Artificial intelligence, its promise and peril, served as the throughline for the Israel Democracy Institute’s economics conference this week, connecting many of the discussions throughout the two-day event in Jerusalem. 

Assaf Patir, chief economist at RISE Israel Institute and visiting fellow at IDI, urged caution on AI predictions. “The forecasts people make in this area are fluctuating every week,” he said. “Economists on this topic are more careful than the tech gurus — we’ve studied and seen more technological revolutions in the past.” 

The more pressing question for Israel, he argued, is whether AI’s productivity gains will reach the 85% of the workforce outside the tech sector. On human capital, he was blunt: Israel needs stronger STEM education at every level, double the graduate school capacity in computer science and a serious effort to bring Israelis from the country’s social and geographic peripheries, particularly Arab and Haredi Israelis, into the tech pipeline — for the economy’s sake as much as for social cohesion.

The annual Eli Hurvitz Conference on Economy and Society — named for the late Israeli industrialist and organized by IDI since 1993 — was held on Tuesday and Wednesday at Jerusalem’s Orient Hotel. 

Unlike most gatherings that feature remarks by a central bank governor, former prime ministers, political party leaders and the nation’s leading economists, where the heavily credentialed speakers address the crowd from a raised platform, the IDI conference was held in a horseshoe format, with participants facing each other at eye level. 

This arrangement fit the spirit of the convening — no lofty orations by disconnected experts but discussions, and even open disagreements, among peers who are in the proverbial trenches of the Israeli economy, setting policy, funding companies, running institutions and studying outcomes.

On the sidelines of the conference, Eli Hurvitz, CEO of the Trump Foundation — who has no relation to the conference’s namesake and whose foundation has no relation to the U.S. president — pointed to the format when asked about the conference’s value. “This conference is unique in bringing together the different sectors of society and economy in one sphere. Israel is small enough to move the needle, and we can do this very quietly if we come together,” Hurvitz said. 

The sessions covered the state budget, high-tech, inclusive growth, the Haredi economy, Arab Israeli integration, cost of living reforms, war recovery and the question of whether Israel has the workforce it needs to compete in the age of AI. 

But for many Israelis over the past almost three years, the more immediate question is not about future global competitiveness, but economic survival for their personal businesses and their families. 

In her remarks, Becky Caspi, director general of the Jewish Federation of North America’s Israel office, highlighted JFNA’s small business loan program, which has extended more than $300 million in loans to over 4,000 Israeli small businesses, with more than 70% reaching ones in Israel’s North, the Gaza envelope and the Negev. The repayment rate stands at 98.5%, she said, adding that this has drawn the attention of commercial banks that had initially retreated from lending in conflict-affected areas. 

“What we’ve seen is that small business owners are remarkable,” Caspi told participants. “The banks are noticing.”

Speakers at the conference included former Prime Ministers Naftali Bennett and Yair Lapid and MKs Avigdor Liberman and Benny Gantz, as well as senior civil servants, leading private sector figures, experts on Israel’s Arab and Haredi communities, top economists and philanthropic professionals. 

Bank of Israel Governor Amir Yaron addressed the conference on fiscal and monetary priorities, with comments that quickly led to speculation about potential interest rate cuts in the face of an ever-strengthening shekel.

MK Mansour Abbas, the chairman of the Ra’am party, had been scheduled for a one-on-one conversation with IDI President Yohanan Plesner but canceled due to a “scheduling conflict.” Plesner told eJP that IDI is “in serious dialogue with Abbas on issues of the Arab sector.”

No ministers from the current government attended or spoke, though senior policy professionals from key ministries were present, including the heads of the National Economic Council, the National AI Directorate, the budgets commissioner and the chief economist of the Ministry of Finance, among others.

“All those who are dealing with the details were there. The politicians are entering an election campaign and are not that interested in speaking at conferences, but I am very glad that all of the relevant policymaking professionals were there and took part in very serious discussions,” Plesner said after the gathering.

The opposition politicians who did attend the conference focused their remarks on the issues that are likely to be central in the fall election: Israel’s relationship with the United States, the balance of power between the branches of government and the integration of Haredi Israelis into wider Israeli society. 

During his speech, Bennett, who now leads the unified Together party with Lapid and formerly served as education minister, laid out his vision to reform the country’s education system, which is currently divided into four systems: state, state-religious, Arab and Haredi, the latter of which generally does not teach math, English and other core subjects. 

“All Israeli children will study a broad shared foundation of Hebrew, English, mathematics, civics, Torah and Jewish and Zionist tradition,” Bennett said, referring to his plan as “From tribes to a people.” He noted that there will be some differences between populations — Muslim Israelis, for instance, could study Quran instead of Torah — though he stressed that most of the curricula would be universal. 

The overall fiscal framing for the conference was presented by Karnit Flug, chair of the gathering and former Bank of Israel governor, who spoke with eJP ahead of the gathering. 

Flug, whose research paper carried the pointed Hebrew title, “Shall We Be Consumed by the Sword?”, argued that Israel faces a choice it has so far refused to make: either raise taxes to OECD median levels and protect civilian spending or watch education, infrastructure and social services erode under a defense budget that has nearly doubled since Oct. 7. 

Flug’s research showed that defense now consumes a quarter of the entire state budget, while civil spending per capita is declining in real terms. The deficit is projected to reach 5.3% of GDP. Meanwhile, the government has cut taxes as it continued channeling billions into inflated coalition budgets that Flug argues are actively impeding growth.

Avi Simhon, a longtime economic advisor to Israeli Prime Minister Benjamin Netanyahu, pushed back on Flug’s recommendation, calling instead for lower taxes to improve the economy. 

“There are two problems here. The first is that the government is imposing taxes that are too high. The second is that the Bank of Israel is, effectively, imposing another tax by raising interest rates, enabling the banks to take money from the public and reshaping the distribution of income in a way that is problematic,” Simhon said. 

Dror Bin, CEO of the Israel Innovation Authority, highlighted the successes of the country’s high-tech sector, but warned of potential troubles on the horizon. 

He opened with the good news — a record number of “exits” worth a total of $84 billion in 2025, a 30% increase in early-stage fundraising and Israel holding its place as the fourth-largest startup hub in the world in absolute terms. But he was equally direct about the threats. Employment in high-tech has flatlined at around 400,000 for three years; R&D headcount is declining for the first time ever; and roughly 7% of Israeli high-tech activity has quietly moved abroad since 2019. 

“To our surprise, we did not find peaks in specific periods,” he said, “but rather a real trend of gradual movement from year to year.” The exchange rate, he warned, is now an acute crisis for the field. “We have already begun seeing announcements of layoffs. Unfortunately, I believe we will definitely see more.”

On the issue of AI specifically, leaders in the field said Israel could take advantage of the economic opportunities that it presents, but it needs to first identify the areas where it can most effectively compete. 

Renana Ashkenazi, managing partner at Grove Ventures, an early-stage venture capital fund, noted that Israel is not home to any of the top AI firms, which rely on expensive large models, but she said that is not a bad thing. 

“Israel has not lost the AI race; it just didn’t play on a field that was irrelevant to it,” she said. “Israel and Israeli high-tech are strong in fast-moving, creative places — places where you need to kind of ‘move fast and break things.’ And today, in the age of AI, the question is how good we will be at identifying the new bottlenecks in the world changing before our eyes, and at seizing key opportunities there.”  

Adina Eckstein, COO of the Lemonade insurance firm, stressed the need for the Israeli government to use AI tools and to encourage all parts of Israeli society to do the same. 

“It truly is the government’s role to make this happen, both by setting a personal example, so that government itself is managed with the assistance of AI, and by creating an environment that enables industry to do the same,” she said.

Hassan Towafra, strategic advisor to IDI’s Arab Society program and former head of the Authority for Economic Development in Arab Society, pushed back on the celebratory framing altogether. “Israel in 2026 holds two global titles,” he said. “One is how advanced we are in the field of artificial intelligence. But our second title is in the area of gaps.” 

His concern was not that AI would bypass Arab and Haredi workers because of capacity — his research showed that when controlling for employment and education variables, the gap in AI use between Jewish and Arab workers is statistically insignificant. The barrier is access, not aptitude. “We cannot afford this dual economy,” he said. “In the end, it places a burden on all of us. It is not only a moral issue — it is economic.”

Nahid Khazem, the mayor of the northern Arab Israeli town of Shefa-Amr, noted that the economic costs of failing to realize the full potential of the country’s Arab population are staggering, an estimated “more than NIS 30 billion [$10.3 billion] in lost output each year.” Khazem called for a comprehensive plan to address the issue.

Reflecting on the two-day conference, Plesner told eJP: “It was very clear that there are some huge opportunities ahead and that Israel is well-positioned to take advantage of them. There was a combination of concern for the future, but also a contained optimism.”