A Conversation with Benjamin Netanyahu

American Enterprise Institute

November 9, 2015

DANIELLE PLETKA: Mr. Prime Minister, youíve been welcomed only three or four times already. Let me welcome you again to the American Enterprise Institute. Weíre delighted to have you here with us.

BENJAMIN NEYANYAHU [Prime Minister of Israel]: Thank you. Thank you very much. I appreciate it.

MS. PLETKA: Thank you very much.

MR. NETANYAHU: I have to interject. I want to tell you. Iím not used to receiving awards in Israel, especially not from the media. (Laughter.) I do get them from the public on election day. But itís very moving for me to be here.

I do remember Irving Kristol as a great intellect, as a fearless intellect. Political correctness was thrown out of the window. He called it like he saw it and he had a profound influence on many. He had a profound influence on me. And I consider myself honored and privileged to have spent many hours with him. I think heís left a great legacy and heís left a great family.

And I want to especially welcome his wife, Bea. Iíve read her books, recently a book, believe it or not on philo-Semitism in Britain. Can you imagine? A tremendous book. This is a tremendous family. It goes on in the next generations. I am deeply honored to have received this award from you. Thank you. (Applause.)

MS. PLETKA: I donít think anybody sitting here in this room would underestimate the affection and respect that the American Enterprise Institute, our entire family, our entire community has for the Kristol family, for Irvingís legacy. So thank you. Thank you so much for saying that.

Now, let me pick up my remarks. Just a quick, brief word. For those of you who have been with us for many years, in years past we have had our honorees give a speech from the podium. And this year, we asked you to have a conversation. And thank you for being willing to do that. We thought it would more interesting, a little bit more enlightening, perhaps, for some of us. And, in addition, it would provide an opportunity to hear about a range of issues that would be of importance to everybody.

But, perhaps more importantly, I think there are some who may be a little disappointed that Iím not going to interrogate you in Washington style about a variety of issues. Iíd like to remind all of our guests, AEI is not a news organization. I may disappoint you. Iím very sorry. But we are a think tank, and weíre interested in the big questions. And I hope that if we can take something away, it will be some big answers.

MR. NETANYAHU: Well, I hope this catches on. I mean, itís a wonderful idea. (Laughter, applause.)

MS. PLETKA: Weíre all about leadership.

Mr. Prime Minister, youíve said, ďIsrael has always been pro-American. Israel will always be pro-American.Ē You yourself spent many years in the United States, as did your father. Tell us a little bit about what is at the heart of Israelís and your affection for the United States.

MR. NETANYAHU: Common values first. I think the values of freedom, free societies, the idea of individual choice that is enveloped with a collective purpose. And I think that defines Israel and defines America. These are two societies built on a purpose, on the idea of freedom.

Iíve spoken in the Congress a number of times, and each time I look and I see the emblem of Moses in the American Congress, and it says a lot. Itís the idea of the Promised Land, the land of freedom, freedom from bondage, freedom to pursue your future. So I think this is the identity of conviction.

But there is something else that I think has to be seen in a historic context. We were a people scattered among the nations. We had no capacity to defend ourselves. And by dint of historical regularity, we should have disappeared. Most nations that existed in the past do not exist today. And certainly a nation scattered from its land and becoming utterly defenseless, subject to the whims Ė the worst whims of humanity should have disappeared.

We gathered our resolve, came back to the land of Israel, the Promised Land, rebuilt our country when we repossessed the power to defend ourselves. But it was said here before that all powers, all countries, even great powers need alliances. We need an alliance, too.

We did not have that alliance in the first half of the 20th century when the founding fathers of Zionism identified the threat of anti-Semitism, the growing threat of anti-Semitism in Europe, we had no capacity yet to build our nation. We built it having lost six million of our brethren. And I believe that if the United States had been the preeminent world power in the first half of the 20th century, things might have turned out differently. And yet, Israel was born in mid-century. The United States became the global power at that point.

And what a difference it made. It made a difference for the entire world by guaranteeing liberty, by facing down Soviet totalitarianism. It made a difference for us in that we had a partner. And I think that not only the common ideals of Israel and the United States, and they were mentioned here, but I think itís also the role Ė the active role of the United States in defending liberty around the world and standing by its allies, in this case the best possible ally of the United States, Israel, I think itís made a world of difference.

And I bet on this alliance. I wouldnít sell the United States short. I wouldnít sell Israel short. And I would not at all diminish the importance of this alliance. I think itís pivotal for the future of our world. And if you ask me about it, Iíll tell you more. This is what I believe. (Applause.) With a sore throat.

MS. PLETKA: Like the United States, which was founded on a big idea and by a group of people seeking freedom, Israel too was founded on a big idea, that of Zionism. But the countryís come a long way since 1896 when Herzl wrote ďThe Jewish State.Ē

MR. NETANYAHU: Right.

MS. PLETKA: Is Zionism still the animating idea of the state of Israel? Is there another direction that Israel goes in? Where does Israel go in the 21st century?

MR. NETANYAHU: Well, having not had a state for 2,000 years, we have secured it again but we have to assure the Jewish future. Thatís what Zionism is about, having Ė giving the Jewish people the ability to have their own independent state.

But, you know, this is an ongoing effort. The challenges keep changing. What you want to make sure is that you have the inner strength to confront these challenges and also to make these alliances that I talked about. Nobody makes alliances with the weak, and nobody makes peace with the weak.

So the first obligation we have to further the future of Israel is to make sure the country is strong militarily, but thatís expensive. I hope you know that. Itís very expensive. So the only way you can actually fund Israelís defenses to safeguard the Jewish future is to have a very vibrant economy. The only way youíre going to have a very vibrant economy is to make sure itís a free market economy.

That is something that Iíve devoted a good part of my life to do and I think that weíre successful in doing that because in Israel what is happening now is that we are harnessing the power of innovation through the power of free markets. If you have intellectual or even technological brilliance but you have no free markets, itís not going to go anywhere.

The former Soviet Union had incredible metallurgists, incredible physicists, incredible mathematicians, but they were utterly useless. If you put them on a plane and took them to Palo Alto, they were producing value within three weeks.

Israel had incredible technologists, incredible scientists, incredible, but we had to liberate our markets, which is a process I had something to do with. And as a result, Israel is becoming, I would say, the preeminent or one of the two great centers of innovation in the world.

And, as a result, our ability to make alliances is shifting. We are now in an extraordinary relationship with two small countries in Asia, India and China, and Japan. Together, we account for roughly two and a half billion people in the world. Now, theyíre all coming to this new Israel.

You asked, where is Israel going? In the century of conceptual products and knowledge, the ones who will prosper are those who can innovate faster. Israel is a speed chess (?) innovator. We donít have that large a number of innovators but we have a very, very large number of very fast innovators. And our culture promotes that. So I think Israel is moving into a leadership position in technology.

Iíll give you a number to illustrate this because I think itís important that I take this away from general concepts and make it concrete. In 2014, as a result of a deliberate policy that my government is leading, Israel had 10 percent of the global investments in cybersecurity. Thatís 100 times our size. In 2015 Ė we tracked that number Ė we received double that amount. We receive 20 percent of the global investment in cybersecurity. In cyber, weíre punching 200 times above our weight. This is an indication of how you can increase your capacities and how you can harness your innate ingenuity both for national power and for international connections.

I read a book by a wonderful writer named Will Durant. Well, he wrote some 12 volumes on history. And towards the end of his life, I think in the late í60s, he wrote a small book. Itís 100 pages long, and itís called ďThe Lessons of History.Ē Well worth reading. I suggest AEI reprint it. Itís tremendous. Every sentence is potent and pregnant with meaning and insight.

And I want to give you the bad news and the good news. The bad news, if I have to Ė if I can use the word crystallize Ė what Durant is saying, he says that in history, numbers count. That is big nations overcome smaller nations because, you know, they have bigger GDP so they can have a bigger military and so on and so forth. And then I think on page 19 or so, he says there are exceptions sometimes when nations can harness their cultural force. And he says the young state of Israel may be an example of such an exception. Well, half a century later, I think we proved the point.

So where do we go? We maintain the defenses of the Jewish state, we develop its economy, we allow our ingenuity to flourish, we become a technological powerhouse, and we hope that in the great battle between modernity and medievalism that afflicts our area, modernity wins. If that happens to be the case, we all win. (Applause.)

MS. PLETKA: There is, though, a great battle going on between modernity and medievalism in your part of the world. And if you talk about democracy being the idea that made Israel strong and markets and capitalism being the idea that will propel Israel into the 21st century and beyond, there are other ideas at play throughout the region.

And there are a lot of people who suggest that, in fact, one of the things that is animating those terrorist groups that have now risen up throughout the region and are tyrannizing most of the people, many of the people of the Middle East, that they are founded on an idea and that as many drone strikes or air strikes or even ground wars that happen, without having an idea to substitute for theirs we cannot win. You canít beat something, as one of my colleagues so often says, with nothing.

So what I want to ask you is as the leader of the only truly democratic market economy in the Middle East, what is the idea that is going to beat this? Is it democracy?

MR. NETANYAHU: Itís certainly greater freedom. I think thereís a process in which the Arab world and parts of the Islamic world move toward the idea of greater freedom. Itís not automatic, but itís certainly a good contrast to the kind of tyranny and savagery that theyíre experiencing now. And the brunt of this savagery is afflicted on Muslims right now. Millions have been displaced and hundreds of thousands butchered, so they have a pretty good idea of what they donít want.

I actually think that sometimes in these kinds of battles, itís first of all important to win physically Ė win, fight. I mean, combating Nazism first involved beating Nazism. You know, you had de-Nazification after you won. You have to win. (Applause.) Itís very important not to allow these beasts the freedom to prowl because what theyíre doing is theyíre emptying parts of the Middle East into Europe. Theyíre now going to empty Africa. And you have these two human streams feeling misery.

I spoke to Prime Minister Renzi of Italy and to David Cameron, prime minister of Britain, and to Angela Merkel just in the last few weeks. And I said Ė I donít want to talk about ISIS. Thatís politically loaded. You can ask me privately later.

But I wanted to speak about Boko Haram. I wanted to speak about al-Shabaab. You know, there must be at least 12 probably closer to 20 leaders of African nations who came to Israel just as Asia is coming to Israel and they only want three things from us: Israeli technology, Israeli technology, and Israeli technology.

The African states all come and they say, we want Israeli technology in agriculture, in health care, in irrigation, whatever. And they all come down to one word: security. Help us in security. So I suggest that to some of the European countries a simple partnership. We form consortiums to deal with individual countries, help them with their economy, help them with their security. The Islamist movements in Africa are not yet strong. They can be defeated today. They can be defeated today. It will be a lot harder tomorrow.

And my point is in addition to the battle of ideas, thereís the battle. You have to win the battle. And the earlier you win it, the cheaper it will be. The longer you wait, eventually these forces will dissipate because there is no hope. There is no future for a world of darkness. And I think the Islamists will lose out, but it may take decades. It may take half a century. Nazism was defeated but it claimed the life of millions, tens of millions of people and a third of my people. I think defeating them early is important. Weíll defeat them in the battle of ideas, but letís defeat them on the ground as well. (Applause.)

MS. PLETKA: I hope you wonít mind if I press you a little bit more on this question because there are plenty of voices, I would say growing in volume, both in the United States and I think even in Israel who suggest that we are better off with the Gaddafis and the Saddams and the Assads in place to tamp down on the Islamists who rise up and that secular dictatorship is really the solution that we should look for for the rest of the Middle East. Others say that democracy is only fertile ground for Islamists to rise up. Where do you come down on that?

MR. NETANYAHU: Well, I went to serve in the United Nations 100 years ago as Israelís ambassador, and there was a woman there. Her name was Jeanne Kirkpatrick. (Applause.)

And I had read an article that she had written called ďDictatorships and Double Standards.Ē And she said basically in this article, she said, we are committed to the larger battle against Soviet totalitarianism. And, on occasion, we decide for the larger goal to make arrangements with secular dictatorships. Thatís basically what she said.

Now, mind you, Saddam was horrible, horrible, brutal killer. So was Gaddafi. Thereís no question about that. I had my own dealings with each of them. But I do want to say that they were in many ways neighborhood bullies. That is, they tormented their immediate environment, but they were not wedded to a larger goal.

The militant Islamists, either Iran leading the militant Shiites with their proxies, Hezbollah and an Islamic Jihad and Hamas, or Ė even though Hamas is Sunni Ė or the militant Sunnis made by Daíesh by ISIS, they have a larger goal in mind. Their goal is not merely the conquest of the Middle East. Itís the conquest of the world. Itís unbelievable. People donít believe that. They donít believe that itís possible to have this quest for an imamate or a caliphate in the 21st century, but that is exactly what is guiding them.

And against this larger threat that could Ė that would present two Islamic states, one, the Islamic state of Daíesh (sp), and the other, the Islamic Republican of Iran, each one of them seeking to arm themselves with weapons of mass death, chemical weapons in the case of ISIS, nuclear weapons in the case of Iran. That poses a formidable threat to our world.

And, therefore, if I have to categorize the threats, I would say that these are the larger threats. And it doesnít mean that you have to form alliances with secular dictatorships. It means you have to categorize what is the larger threat. And that is something that I think is required from all of us.

Political leadership involves always choosing between bad and worse. I seldom have had a choice between bad and good. I welcome it when it happens. But these are by far the easiest choices. Itís choosing between bad and worse that defines a good part of leadership. And I think I know how to choose that. (Applause.)

MS. PLETKA: Letís talk about Syria for a moment, and then I want to turn quickly to Iran. Syria is spiraling out of control. The situation seems to be going from bad to worse. When you think about this, how do you see the implications for Israel? How do you see this affecting Israel? How do you see solutions that Israel can effect?

MR. NETANYAHU: I have this weakness. You know, Iíve done a lot of economic reforms in Israel, I think about 50 Ė a lot. You can ask me later about them but I want to give you a Ė

MS. PLETKA: Iím not taking this hint enough.

MR. NETANYAHU: Well, they want to have dinner, but I want to tell you about that. So these economic reforms, the most difficult problem, a country where people think, itís actually conceptual, itís getting the concept right, getting the idea right especially if you can borrow it from others and see where it worked, OK? Then you just have to fit it to your own country.

And then you have the battle with all the vested interests and so on, but I find that particularly boring. Itís the first part, deciding what is the right thing to do, that always takes the largest effort and also the greatest intellectual investment. And itís pretty easy to do in economics. Itís pretty easy to do in education. Itís pretty easy to do in other things.

If I see a situation where I donít have a clear concept, I donít charge in. In Syria, I do not see a simple concept because you choose here between a horrible secular dictatorship or the two other prospects that would be buttressed by Iran, and you would have Iran run Syria, a horrible prospect for us, or Daíish, which is also touching our borders on the Golan. When two of your enemies are fighting each other, I donít say strengthen one or the other. I say weaken both, or at least donít intervene, which is what Iíve done. Iíve not intervened.

I have acted several years ago, and I think I was the first country to do that, to put a military hospital 10 yards away from our border with the Golan, with Syria, and weíve taken in thousands of Syrians Ė children, women, men amputated, horrible conditions Ė given them treatment in Israeli hospitals. We never showed their pictures because if their photograph is seen and theyíre then rehabilitated and they go back to their villages or towns, theyíll be executed on the spot.

But, other than that, Iíve left the internal battle in Syria untouched because Iím not sure what to choose and you have to openly admit it. But here is what I do define in Syria. I donít want Syria to be used as a launching ground for attacks against us.

And I have said this to Vladimir Putin when I flew to Moscow to see him. I went to see him first to make sure that our planes donít crash at each other. Itís not a good idea.

But I told him, hereís what we do in Syria. We will not allow Iran to set up a second front in the Golan, and we will act forcefully and have acted forcefully to prevent that. (Applause.) We will not allow the use of Syrian territory from which weíd be attacked by the Syrian army or anyone else. And we have acted forcefully against that.

And, third, we will not allow the use of Syrian territory for the transfer of game-changing weapons into Lebanon, into Hezbollahís hands. And we have acted forcefully on that. I made it clear that we will continue to act that way. I explained that to Putin. I said, whatever your goals are in Syria, these are our goals and we will continue to act that way. And I think that message was received.

Now, there is talk now of an arrangement in Syria, and I spoke about it today in a very good conversation I had with President Obama. And I said that any arrangement that is struck in Syria, if one is achievable Ė Iím not sure Ė Iím not sure Humpty Dumpty can be put back together again. I have strong doubts.

Iím not sure Syria as a state can be reconstituted. But whatever arrangements are made in Syria that do not preclude Iran from continuing its aggression against us directly or by transferring weapons to Hezbollah, that doesnít oblige us. We have very clear policy demands in Syria. We keep them, and weíll continue to keep them. The defense of Israel is what concerns me in Syria first and foremost, and on that weíll continue to act forcefully. (Applause.)

MS. PLETKA: I know you want to talk about the economy, but let me ask you quickly about Iran, otherwise the audience wonít forgive me. The Iranians certainly are embroiled in Syria, but these have been pretty good times for them actually. We see them interfering in Yemen without too much pushback, in Bahrain, in Lebanon, of course. Theyíre still active in the West Bank and Gaza. They are everywhere without very substantial pushback.

Do you see Iran as being constrained or in some way moderating its action because of the Joint Comprehensive Plan of Action, better known as the Iran deal? How do you see Iranís ambitious playing out?

MR. NETANYAHU: Itís no secret we had a disagreement, President Obama and myself, on the nuclear issue. That deal was signed. I think right now we have to concentrate on three things.

The first is to prevent Iran from violating the deal. I was concerned with two things about the deal: one that Iran violates the deal; the other, that Iran keeps the deal and within 15 years, they have a clear path to producing the enriched uranium for a massive nuclear arsenal. I thought and Iím still concerned with that aspect of it.

But, right now, we are in agreement that we want to keep Iranís feet to the fire. We want to make sure they donít violate the deal. And the president and I spoke about that today at some length. So weíll cooperate, first of all, to make sure that Iran doesnít cheat. And, believe me, it has a proclivity for cheating. So thatís the first thing.

The second thing is we have a vested interest Ė and by we, I mean the United States and Israel, not only Israel Ė to prevent Iranís conventional aggression. Remember that Iran is not only arming Hezbollah as I described, trying to build a second front in the Golan supplying Hamas in Gaza and Islamic Jihad with a technology of attack drones acting in Yemen, trying to undermine Jordan, you name it. Also building an arms industry, 50,000 men strong, that produces submarines, satellites, precision rocketry, and many other advanced weapons. And Iran could pursue this aggression if itís not met with countervailing force.

So I think the second thing other than keeping their feet to the fire is supporting your allies. And the most important ally and the most important countervailing force for Iran is the state of Israel. Support Israel. (Applause.)

If I can be subtle enough, and the president and I discussed today an MOU, a memorandum of understanding for American military support for Israel for the next 10 years, imagine Ė imagine the Middle East without Israel. What do you think would happen in our immediate vicinity? Iím the foreign minister, so I have to be diplomatic. Iíll leave it to your imagination.

Now imagine a Middle East with three Israels, one in Afghanistan, one in Libya, one near Yemen. It would be a far different situation. The support for Israel that Iím talking about Ė well, the United States supports Israel to the tune of $3 billion a year, OK? You spent on the wars in Afghanistan and Iraq $1.5 trillion. So thatís five centuries worth of support for Israel. I think [Defense] Secretary [Ash] Carter and the president today said that supporting Israel is not just important for Israel. Itís something that we deeply appreciate.

But itís also a very solid investment in American security as well. We are an ally that doesnít ask for any American troops. We never have, and we donít intend to. We can defend ourselves. We just want to have the tools.

So I think the second thing in fighting Iran is giving Israel the tools to defend itself and deter Iran. Thereís a third item that I think is essential. Iran is not merely practicing aggression in the Middle East. Iran is building a terror network in both hemispheres, adding a new terror cell roughly every four weeks. When I say both hemispheres, that obviously includes the Western Hemisphere, this hemisphere. And I think this terror network that is growing rapidly should be torn apart.

So three things: keep their feet the fire; support your allies, this ally first; and, third, bring down that terror network. I think thatís what I can say about Iran. It will be left to history to see if Iran will modernize and reform under this clique. I have my doubts. I hope Iím wrong. I suspect Iíll be proved right. But Iíll be delighted, Iíll be delighted if the Google kids take over Tehran. That has not yet happened.

MS. PLETKA: I think weíll all be delighted. Now, normally, I would cut things off because weíre about to run out of time, but I want to press you on an issue that I know youíre very reluctant to talk about, and that is Israelís economy.

MR. NETANYAHU: I love that one.

MS. PLETKA: You said, ask me about Israelís economy. You tell us: what do you want people to know? What do you want people to take away? Thatís going to be my last question. So go for it.

MR. NETANYAHU: I think the supremacy of free markets is not self-evident. I think it has to be explained. I think the task of leaders is first of all to get things conceptually right. But the second is to communicate it effectively.

When I became finance minister in the midst of a crisis in 2003, we were in a horrible crisis. Our economy was shrinking. Our GDP per capita was shrinking. We had terrible unemployment and so on. And most people thought it was because of the Intifada that we had at the time or the collapse Ė remember, the NASDAQ bubble bursting and so on that had an effect on us. And I thought that certainly contributed to it, but I didnít think that was the major problem.

And so I had about three weeks to come up with an economic plan that ultimately made many, many changes in Israel, but I thought no less intensely about ďHow do I communicate this to a country that doesnít have lemonade stands when youíre a kid?Ē You know, you have little cards when I was a child, and you could see this was a MiG fighter and this was a Mystere fighter. Thatís what we traded as cards. We didnít have lemonade stands. We had a fairly semi-socialist economy.

So how do I explain the idea of free markets and their centrality in todayís world? And so, three weeks later, I did a press conference and I said, I want to fall back on my first day in basic training in the Israeli paratroops.

The commander put us in a straight line and he said, you are now going to take a race. But itís a special kind of race. Each man looked to his right; you are the first man, he pointed to me. Put the guy to your right on your shoulders, and the next guy did that, and then the guy after him did that. And I got a pretty big guy. He was heavy. The next guy was the smallest guy in the platoon, and he got the biggest guy on his shoulders. And the third guy was a big guy, and he got a small guy, and so on. And then the commander blew the whistle. I barely managed to move forward. The next guy, the guy next to me, the small guy with the big guy on his shoulders, collapsed. And the third guy took off like a rocket and won the race.

And I said, in the modern economies, all national economies are pairs of a public sector sitting on the shoulder of the private sector. In our case, the public sector became too big, too fat. (Applause.) And weíre about to collapse. So we have to put the fat man on a diet and we have to strengthen the guy at the bottom, give him a lot of oxygen in his lungs. That means lowering tax rates. And, third, we have to remove the obstacles, the barriers to the race, barriers to competition.

By the way, this became known as the fat man/thin man thing, and taxi drivers could repeat it. But, effectively, we ended up doing exactly that.

We constrained the growth of public spending. We lowered tax rates. I had a big argument about that. They said whoís this guy ďLauferĒ? I said, no, no, itís not ďLaufer.Ē His name is Laffer. And we actually tried it. And it works. It worked for us, big time. (Applause.)

And we instituted a lot, a lot of reforms. I mean, even earlier, as prime minister in my first term, I removed, you know, all constraints on foreign currency exchange. And that was supposed to collapse our economy. And, of course, everybody was warning me that a mountain of money will move. It did Ė into the country, you know.

And so we did all these reforms. And the consequence of that is that we grew at 5 percent a year for a decade with the exception of 2008. We still grew, but we grew at 5 percent per decade. And we have now overcome Ė you know, passed many leading economies in the world.

And if we continue to adhere to free market principles and encourage innovation, and open new markets to the east, new products, new markets, deregulation, and infrastructure, which weíre investing in mightily, then I think Israel has a brilliant economic future.

The thing that I have to tell you, though, is that although our GDP per capita is rising rapidly, we have a small GDP. We have eight million people. We can be number one in cyber. We are. We can be number one in many other things. But weíre small and, therefore, we have to compensate that with other means, among others, the American military assistance which is invaluable.

But I think that the race that I described, the thin man/fat man race, is ongoing. You always have to improve the performance of your economy. You have to make sure that government does not interfere with ingenuity but actually promotes it.

And you can never rest on your laurels, never rest on your laurels. Life is competitive. The life of nations is competitive. You should always hone your competitive edge. This is not something that consultants tell you. Itís some things that leaders have to do. You have to hone the competitive edge of your people. And you should have as much alliances as you can with other like-minded states like the United States of America. (Applause.)

MS. PLETKA: Amen. Let me say Ė

MR. NETANYAHU: I think Mr. George Priest asked me to explain why we donít have peace. You have until tomorrow? (Laughter.) Hereís my short answer.

I have two rules when Iím in a press conference when I have journalists. I put a board on, and they ask me the questions, I write all the questions. I write all the questions. And then I go through each one. And hereís my answer to that, hereís my answer to that, hereís my answer to that. And this one, Iím fudging. I donít want to fudge. I actually tell them that I fudge. I donít want to fudge. I want to tell you what the answer is.

The reason, first of all, the conflict that we have in the Middle East is multiple. It used to be said that the core of the conflict, in the singular, in the Middle East is the Israeli-Palestinian conflict. Well, that went by the window. When you see Iraq collapsing, Syria collapsing, Yemen collapsing, Libya collapsing and everything else in turmoil, nothing to do with us.

The core of the conflicts in the Middle East is the battle between modernity and early, primitive medievalism. Thatís the core of the conflicts. (Applause.) The core of the specific conflict between Israel and the Palestinians is the persistent Palestinian refusal to recognize a Jewish state in any boundary. This is why this conflict persisted for 50 years before there was a state, before there were territories, before there were settlements.

If that were the core of the conflict, the settlements, why did it take place when my grandfather landed in Jaffa in 1920? Jews were murdered then for what? There was no West Bank. There were no settlements. Now, that continued in 1921, 1929, 1936, 1939, 1948. What was that all about? Nineteen sixty-seven, for nearly half a century we were being attacked because there was a persistent refusal to accept us in any boundary. Well, we got into these territories as a result of the conflict. And what Arab propaganda has done by endless repetition is to turn the result of the conflict into its cause.

Now, how do you know that thatís the case? Because we left Gaza completely, every last centimeter, and theyíre still firing rockets at us from Gaza. And when you ask them, why are you doing this? Is it to liberate the West Bank? And they say, yeah, sure. That too, but no. Itís to liberate Palestine, you know, Acre, Haifa, Jaffa. They always get back to Jaffa.

So now I turn to the other guys, to the Palestinian Authority and not to Hamas. At least they donít practice violence, which is important. And I say, well, what about you? Are you willing to recognize the Jewish state? Are you willing to recognize the fact Ė youíll have a nation-state for the Palestinian people.

How about a nation-state for the Jewish people? I mean, after all, weíve only been there almost 4,000 years, and we recognize thereís two peoples there. Weíre willing to make the deal. Are you willing to make the deal? Are you willing to recognize the Jewish state? Because thereís no point in making another Palestinian state, another Arab state that will continue the battle from improved lines against the Jewish state. Are you willing to end the conflict, give up the claim of the so-called right of return? Make peace.

And you know what happens when you ask them that? They move. They say, oh, weíre willing to recognize Israel. I didnít ask Israel. I said are you willing to terminate all claims to the Jewish state? You wonít get Jaffa. You wonít flood us with refugees. Are you willing to do that? And the answer is theyíre not. We will have peace when the Palestinians will accord us what they ask us to accord them.

Weíre willing to have Ė let them have a state of their own. They have to reconcile themselves to the fact that we have a state of our own and itís here to stay. That is the core of the problem. (Applause.) In the Middle East, modernity against medievalism, Israel and the Palestinians, the persistent refusal to recognize a Jewish state in any boundary. I hope that changes.

But I have my mind on making sure that until it changes that, yes, we work Ė we work up the economies to create at least an economic vested hope in the future. If the Palestinians follow the prescriptions Iíve given here for market development, theyíll be better off economically, and weíll move two steps closer to peace, too.

Thank you very much. Thank you. (Sustained applause.)

MS. PLETKA: Thank you.