April 26, 2012- Israel's 64th birthday.

Several commentators pointed out, Israel is no longer a young state. This birthday provides a good moment to reflect on the state of the state and the challenges it is liable to face in the upcoming year.

I first visited Israel in 1965, when it was clearly a rather poor developing country. It is hard to overstate how different this country is today. It's a miracle I feel every day, living in Tel Aviv, a world-class city, that lacks for nothing. The country as a whole has been transformed into an advanced post-industrial society. Of course post-industrial societies have their own challenges. Greater value of capital, both financial and intellectual causes greater income inequality. In Israel that problem is more severe than in the United States, both because of the high cost of living in Israel, (particularly prices for food which costs much more than in the US), and the fact that most Israeli workers who are neither in hi-tech or finance make salaries considerably below other western counterparts. This is a challenge for which Israel will need to find innovative solutions in the next few years.

The most dominant part of Israel's history has been the continued lack of peace, along with the wars that we have had to fight. This year, Israel's 64th, has been one of the most peaceful in its history. This is the case, not because peace has broken out, but rather, due to the weakness of our enemies. Unfortunately, looking toward the future, the situation is not likely to remain as peaceful. In the past year the shadow of the Iranian nuclear program has loomed larger. Whether the Iranians will blink, and back down from their program plan is still unclear. The IDF chief of staff gave an interview yesterday, in which he stated he believed the Iranians have not yet decided to produce atomic weapons, and that it's leadership is sane. Clearly, he is not speaking from the same playbook as Prime Minister Netanyahu. There are also signs that the sanctions are having a real impact on Iran.

So... In honor of Yom Ha'atzmaut I will be optimistic regarding Iran (at least for the day). If I was not, I guess I would not choose to live in Tel Aviv. Unfortunately, I am less optimistic regarding the medium-term effects of the Arab spring. One of my favorite book titles has always been Thomas Friedman's “The Lexus and the Olive Tree”. In this book, Friedman’s underlying theme was that in Japan they were making cars with robots, while in the holy land people were fighting over olive trees. If the Arabs and Israelis would both become more interested in producing products with robots, instead of fighting over olive trees, there might be a better chance for peace. The Arab Spring has led to the rise of the Islamic parties. This transition has moved the Arab side even closer to the olive tree and away from the Lexus.

On our side, the conflict is more complicated. Most of Israel has moved closer to the Lexus. Israelis are, as a whole, much more interested in being part of the world economy, than worrying about preserving any specific olive tree. However, one of the complicating factors over the past two decades has been the rise in the number of ideological/religious settlers, whose connection to the land seems greater than their connection to the state. To date, other than their political power to push Israel into stupid political situations, they have caused no long-term damage. What might happen if there is ever a Palestinian side willing to actually make peace is a challenge I hope we face.

While the list of struggles in the coming decades is large, one that looms too large to ignore. This is the challenge of dealing with Israel's rapidly growing population of Charedim. The Charedi population threatens to overwhelm the secular population in the county. The fact that the overwhelming majority of the Charedi population does not serve in the IDF or participate in the work force has made a confrontation virtually inevitable.

On a personal note, this was the first time I celebrated both Memorial Day and Yom Ha'atzmaut in Tel Aviv. Since I had previously lived in Jerusalem while living in Israel. After spending two nights in a row in a packed Rabin square, I must credit the municipality of Tel Aviv with a flawless execution of these two distinctive and emotional events. Both evenings were dominated by song. Last night’s spectacular fire works made the evening, but both events perfectly reflected the spirit of each night. The Memorial Day ceremony reflected the profound sadness we share for all who sacrificed for the sake of the sake and for our safety; and 24 hours later, in the very same place, the city celebrated our independence, with a gusto that I doubt you see in many places in the world.