The government has learned from economic disaster, embraced high-skilled immigrants, played venture capitalist, and imported one heck of a good central banker.
In case it wasn't clear the first time he said it, Mitt Romney is certain that "culture" is the reason Israelis are relatively rich today, while Palestinians are quite poor. Much of the world -- including the authors Romney cited -- responded to his analysis with a collective "oy."
But Romney's stand does raise a few good questions. Among them: How on earth has Israel become so successful? Sure, its economy has no shortage of problems -- in particular, a startling degree of income inequality. But in the span of just a few decades, the Jewish state has "transformed itself from a semisocialist backwater into a high-tech superpower," as The Economist put it in 2010. Per capita, it gives birth to more technology startups and is the destination for more venture capital than any other country in the world. Its economy barely flinched during the financial crisis.
Here are four big reasons (though by no means the only ones) Israel is in the strong shape it is today.
IT LEARNED FROM DISASTER
It may now be known as the Silicon Valley of the Middle East, but back in 1984, Israel's story had much more in common with modern-day Zimbabwe. That year, the inflation rate averaged 450 percent, and for a few months reached vertigo-inducing highs of around 950 percent. The economy, in short, was eating itself alive. But the crisis had an upside, in that it sparked reforms that would lay the groundwork for Israel's present-day prosperity.