Principles and Guidelines for Achieving Socio-economic Leapfrogging

Leapfrogging is not a luxury, it is a necessity.

• Israel’s inferior position in the global competition for human capital may cause the collapse of its social and economic foundations – There is a disparity between Israel's excellent human capital and the quality of its private sector, on the one hand, and the mediocre quality of life Israel offers its citizens in comparison to the leading developed countries, on the other hand. Hence, Israel is currently one of the world's leading exporters of human capital. If this disparity grows, Israel may be vulnerable to emigration of a critical mass of its qualified and educated citizens, leading to the erosion and even collapse of the backbone of its society.

• Therefore, Israel's leapfrogging – achieving sustainable high growth that would allow the country to close the gap in quality of life with most developed nations – is not a luxury. It is a necessity.

• Nevertheless, Israel is not organized for leapfrogging. Its public sphere and discourse are focused on macro-economic stability and moderate growth but not on leapfrogging.

• Therefore, the Reut Institute has embraced the ISRAEL 15 Vision - which calls for Israel to become one of the fifteen leading countries in terms of quality of life within fifteen years - to inspire its work in the areas of economic and social development. In order to realize this vision, Israel's social and economic performance must ‘leap’ to a point where it catches up with the most developed nations.

• Leapfrogging occurs when the average annual real GDP growth exceeds 3.5% for at least eight years. In order to be considered an 'economic miracle', an average of 7% real growth needs to be sustained for at least 25 years. Thirteen countries have achieved this feat, among them: Singapore, Japan, South Korea and Brazil. Israel also leapt between 1951 and 1972. During this period we enjoyed an average real growth rate of 5.5% per year.

• Sustainable high growth is a necessary but insufficient condition for leapfrogging – As mentioned, in order to be considered leapfrogging, growth has to be sustained at a level of 3.5% for 8 years. Another necessary condition for leapfrogging is 'inclusiveness' i.e. that the quality of life of all citizens is improved.

• There is no 'recipe' for leapfrogging. Each country that leapt shaped its economic and social path according to its own unique history, social structure, system of government and unique assets and burdens.

• The key to leapfrogging: The capacity to transform - Leapfrogging requires an acceleration of the pace of change in the makeup of products and services, which is tantamount to acceleration of social change. It thus requires the establishment of institutions that allow for and support rapid change in the social and economic environment.

• The 'difference that makes the difference' - The public sector's role lays the foundation for leapfrogging.