• AUGUST 26, 2010

Innovative Israel Failing To Grow High-Tech Start-Ups

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By SARA TOTH STUB

Jerusalem
Israel's inability to turn its high-tech start-ups into mature companies that remain in the country is causing concern for both the industry and the government.
While Israel boasts the most high-tech start-ups per capita in the world, over the past decade a tendency has emerged whereby the majority of successful ones are acquired by or merged with larger foreign companies. This occurs before the Israeli companies have the chance to grow into substantial independent firms that can provide local jobs and encourage the development of management skills.

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SolarEdge Technologies

One firm facing the challenge of getting later-stage funding is SolarEdge, which makes technology for photovoltaic solar panels. 'We want to build a global company,' says one of the company's founders.
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A number of factors contribute to this, including a lack of later-stage funding, a shortage of local management skills and culturally ingrained short-term thinking, analysts and chief executives of high-tech companies say.
"They tend to exit as soon as possible to get some sort of return. They don't have the patience or confidence to grow to the next level," says Eldad Tamir, chief executive of Tamir Fishman Group, a Tel Aviv investment house that also engages in venture capital.
Gal Trifon, CEO of digital-advertising company MediaMind Technologies Ltd., which raised $57.5 million in an initial public offering in early August, says finding enough funding and building a corporate structure was difficult and required a lot of patience. "It would have been easier to sell," he says.
Without more big companies and international investment in local high tech, Israel risks not capitalizing fully on, or even losing, its innovative edge, which is a backbone of the local industry. Israel has few natural resources, and its main asset is human capital and innovation, says Yoram Tietz, managing partner of Ernst & Young Israel.
Israel's high-tech industry, which includes the software, medical-device, electronic-device and advanced-mechanical sectors, made up about 15% of the country's $200-billion-a-year gross domestic product in 2009, and 40%, or $35 billion, of its exports, according to the Ministry of Finance.
""There are weaknesses in the model; we don't have the whole ecosystem to grow companies in Israel," says Eugene Kandel, head of the National Economic Council, a division of Prime Minister Benjamin Netanyahu's office, which is studying the issue. "We need at least a small part of our start-ups to turn into big companies and stay in Israel."
Mr. Kandel says Israel has 3,800 start-ups. But according to the Israel High Tech Industry Association, a trade association for the high-tech and venture-capital sectors, it has only four technology companies with market capitalizations of more than $1 billion. Such statistics give rise to two questions: What makes Israel so innovative? And why can't companies there grow?
Saul Singer, co-author of the 2009 U.S. best seller "Start-Up Nation," says the innovation required for start-ups is natural to Israelis who, in a small country surrounded by enemies, are used to taking risks, facing adversity and making decisions amid ambiguity.
"Israelis have always been good at turning adversity into a source of creative energy," Mr. Singer told The Wall Street Journal in an interview. "The country is a start-up. It took a lot of drive and innovation just to survive in Israel."
Entrepreneurs identify two main obstacles to companies growing bigger: a lack of later-stage financing and a paucity of managerial talent.
The roots of the financing problem lie in the sector's origins in the 1990s, analysts say, when it was backed heavily by venture capital that focused mainly on early-stage investment and put pressure on entrepreneurs to sell their companies to ensure a return on that investment.
CEOs say that while they would prefer to stay headquartered in Israel to take advantage of the local culture of innovation, not selling to a foreign company is dependent on getting later-stage funding, either through venture capital or an IPO
"Late-stage funding is barely available for this industry," Mr. Kandel says.
One company facing such a challenge is SolarEdge Technologies Inc., founded in 2006 by three veterans of an Israeli military laboratory, and which makes technology for photovoltaic solar panels. Like many of their peers, the founders say Israel is the best place for innovation and engineering talent. The company has received $34 million in funding from a combination of private venture capital and GE Energy Financial Services, and a month ago began a search for new funding to tide it over until an IPO, which is at least a year away. It expects 2010 to be its first cash-flow-positive year, with $30 million in revenue; expected revenue for 2011 is $65 million.
"We don't want a big player to buy us out," says Lior Handelsman, one of SolarEdge's founders and vice president of product strategy and business development. "We want to build a global company."
But venture capital—which has been of major importance despite its limitations—also isn't what it was. In 2009, Israeli high-tech companies raised $1.12 billion in venture capital, the lowest amount since 2003, according to the IVC Research Center, which publishes data on the industry. The industry raised $2.07 billion in 2008 and $1.76 billion in 2007, the center said.
"The VCs are almost dried out," says Inon Beracha, who founded Ceragon Networks Ltd. in 1996, and who says he doubts he would get funding today like he did back then. Ceragon began with venture funding from the founders of RAD Group, a collection of companies in the network and telecommunications fields.
Compounding this problem, local institutional investors have largely stayed away from venture-capital investment, allocating an average of 0.2% of their portfolios to it, as opposed to an average of 2.5% for U.S. institutional investors, according to the finance ministry.
Mr. Kandel, of the National Economic Council, says the government should team with the private sector to create late-stage venture-capital funds to address this problem, much as it invested $100 million in early-stage venture funds through the Yozma program in the 1990s.
In that program, the Israeli government partnered with foreign venture funds to create 10 venture-capital funds for the high-tech sector. Michael Eisenberg, a general partner in Benchmark Capital's Israel office, credits Yozma with creating Israel's venture-capital industry and has called for a similar government program dedicated to late-stage capital.
The cabinet recently approved policies to encourage the development of larger high-tech companies, including tax incentives to companies that stay in Israel and to Israeli companies that buy or invest in smaller local start-ups. The cabinet also approved the creation of a safety net to encourage local institutional investors to participate in venture capital. The safety net would allocate 200 million shekels ($52 million) annually to reimburse qualified institutional investors for part of their losses in venture investments, the finance ministry said. The proportion of reimbursement hasn't been established.
The government hopes the safety net will help raise the average amount of portfolio money that institutional investors dedicate to venture capital to 2.5%, a finance ministry official says. The plan also includes measures to encourage that innovation continues, such as bringing retired high-tech professionals to teach in high schools, establishing more cooperation between university laboratories and the corporate world, and offering financial incentives to Israeli researchers returning from abroad.
CEOs of several high-tech companies aiming to keep their headquarters in Israel say the government's plan seems to be on the right track, but that it doesn't do enough to increase significantly the availability of late-stage funding.
The government's safety-net plan for institutional investors is only a first step in creating more late-stage capital, Tamir Fishman Group's Mr. Tamir says. "The good news is that people are aware. Whether or not that will solve it or not remains to be seen," he says.
It's also in the interest of the local venture-capital sector to focus on expanding companies in Israel rather than creating early exits, says Aaron Mankovski, managing general partner of Pitango Venture Capital and chairman of the High Tech Industry Association.
"It's not just for the sake of Zionism," Mr. Mankovski says. "To get a good price in a merger or an initial public offering, you need a larger company today." Unlike in the late 1990s, acquiring companies don't want to buy just an idea or technology, but want an organization with management and a proven business record. The amount of revenue a company needs in order to go public today on the Nasdaq Stock Market is about $100 million, he says, up from $50 million 10 years ago.
Another challenge is finding qualified managers, industry and government officials say. Ori Hadomi, CEO of Mazor Surgical Technologies, says his company, which produces medical robotics for the global market, is still headquartered in Israel and trades on the Tel Aviv Stock Exchange, but runs its marketing and product management out of an office in the U.S., where Mr. Hadomi has recently relocated. The company tried to hire people for such jobs in Israel, "but we couldn't find them," Mr. Hadomi says. "We really lack a professional marketing and sales culture."
Many CEOs see Israel's problem as one of critical mass. More large companies developing there would develop local managerial talent. But the lack of such talent stops such companies from developing. Israel needs to be seen as not just a hub for innovation but as a center for business development, they say.
They also say developing a number of large high-technology companies in Israel is crucial in being able to draw more investment to the country and raise the level of corporate managerial skills.
Mr. Netanyahu said in a speech at the conference of the High Tech Industry Association in Jerusalem earlier this summer that it is a priority for the government to help develop large Israeli high-tech companies to keep the industry sustainable for the long term.
"We're not resting on our laurels," Mr. Netanyahu said in the speech. "We want to create a structure both of ideas and people and money that encourages these ideas to develop into actual companies, into products and services that stay in Israel."
Mr. Netanyahu's concern for the high-tech industry recently led to eight months of meetings between his office and finance ministry officials, to develop, with the input of high-tech industry leaders, a plan to address the sector's weaknesses, Mr. Kandel says.
One measure that could lead to more companies staying in Israel is raising foreign investors' awareness of locally listed companies, says Ester Levanon, CEO of the Tel Aviv Stock Exchange, which lists about 130 high-tech companies. This would draw more foreign investment, which in turn would allow for more local IPOs and higher valuations, giving start-ups that aren't big enough for the Nasdaq an alternative to selling out to a larger international company, she says.
To raise awareness internationally, the exchange is developing a plan to subsidize two years of coverage of Israeli high-tech companies, with four reports a year by an international investment-research company, Mrs. Levanon says. "In order for companies to survive on the stock exchange, they need analysts. That's crucial for companies," she says.
Mrs. Levanon says the exchange is considering adding another index that caters to small to medium-sized high-tech companies. A new index would encourage more of these companies to list in Tel Aviv rather than on smaller start-up oriented indexes abroad. "I don't believe it makes sense to list in London or Toronto when there is a high-tech sector in Tel Aviv," she says.
But if the problems of financing and management skills can be solved, there is still a more basic issue to address: the mindset of the Israeli high-tech sector itself. "Everyone who sells a company is a hero in Israel," says Mr. Beracha, now CEO of PrimeSense Ltd. a maker of 3D-sensing technology. This stems in part from a culture of short-term thinking that has come to pervade Israel, a young country dealing with a constantly volatile political and security situation, local analysts and CEOs say.
"Israelis act before they plan because you can never know what will happen tomorrow," says Mazor's Mr. Hadomi, speaking the day after one Israeli soldier, at least three Lebanese soldiers and a Lebanese journalist were killed in an exchange of fire on the Israeli-Lebanese border.
No one doubts that the sales of Israeli start-ups over the past 15 years have boosted Israel's economy and helped put it where it is today, with a positive foreign-investment balance. Since 1998, Israel has drawn $70 billion in foreign direct investment, according to Ernst and Young Israel. The country's economy weathered the global economic crisis well, reporting 0.7% growth in gross domestic product in 2009, according to Israel's Central Bureau of Statistics. Unemployment in May, the most recent month for which figures are available, was 6.5%, and in late July the Bank of Israel raised its key interest rate 0.25 percentage point, to 1.75%, to combat inflation and rising housing prices.
"We don't want to mess with success," Mr. Kandel says, saying innovation and the selling of start-ups will probably always play an important role in Israel's economy. "But while we were quite successful, this was not necessarily a sure win, and it's not necessarily going to stay that way unless we stay ahead of the curve."
He would just like to see 1%, or 30 to 40, of Israel's 3,800 start-ups grow into global companies based there.
But not everyone is swayed by a perceived need to build big companies. Mr. Singer, the author, calls all the talk in the sector about trying to build bigger companies "Nokia-envy," referring to the Finnish phone firm. He says Israel perhaps just isn't suited to developing big companies and that it may be better off concentrating on start-ups.
"The lack of patience, lack of respect for authority, lack of planning, chutzpah—whatever you want to call it—are things that make us good at start-ups but don't make us particularly good at big companies," he says. "We need to appreciate the importance of start-ups in the global economy, and if we can build bigger companies along the way, well, that's nice too."

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The curious case of a Cairo synagogue

The curious case of a Cairo synagogue | Al-Masry Al-Youm: Today's News from Egypt "

The first sign says it's a National Democratic Party (NDP) office. Another establishes it as a Ministry of Social Solidarity local unit. A third sign claims it belongs to "El Wayli Kindergarten." But really, the building is a synagogue, a Jewish house of worship. More in link above

'Accepting Palestinians into Israel better than two states' Rivlin (haaretz) 29th April 2010

Knesset Speaker Reuven Rivlin said Thursday that he would rather accept Palestinians as Israeli citizens than divide Israel and the West Bank in a future two-state peace solution.

Speaking during a meeting with Greece's ambassador to Israel Kyriakos Loukakis, Rivlin said that he did not see any point of Israel signing a peace agreement with the Palestinian Authority as he did not believe PA President Mahmoud Abbas "could deliver the goods."

Referring to the possibility that such an agreement could be reached, Rivlin said: "I would rather Palestinians as citizens of this country over dividing the land up."
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Late last year, Rivlin said in a Jerusalem address that Israel's Arab population was "an inseparable part of this country. It is a group with a highly defined shared national identity, and which will forever be, as a collective, an important and integral part of Israeli society."

In a speech given in the president's residence, the Knesset speaker called for a fundamental change in relations between Jews and Arabs in Israel, urging the foundation of a "true partnership" between the two sectors, based on mutual respect, absolute equality and the addressing of "the special needs and unique character of each of the sides."

Rivlin also said that "the establishment of Israel was accompanied by much pain and suffering and a real trauma for the Palestinians," adding that "many of Israel's Arabs, which see themselves as part of the Palestinian population, feel the pain of their brothers across the green line - a pain they feel the state of Israel is responsible for."

"Many of them," Rivlin says, "encounter racism and arrogance from Israel's Jews; the inequality in the allocation of state funds also does not contribute to any extra love."

Israel is sliding toward McCarthyism and racism By David Landau

"In every generation a man is to consider himself as if he personally experienced the Exodus from Egypt." That is the central message of the Haggadah, of the seder night and indeed of Passover itself - the Festival of Freedom.

The message isn't necessarily confined to the experience of the Hebrew slaves, who were delivered from bondage. The entire epic of the Exodus is meaningful. Our generation, in particular, the generation of renaissance and occupation, might do well to consider the narrative from the Egyptian perspective.

In other words, how does a society professing the noblest values toward the Other - "In the best of the land bring your father and your brothers to live," Pharaoh urges Joseph (Genesis 47:6); "the foundations of freedom, justice and peace," Israel's Declaration of Independence proclaims - how does such a society come to adopt policies of discrimination, persecution and endless conflict? "Let's double-cross them," the new pharaoh, the one who "knew not Joseph," says of his Jewish minority. "Or else they'll grow demographically, and when war comes, they'll side with the enemy ..." Sound familiar?
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How, then, does a society morph in this way? The answer seems to be, inadvertently. Since last Passover, over the first year of Benjamin Netanyahu's prime ministership, Israel has slid almost inadvertently a long way down the slope that leads to McCarthyism and racism.

Inadvertently. That must be the explanation. Otherwise, how to explain the dismal fact that during this year a heinous travesty was perpetrated against Naomi Chazan - and the streets of our cities weren't seething with mass demonstrations? Major crossroads around the country were adorned with a literally Sturmer-like cartoon portraying this hitherto respected and distinguished woman, until recently a deputy speaker of the Knesset, who heads a fund that pours millions of philanthropic dollars into educational and civil, social projects in Israel - and thousands of decent people were not out there shouting, 'Fascism shall not pass!' One needn't like all of the organizations that Chazan's New Israel Fund supports to be outraged and disgusted and frightened by the style of the campaign that was mounted against her. (Full disclosure: I've lectured on occasion for the New Israel Fund.)

What's so depressing about the Chazan affair is not so much the crude brutishness of her adversaries as the limp impotence of the many people who tut-tutted - and did nothing. When this form of inadvertence descends on an enlightened society, it numbs and paralyzes. That, perhaps, is how to understand a recent academic discussion broadcast on Army Radio about the "Nakba Law." A noted jurist explained that a bill submitted by a group of MKs, slapping a three-year jail term on anyone mourning the Nakba ["the catastrophe," as the Palestinians see 1948 and after] on Independence Day was unlikely to get through the Knesset. Even if it did, she went on, it would probably be struck down by the High Court of Justice. The criminal code, she explained, was not the appropriate means to deal with "the problem." However, she added, completely matter-of-fact, a bill cutting off state funding from any local authority marking the Nakba on Independence Day would probably get through. Its curtailment of freedom of speech could be deemed proportionate. (A bill in this vein has since passed its first reading.) Not a word of reservation from this jurist or her interviewer, who himself is an academic lawyer. No value judgment. Just dry academic analysis.

Without making any ghastly comparisons, listening to this radio program, one found oneself thinking that in other countries where the regime steadily transformed from democratic to non-democratic, there must have been liberal-minded, gently spoken academics who provided meticulous, legalistic analysis of malevolent laws enacted against minorities.

As history, both ancient and more recent, teaches us, there is another vital component in the inculcation of a whole society with xenophobia. It's the big lie, repeated over and over until ordinary people inadvertently come to regard it as truth. "Go and worship your God," Pharaoh pretended to Moses, time after time. His own people no doubt believed him.

In our own case, this past year, Netanyahu has incessantly repeated his mantra that he's merely doing in Jerusalem "what all my predecessors have done for 43 years." The purpose of this pretense is to erase from the public mind, at home and abroad, the fact that two of his predecessors negotiated with the Palestinians and the Americans over dividing the city. The purpose, too, is deliberately to blur the hugely significant difference between building in the Jewish neighborhoods that have been developed over decades and forcibly inserting Jewish settlers into all-Arab neighborhoods like Sheikh Jarrah. The purpose, basically, is to obliterate any chance of implementing the "Clinton parameters" - Jewish areas to Israel, Arab areas to Palestine, Holy Basin to God [or an international consortium representing Him] and thus reaching a fair compromise on Jerusalem.

The demonstrations taking place on Fridays at Sheikh Jarrah offer some smidgen of hope that not everyone has been duped and silenced. The Naomi Chazan front was abandoned. The "Nakba Law" front was lost without a fight. The battle line in Israel's war of survival as a Jewish and democratic state now runs through the Arab neighborhoods of Jerusalem. There, alongside the few brave Israelis out demonstrating, the president of the United States has planted his pennant, too. Is that the line, at last, where Israel's decline will be halted?

Peres blames Netanyahu for breaching Jerusalem status quo

Haaretz 29 3 2010 Barak Ravid
President Shimon Peres believes the administration of Prime Minister Benjamin Netanyahu has violated the accepted status quo on building in East Jerusalem by allowing construction for Jews in the heart of Arab neighborhoods in the city.

Peres reportedly told the prime minister that the current diplomatic crisis with the United States could be resolved if Israel affirmed that the agreed-upon status quo will not change, and that there will be no further building for Jews in predominantly Arab areas of the city like Sheikh Jarrah and Silwan.

The president reportedly told Netanyahu and several ministers in his cabinet that every Israeli government until now has agreed not to build in predominantly Arab areas of the city. "Previous governments built in Jewish neighborhoods, but not in Arab ones," he said. "Even Menachem Begin and Yitzhak Shamir did not build in the heart of Arab neighborhoods in East Jerusalem. That's why the entire world agreed to [building in Jewish areas], and it wasn't a stumbling block in negotiations."
My Response:
Peres Leader of Opposition or Tzipi Livni?
This Report makes Sense as I know Dalia Rabin 60 like me Also Supports the Changing the System of Elections in Israel. When Olmert was PM Peres behaved like he was PM -Know that Israel has Clumsy PM Peres Behaves like he is FM and PM and maybe Finance Minister too. In this Report he is like Leader of Opposition. But Tzipi Livni can do both, She is the Good Leadet of Opposistion and Best Candidate for PM, She is too Young to be President though. and Hillaary Clinton seems to have more Vision than most Israeli Politicians. If it was not Sad I would think it is Purim not Pesach. Bibi Let Gilad Back first! Berghooty can Get the Palestinians to be Realistic.


During a birthday celebration on Friday for Dalia Rabin, a former MK and the daughter of former prime minister Yitzhak Rabin, Peres recalled the elder Rabin's warm relations with former U.S. president Bill Clinton.

"My heart is crushed when I see how the [current] prime minister was received in Washington," Peres said. "I couldn't help thinking about better days."

The forum of seven senior ministers convened Friday afternoon to be briefed by Netanyahu on talks he conducted with U.S. government officials during his visit to Washington earlier in the week. The consensus reached at the meeting was reportedly that it was the U.S. administration, and not Israel, that changed its stance on construction in East Jerusalem, including its Jewish areas.

The ministerial forum will meet today as well as over the coming week, in a bid to present Washington with the Netanyahu government's official position on a series of issues - including building in East Jerusalem - by the end of the Passover holiday.

Where Hannah Arendt went wrong By Shlomo Avineri haaretz.com

Where Hannah Arendt went wrong
By Shlomo Avineri haaretz.com
The Origins of Totalitarianism, by Hannah Arendt.
newly published in Hebrew as "Yesodot Hatotalitariut," translated from the English by Idith Zertal;
Hakibbutz Hameuchad Publishing House, 742 pages, NIS 118

In English, "The Origins of Totalitarianism" is available in hardcover from Schocken, with an introduction by Samantha Power, 704 pages, $37.50; in paperback from Mariner Books, 576 pages, $19.


Hannah Arendt's "The Origins of Totalitarianism," first published in 1951 (in English), has played a major role in shaping the way international affairs have been viewed, from the second half of the 20th century onward. Perhaps more than any other treatise, it has contributed to the way people with a liberal outlook have grappled with the totalitarian ideas and regimes of both the right and the left. To a large extent, this book entrenched the concept of totalitarianism and characterized this type of regime, stressing the shared characteristics of Nazism and Communism, despite the many differences between them.

The publication of the first Hebrew translation of this work, which entailed considerable effort because of Arendt's complex and sometimes unsystematic mode of writing, is an important and welcome event. It is
sometimes said that the reason the book was never translated earlier was because of the anger in Israel over her theory about the "banality of evil," as expressed in her book "Eichmann in Jerusalem" (1963).


Yet other books about totalitarianism also took a long time to come out in Hebrew: Karl Popper's "The Open Society and its Enemies," which was first published in 1945, was only translated into Hebrew in 2003; F.A. Hayek's "The Road to Serfdom" (1944 ) came out in Hebrew only in 1998; and "Totalitarian Dictatorship and Autocracy," by Carl Friedrich and Zbigniew Brzezinski (1956 ), has not yet been accorded a Hebrew translation. For understandable reasons, "The Origins of Totalitarian Democracy," by Jacob Talmon, then a professor of modern history at Hebrew University, came out in Hebrew shortly after the 1952 publication of the English edition.

This hasn't been some kind of evil conspiracy. Rather, there are objective difficulties with the translation of many important theoretical books, and the need is less than urgent because intellectual and academic circles in Israel, after all, have access to them in English. The absence of a Hebrew edition has not prevented lecturers at the country's universities from including Arendt's book on reading lists for students since the mid-1950s. Nevertheless, it will come as no surprise if the appearance of the Hebrew translation makes waves in the public discourse.

It is difficult to classify Arendt's volume on totalitarianism as a book on philosophy, history, political science or mass psychology. In fact, it is a treatise about the history of culture that is tremendous in its scope, and in this respect it is in the tradition of all-embracing works like Oswald Spengler's "The Decline of the West" or Arnold Toynbee's "A Study of History." Nevertheless, despite its eclectic character (or "hybrid" nature, as Idith Zertal, the translator and editor of the Hebrew edition, calls it in her preface ), to this day it offers the best insight into totalitarian movements and regimes.

After World War II, the West faced an intricate problem: While Nazism and Fascism had been defeated, this victory was made possible largely thanks to Stalin's Soviet Union. Before 1945, the war could be depicted as pitting the "free world" against the dictatorships of Hitler and Mussolini, but the strong-armed Communist takeover of Eastern Europe made it difficult to cling to this fiction.

Hannah Arendt -- like Popper and Talmon -- afforded the West the ideological infrastructure needed to see the Cold War not only as a struggle between two superpowers aspiring to world hegemony, but also as a continuation of the fight against totalitarianism as such, whether it comes from the right or the left. Arendt made a crucial contribution to that fight, and therefore her book -- which does not make for easy reading -- won tremendous popularity not only in academia but also among the general public. As happens in such cases, it is not entirely clear that everyone who cites the book has actually read it or thoroughly understood it (much as with Francis Fukuyama's "The End of History and the Last Man" and Samuel Huntington's "The Clash of Civilizations and the Remaking of World Order" ).

Arendt's primary contribution to the understanding of totalitarianism lies mainly in her contention that the totalitarian movements, both fascist and communist, provided an answer to the masses facing the disintegration of traditional European society, with its hierarchies, norms and accepted modes of behavior. Modernization and democratization, it emerges, did not in fact elevate "the people" but often, rather, the "masses" or the "mob" ? an observation already made by conservative writers like Jose Ortega y Gasset.

According to this perspective, fascism and communism were not a continuation of the historical dictatorships based on ruling classes or conquests. They represented a new kind of tyranny, nourished by the alienation spread by modern life. The individual, "the common man," is entirely cut off from moderating or restraining affiliations. He has nothing in his life but the idea that connects him directly, with no need of institutional mediation, to the movement and the leader.

Hence the mass marches and pageants -- whether in Nuremburg or in Red Square. Hence the intoxication from the stunning individual experience of marching together with tens of thousands of others to stirring music and flags waving. Hence, too, the creation of an intrusive bureaucratic machine, accompanied by a secret police force and concentration camps, with hierarchical and rigid discipline binding together a population with no other foci of identification. What enthusiastic belief does not do, fear will, and the combination of the two is tremendously powerful.

The cruel irony is that the totalitarian society really is a classless society that could therefore be headed by nonentities like Hitler and Stalin, who truly did represent the "people's will," as embodied in an indistinguishable mass, far more than their sophisticated and educated rivals. These leaders demanded total conformism in every aspect of life, from thought to dress, and therefore they excluded, and destroyed, minority groups. Blind loyalty to the populist leader also led to belief in his supernatural powers, and the absence of an effective opposition to his rule, even when the extent of his failure should have been clear to all.


Nazism and nationalism

Today we know far more about totalitarian regimes than Arendt did when she wrote the book. Thousands of studies have opened the Nazi regime's secrets to us, and many facts about the Soviet Union came to light (or were finally confirmed ) after its disintegration. Nevertheless, Arendt's descriptions are still read with great excitement, just as Arthur Koestler's novel "Darkness at Noon" still provides insight into the purge trials in Moscow, perhaps more than many learned treatises.

However, most of Arendt's book does not actually discuss totalitarianism. Of its three sections, only the last focuses on totalitarianism; the first two are entitled "Antisemitism" and "Imperialism." While the fact that Arendt was not a historian did not impair her analysis of contemporary totalitarian regimes, it did lead her to develop some problematic conclusions in the first two parts of the book, in which she discusses political developments in Europe in the modern period, mainly the emergence of racism and what she calls "the decline of the nation-state." The justified excitement over Arendt's profound insights into totalitarianism in the final section of the book are to a large extent responsible for the lack of attention paid to the other parts of the tome.

In the section on imperialism, Arendt devotes a chapter to the rise of the pan-German and pan-Slavic movements and, surprisingly, depicts them as evidence of the decline of the nation-state. However, historical research, like the statements of those selfsame "pan-" movements, indicates that they are clearly nationalist movements taken to the extreme. For instance, pan-Slavism was an expansion of Russian nationalism, aided by the national movements of other Slavic peoples (such as the Czechs, but never the Poles ). And German nationalism at its most extreme was not satisfied with the unification of Germany. The pan-German ideology saw itself as the clearest expression of German nationalism, and therefore saw the Volksdeutsche -- ethnic Germans living in other Eastern Europe countries -- as an integral part of the German people and the Third Reich.

To argue otherwise means overlooking and missing the historic connection between Nazism and its roots in the extreme wing of German nationalism. Associating the "pan-" movements with the decline of the nation-state also brings Arendt to her problematic placement of modern anti-Semitism in the fabric of European history.

Her key statement on this issue, which pervades her entire discussion of anti-Semitism, is that "modern anti-Semitism grew in proportion as traditional nationalism declined, and reached its climax at the exact moment when the European system of nation-states and its precarious balance of powers crashed."

There is no historical support for this contention, and research shows that the opposite is true: It was the rise of the modern nation-state, and the challenges it faced, that led to the sharp increase in anti-Semitism. As Zeev Sternhell has shown, the rise of integral nationalism at the end of the 19th century in France was channeled in the Dreyfus affair into extreme anti-Semitism, and studies by George Mosse and Peter Pulzer indicate a similar link in Germany and Austria.

Moreover, and this is totally missing from Arendt's account, the rise of aggressive anti-Semitism in Eastern Europe is directly connected to the rise of nationalist movements and nation-states there. As nationalism thrived and achieved its political aims in Romania, Hungary, Poland and Lithuania, anti-Semitism increased when the nationalist movements had to confront the existence of a relatively large Jewish minority in their territories. Apart from a discussion of Russia, where Arendt's analyses are riddled with her problematic view of pan-Slavism as an expression of the failure of Russian nationalism, Eastern Europe is absent from Arendt's discussion. This raises the following very big question: How is it possible to discuss modern anti-Semitism while ignoring what happened to the most sizable Jewish population, which was in Eastern Europe?

A more comprehensive examination of Arendt's theory concerning the rise of anti-Semitism in the parts of Europe she does discuss (mostly Germany and to a certain extent France ) confronts the reader with yet another problematic conclusion: that the Jews, through their financial and banking activities, played a crucial role in the rise of the absolute monarchies and the modern nation-state. Critical readers cannot help but ask themselves what exactly is going on here, and where these views are coming from.

The answer is clear: Arendt, who explicitly acknowledges that she is not a historian, is talking about the role played by the "court Jews," mainly in the 18th century, in the courts of some German princes. At the same time, she is basing her argument on Jewish bankers' involvement in the development of the banking system in the 19th century. No one disputes this. The problem is that Arendt generalizes from these historical findings to draw conclusions about the place of "the Jews" in European history, while entirely ignoring the fact that most of the Jews -- even in the German states -- were neither court Jews nor financial advisors to princes, but rather small traders and shopkeepers.


'No poor Jews'

As Arendt would have it, there were no poor Jews living on the margins of European society, managing to live with difficulty and without political and civil rights. As Arendt would have it, "the Jews" were all bankers, financiers, court Jews and privileged, or in her generalizing language: "The Jews had been purveyors in wars and the servants of kings." Not some individual Jews, but "the Jews."

Moreover, Arendt seems to be unaware of a major fallacy in her account of the Jews' role in the rise of absolute monarchies and the modern nation-state: Several of these countries had few or no Jews living in them at the time of their emergence as modern nation-states.

France emerged as the major European absolutist monarchy under Louis XIV when hardly any Jews lived there. In England too, a modern state took shape toward the end of the 18th century in the wake of the industrial revolution, but very few Jews lived there at that time either. As for Spain, an absolutist state par excellence, the Jews had been expelled during the period when the Spanish absolute monarchy was being consolidated.

The ahistoricity so blatantly visible in these theories is accompanied by other generalizations that do not stand up to scrutiny. According to Arendt, "the Jews" always supported the governments in power in whichever country they were living, but the truth is that the number of Jews in the revolutionary, liberal and socialist movements was far greater than their representation in the overall population. "The Jews," continues Arendt, were responsible for the hatred felt toward them because of their communal seclusion, their non-involvement in politics, their concern solely for themselves and their non-participation in social and class struggles.

The point is that one can argue precisely the opposite, that it was the disproportionate prominence of Jews in politics -- especially liberal and socialist politics -- that gave rise to anti-Semitic criticism. Examples range from Karl Marx and Eduard Bernstein in Germany to Ferdinand Lassalle in France; Jews were also heavily involved in the Communist revolutions in Bavaria and Hungary after World War I, and clearly in the Soviet revolution. Indeed, this was one of the classic anti-Semitic canards of the 19th century and of the Nazis in the 20th. But there is no mention of any of this in Arendt's analysis.

Equally astounding is the fact that in a nearly 200-page discussion of anti-Semitism in Germany, Arendt never mentions the writings of some of the chief anti-Semites: Wilhelm Marr, Eugen Duehring and Heinrich von Treitschke. (While not discussed in the text, Duehring is, however, mentioned in a footnote, though his Christian name is misspelled. ) Nor is there any mention of the fact that the German student fraternities, the Burschenschaften, were a hotbed of anti-Jewish activity at the start of the 19th century, with the rise of German nationalism during the Napoleonic wars. As for the anti-Jewish statements by Johann Fichte, the major philosophical precursor of German nationalism -- not a word.

The absence of these works and developments from discussion is all the more surprising because these are figures whose books resonated greatly among the German public -- in fact, it was Marr who coined the term "anti-Semitism." Nor is there any mention of Richard Wagner's "The Jew in Music." Just as Arendt does not discuss the Jews themselves (apart from court Jews and bankers ), so the anti-Semites do not really appear in her treatise. This is presumably due to the fact that had she mentioned them, it would emerge that the anti-Semitic criticism of the Jews was very different from what Arendt claims it to be: Anti-Semitic propaganda maintained, for example, that Jews, in their revolutionary activity, were undermining the existing political order or that they were "contaminating" the purity of the German culture or race. These aspects of anti-Semitic accusations against the Jews are absent from Arendt's account.


One of the problems with Arendt's historical analysis is that she bases her views not just on balanced, well-respected research, but also on the writings of Nazi historians such as Walter Frank, whom she cites often and without reservation. Frank, who headed the Reich Institute for the History of the New Germany, was responsible under Nazi rule for "cleansing" the German universities not only of Jewish lecturers but also of books written by Jews. Citing Frank, who committed suicide after the fall of the Third Reich, as a historical source regarding the role of the Jews in German history is problematic, to say the least.

Arendt also demonstrates a shallow historical understanding of Benjamin Disraeli. Rightly, she says there are racist elements in his novels and speeches, and it is appropriate to link him to thinkers like Arthur de Gobineau and Houston Stewart Chamberlain. Yet there is a difference: Gobineau and Chamberlain wanted to exalt the white race as supreme and justify European dominance of "inferior" races. But while Disraeli glorifies the oppressed and humiliated Jews and depicts the Europeans as intellectually inferior, this is protest racism by the humiliated, much like the black racism of Frantz Fanon, Malcolm X and James Baldwin. All racism is despicable, but there is room for distinctions.


'The oriental mob'

Bearing all this in mind, readers of "The Origins of Totalitarianism" will perhaps not be surprised by several strains of thought that appeared later in "Eichmann in Jerusalem." Nevertheless, they might be surprised by the way Arendt described the atmosphere at the Eichmann trial in a letter to German philosopher Karl Jaspers: "My first impression: On top, the judges, the best of German Jewry. Below them, the prosecuting attorneys, Galicians, but still Europeans. Everything is organized by a police force that gives me the creeps, speaks only Hebrew, and looks Arabic ... And outside the doors, the oriental mob, as if one were in Istanbul or some other half-Asiatic country."

Nevertheless, it would be wrong, even wicked, to see Arendt as a person tainted by Jewish self-hatred. She was a proud Jew and a courageous fighter against anti-Semitism and totalitarianism, which is why she wrote this book. Yet as she herself would acknowledge, sometimes victims internalize the criticism aimed at them by their enemies. And indeed, though her book contains echoes of anti-Semitic stereotypes and accusations, Hannah Arendt is by no means a self-hating Jew. On the contrary, she comes across as a victim of anti-Semitism, in what is perhaps one of its cruelest, and most insidious, forms. There are tragic aspects to this monumental treatise, demonstrating just what anti-Semitism can sometimes do to the most brilliant of Jewish minds. This tragedy is painful and distressing -- and far from banal.

Prof. Shlomo Avineri's most recent book is "Herzl," published in Hebrew by Zalman Shazar Center Press.

February 9, 2010 nytimes.com

Identity Found: On West Side via West Bank

By FELICIA R. LEE

Najla Said’s “Palestine,” a one-woman Off Broadway show that began previews on Saturday, is a coming-of-age story about Ms. Said’s journey to become an Arab-American on her own terms.

The daughter of Edward W. Said, the Columbia University professor who until his death in 2003 was the most prominent advocate in this country for the cause of Palestinian independence, Ms. Said guides the audience though her teenage years as a self-described politically agnostic Upper West Side princess to a vision of herself today, a 35-year-old woman who is deeply moved by the very word “Palestine.”

Ms. Said, a writer and actor, insists that she is not an especially political person. “Palestine,” which officially opens on Feb. 17 at the Fourth Street Theater in the East Village, offers no remedies for Mideast tensions or blanket assessments of a complex situation. Ms. Said just tells her tale (with generous helpings of humor), which includes attending an elite Manhattan prep school (Trinity), where she blended in with her Jewish friends; becoming anorexic at 15; and visiting the West Bank and Gaza, Jordan and Lebanon with her family, where her priority was often getting in some beach time rather than analyzing the geopolitical situation.

“I worried about being pretty enough, smart enough and fitting in,” Ms. Said recalled during a recent interview about “Palestine” and the years before 9/11 cast a dark shadow. “In the way of many immigrant kids,” she added, “I just wanted all the questions about identity to go away.”

Those questions persisted, of course. And so on a minimalist stage, with shifts in mood and scene accomplished by an original soundtrack of Arabic and Western music, Ms. Said talks about them. Her trips to the Middle East with her family were sometimes a jumble of confusion, she says, with the smell of open sewage in Gaza, the stark separation of the sexes, the food and the language that seemed to have nothing to do with her cushy Upper West Side life.

Her mother, Mariam Cortas, is Lebanese and was brought up Quaker. She and Mr. Said, a professor of English and comparative literature who was born in Jerusalem but left the Middle East as a teenager, bonded over books like “Jane Eyre,” not discussions of Orientalism. In the play Ms. Said recalls her Christian father fondly as a “cute old guy,” dapper in a three-piece suit, playing tennis, driving a Volvo and smoking a pipe.

Beyond his daughter’s gaze, Said was certainly considered a provocative figure. Some supporters of Israel accused him of failing to condemn specific terrorist acts by Palestinian groups. His supporters applauded his advocacy of a Palestinian homeland. Ms. Said’s play revisits a 2000 international incident over a widely published photograph of her father at the Lebanese border, about to throw a stone at an abandoned Israeli guardhouse.

Ms. Said casts his action as part of a stone-throwing competition with her older brother, Wadie, with little political significance. Her father at the time called it “a symbolic gesture of joy” that the Israeli occupation of southern Lebanon had ended. His detractors urged Columbia to reprimand him or to repudiate his action, but university officials decided that no action was needed.

Given that “Palestine” flirts with that kind of controversy, Sturgis Warner, the co-artistic director of the Twilight Theater Company, which is producing the show in association with New York Theater Workshop, said he worried about raising the initial $30,000 to mount the production. But even with the inherent difficulties of fund-raising, money from all kinds of people flowed in from all over the world, Mr. Warner, who is directing the show, said. It included a $15,000 donation from the Israeli conductor Daniel Barenboim, who was Edward Said’s best friend.

“Najla’s play is important because it adds a personal dimension to the difficulties of communication in a life that has many different reference points,” Mr. Barenboim said in an e-mail message. He mentioned Ms. Said’s position as a second-generation American with Arab roots, growing up in a predominantly Jewish environment, a child of privilege confronted with “the deprived conditions of many Palestinians.”

“The way she moves between these spheres,” he added, has much in common with the West-Eastern Divan Orchestra, a project Mr. Barenboim started in 1999 with Edward Said, who played piano and wrote music criticism. With the orchestra, Mr. Barenboim said, he and Said wanted to “encourage conversations between Arabs and Israelis and connect people individually across the chasm of speechlessness that so often characterizes the Palestinian-Israeli conflict.”

To Mr. Warner, whose company supports the creation of new plays, especially by emerging playwrights, “what’s important is showing the individual narrative and going beyond the politics.”

Indeed, while Ms. Said’s theatrical cocktail might be viewed as personal and political, she said she made efforts not to offend any group. She felt the pain of being misunderstood all too keenly after 9/11, she said, because she realized that her heritage made her an outsider, at best, to people who knew nothing about her or about Arab-Americans.

But Ms. Said also finds a danger in group identification, which can mean the loss of the details of real personal history, which are needed for people to see and hear each other fully, she said after a recent rehearsal. “We’ve all got stories,” she said.

Lameece Issaq, a Palestinian-American playwright who lives in New York, concurred. “We are artists, trying to get work, but we have to create conversations to take on the complexity of our experience,” Ms. Issaq said. She is part of a group of playwrights who are establishing the Noor Theater group to support, develop and present the work of artists of Middle Eastern descent. (Ms. Said is not involved but has done similar work in the past.)

“Like Najla, people are coming out more and sharing their narratives more,” Ms. Issaq added.

In the past few years Ms. Said has appeared in Off Broadway plays, in film and on television, and most notably in the Seattle Repertory production of Heather Raffo’s solo play, “Nine Parts of Desire,” which looks at the lives of a cross section of women in Iraq. “Palestine,” she said, has been a chance to deal with all the things she spent many years trying to avoid.

“When I hear the word Palestine, I hear my dad’s voice saying it. But I don’t know what it is, because it’s not a place for me,” she said. “I don’t know it; I have no connection to it. Even my dad was not really connected to the actual, geographical place — for him it was an idea, a struggle for equality and human rights.”