Isaac Newton formulated his Law of Universal Gravitation some 322 years ago, in 1687. According to French philosopher Voltaire, who first recounted (or invented?) the story, Newton sat under an apple tree in 1665, was bonked on the head by a falling apple − and presto! His theory of gravity!

Centuries later, along came the State of Israel − and utterly disproved Newton’s law. Israel’s economy defies gravity in at least two astonishing ways —  in real estate prices and in war and peace (the ability to defend herself,  at great expense,  while maintaining a viable economy).

According to Frank Knight, a company that tracks real estate prices globally, real estate prices have declined almost universally in the countries that it follows. The declines ranged from 18 percent in the U.S. to about 5 percent in France and Germany. In the global recession, people simply are not buying houses and companies are not buying or renting commercial real estate. 

A major exception is Israel. In the first quarter of 2009, housing prices in Israel rose by 12 percent, leading virtually every country. Even India, whose economy has fared relatively well in the downturn, saw housing prices rise only by 5 percent. 

Why do housing prices in Israel defy gravity? Apparently Israelis believe houses are a good store of value in the long term, and divert their cash into housing when capital markets slump. Moreover, conservative Israeli banks did not engage in risky adventures that later led to collapse of the mortgage market and foreclosures.

A second gravity-defying area is that of war and peace. The Global Peace Index (GPI) measures the rank of 144 countries in terms of both domestic and internal conflict, based on  23 indicators of peace, both outside borders and within them. The three main dimensions are: domestic and international conflict, safety and security in society and militarization. For every rise of 10 places on the GPI ladder, GDP climbs by $3000 on average. (The most peaceful country in the world is New Zealand, followed by Denmark, Norway, Iceland and Austria).  

Where is Israel? At the very bottom, just behind Sudan, just ahead of Somalia, Afghanistan and Iraq. #141!  What an awful ‘club’ to be a member of. (Note:  Somalia has had no government at all for 20 years). Surrounded by hostile nations, confronting Iran, Syria, the Palestinians (especially, Hamas), Israel spends 7.3  percent of its GDP on defense. 

According to the GPI data, and its GPI ranking,  Israel’s GDP should, by my calculation, be minus  $10,000. Yet in fact it is about $28,000– light years ahead of the failed nations of Somalia and Afghanistan. The gravity of war has failed to pull Israel down. 

Recently, with a group of friends over breakfast, we took turns saying what each thought was typically most Israeli.  I said, what was most Israeli was living in this incredibly beautiful, vibrant resilient country, battling terrorists with one hand and writing world-class software with the other, surmounting the fanatical hatred of 1.5 billion Moslems, all the while giving its citizens a high and growing standard of living, while people complain hourly about how awful it is and how bad its leaders are.   

Israel defies gravity. May it continue to do so forever.

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