce it.

Failing countries display the opposite characteristics: corrupt political systems, promotion based on proximity to power rather than ability, poor education, an exodus of capable people from public service, educated citizens – doctors, engineers, researchers – leaving for other countries, declining personal safety, diplomatic and economic isolation. If that description sounds familiar, we are in trouble.

History’s most important lesson is that success comes with no guarantee. A successful country that ruins its own system stops being successful.

In 1913, Argentina was one of the 10 richest countries in the world, as wealthy as France and Germany. Then came military coups, corrupt presidents who replaced Supreme Court judges with their own people, and governments that handed public contracts to cronies. Since then, Argentina has stripped 13 zeros from its currency and defaulted on its debts nine times.

Argentina was not impoverished by a war or a natural disaster. Its citizens continued getting up in the morning and going to work, just as before. What broke was the political system. Remember this: a person can work hard all their life and still end up poorer, simply because the system above them has broken down.

Until four years ago, Israel met every criterion of a successful country. Today, the signs that we are moving into the other category are multiplying. The problem is not the citizens. These are the same people: hardworking, talented, and entrepreneurial. The problem is the political system. In a relatively short time, Israel has moved from a functioning democratic system that provides the conditions for success to a corrupt system of the kind that leads to failure wherever it takes hold.

Under the current government, a transport minister who fails at her job and openly enjoys trips abroad instead of working pays no price within the governing party. Quite the opposite: in its most recent primary, she moved up to fourth place. A state commission of inquiry found the former public security minister personally responsible for the Mount Meron disaster. Instead of being dismissed, he was promoted to speaker of the Knesset and then elected to second place in the party primary. A man convicted three times who has served time in prison attends cabinet meetings. Alongside him sit others convicted of supporting terrorism, criminal offenses, and serious corruption offenses. Corruption is no longer incidental. It has become the system.

These are more than ethical failures that make leadership by example impossible. They are failures of management that directly damage Israel’s ability to remain a successful country. The current government has severed the essential link between success and reward, and between failure and consequences. That link is the engine of every successful country. Government does more than run the country, it sets an example to people how to behave. If being connected pays better than being good, good people will learn to become connected. Or they will get up and leave. If failure carries no cost and success brings no reward, there is no reason to make an effort.

All of this is doing serious damage to Israel’s success. If we do not change direction very soon, the economy will suffer, security will continue to deteriorate, and our children will be much poorer than we are.

Government corruption quickly seeps downward. From central government, it spreads to local government, then to every public tender, every government job, every large organization. Criminal organizations see an opportunity and move into the public sphere. The legal system weakens. Contracts are breached. Foreign companies leave.

We have already started paying the bill.

In 2023, just 20 percent of Israeli high-tech companies were registered abroad. A year later, in 2024, that figure jumped to 80%. Those companies were supposed to pay taxes here in the years ahead. Now they will pay them to the tax authorities in the United States or Ireland. That same year, 2024, Israel’s credit rating was downgraded for the first time in its history. Then it was downgraded again. Moody’s, the credit rating agency, did not cite the war alone. It explicitly, and sharply, pointed to a “decline in the quality of institutions and governance.”

What does that mean for your wallet? A great deal. The credit rating feeds through to the interest you pay on your mortgage and to the prices of housing, food and basic goods. What else? The state cannot make the down payment on the Apache helicopters it ordered and loses the procurement bid. Security suffers.

The consequences are dramatic, and swift. In the past three years, nearly 1,400 doctors have left Israel, almost twice as many as a decade earlier. Over those same three years, more than 200,000 Israelis left the country, many of them among its most educated and productive citizens. You can sneer at “the elites” all day long, but remember that the top two income deciles pay more than 80% of Israel’s taxes and create most of its jobs. That money builds our children’s schools, produces Iron Dome systems, and keeps water flowing from our taps.

Brain drain is the greatest threat to Israel’s economy. Some 400,000 high-tech workers, one in every nine people employed in Israel, now generate more than half our exports. They can work anywhere in the world. They choose to work here. Israel’s most valuable asset is not gas or party insiders. It is people who have a choice.

This applies to security as well as to the economy and Israel’s international standing. If we do not replace the government – and the way the political system operates – we will have more October 7ths and more flydubai incidents. Why? Because these are not isolated events. They are products of a broken organizational culture and a dysfunctional government. We entertained the illusion that the people who cannot get your suitcase from the plane to the baggage carousel at Ben Gurion Airport would know how to keep us safe in the air. That illusion crashed. Thanks to civilian resourcefulness and a series of miracles, the plane did not crash with it. This time.

The only advantage of this grim situation is that that since the damage came from the top, the repair can come from the top, too.

This deterioration is at odds with Israel’s character. We do not have a long history of rotten government, as Lebanon or some Latin American countries do. For most of its existence, Israel had a sound political system that encouraged excellence and achievement, invested in education and cultivated a healthy institutional culture (Netanyahu, before his years in power took their toll on his integrity, played a part in that). We do not have to start from scratch. The foundations are there. And they are strong.

We have done it before. In 1984, inflation in Israel reached 445%, and the economy stood on the brink of collapse. In July 1985, a government less than a year old made a difficult decision: it embarked on sweeping reforms of government, fought corruption and changed the country’s priorities. Within less than two years, inflation fell to around 20%. The start-up nation was built on those foundations. The citizens were the same citizens. What changed was policy and the approach to governing.

What we need now – urgently – is an effective, honest, clean government, with an experienced team that knows how to get things done and is focused on the country’s success, rather than personal advancement or favors for cronies.

We need to put the best people in the right jobs and return to the democratic principles and standards of management that made Israel a success story. We need to stop funding idleness and draft evasion as political rewards. We need to restore Israel’s enterprise and excellence and bring our talent home. We need to return to the basic principles of good government: those who are good advance. Those who fail go home.

Israel’s problem lies in its government. That is where the repair must begin. The citizens who work, contribute and serve are the best in the world. They deserve a functioning, honest government that works for them.