The EconomistAugust 22nd 2020 Leaders 1112 Israeli hostilities is no longer so; countries increasingly look to-
wards the future, not the past, when shaping their policies. In a
perennially troubled neighbourhood, this decline in tension is
worth celebrating, even if other dangerous fault-lines remain.
It was no secret that Israel and the Gulf states had grown clos-
er of late. Motivated by a common enemy, Iran, their armies and
spy agencies swap intelligence. Recently, Israeli officials began
popping up in Gulf capitals. But the uae’s decision to take its re-
lationship public will bring more benefits for both sides. Israeli
business people are excited about their access to Dubai, the re-
gion’s financial hub—which happens to be in dire need of a
clean-up (see Finance section). Deals have al-
ready been signed between Israeli and Emirati
firms. It feels like a much warmer peace than
that between Israel and Egypt. Other Arab states
are talking about following the uae’s lead.
Give the Trump administration due credit.
Seven months ago it unveiled a peace plan that
was immediately rejected by the Palestinians
and most Arab states, because it allowed Israel
to annex about 30% of the occupied West Bank and gave the Pal-
estinians something less than a state in return. But at the same
time America was sponsoring secret talks between Israel and the
uae. Somehow, in a feat of diplomatic alchemy, American offi-
cials turned this far-fetched scheme into leverage. The uaede-
manded no real concessions from Israel, other than a promise
from Binyamin Netanyahu, the Israeli prime minister, that he
would not move ahead with annexation at the moment.
The deal is a boon for Mr Netanyahu, who has been under fire
at home over allegations of corruption and for his poor handling
of covid-19. The prime minister claims there is “no change” to his
pledge to annex parts of the West Bank. In reality, the deal lets
him duck a tricky issue. His nationalist allies have wanted him to
absorb Israeli settlements in the occupied territories, even
though it would have brought international opprobrium. He has
avoided that choice and, nonetheless, thrown the nationalists a
bone. They have always rejected the idea of swapping land for
peace, long the framework of talks with the Arabs. Peace for
peace should suffice, they argued. Now, apparently, it does.
The big losers, as ever, are the Palestinians. Only three years
ago the Arab states re-endorsed a strategy of offering normal re-
lations with Israel in return for its withdrawal from the occupied
territories and the establishment of a Palestin-
ian state, among other things. But Arab rulers,
particularly in the Gulf, have grown increasing-
ly frustrated with the stale and stubborn Pales-
tinian leadership. Perhaps exposing the charade
of pan-Arab solidarity, and separating the Israe-
li-Arab conflict from the Israeli-Palestinian one,
will lead to a more honest assessment of what is
possible. For the time being, though, a just sol-
ution to the Palestinian plight feels as elusive as ever.
And what of those other fault-lines? The most dangerous lies
between, on one side, America, Israel and much of the Arab
world, and, on the other, Iran. Its economy is on the brink of col-
lapse, while its proxy in Lebanon, Hizbullah, faces a backlash
over a deadly explosion in Beirut. The Israel-uaedeal, as much as
it reflects their shared antagonism to Iran, adds a new element to
President Donald Trump’s “maximum pressure” campaign.
Where that campaign will ultimately lead remains an open ques-
tion. But officials in America and the Middle East would do well
to remember that bitter enemies need not always remain so. 7O
ver thepast two decades fewer firms in America have listed
on the stockmarket, opting instead to stay in the shadows for
longer. Entrepreneurs and venture capitalists (vcs) make two
complaints. First, initial public offerings (ipos) are a rip-off. Sec-
ond, the degree of outside scrutiny firms face can be uncomfort-
able. Now a new wave of tech firms are expected to go public, in-
cluding Airbnb, a home-rental firm, and Palantir, which does
data analytics (see Business section). Some plan to use one of
two alternative techniques for floating: direct listings and blank-
cheque companies. This disruption to the conventional ipomar-
ket is risky but welcome. However, in the long run these new-
comers won’t be able to escape ruthless outside scrutiny of their
business models.
The decline of ipos is striking. On average in the 25 years to
2000, 282 firms staged one each year, but since 2001 the figure
has fallen to 115. This has made the economy more opaque and
prevented ordinary people from investing in young firms. The
underlying cause is a shift in the balance of power towards com-
panies. Tech startups tend to be asset-light and need less capital,
while the vcindustry has grown and can fund firms for longer.
Startups can thus delay going public. Amazon floated in 1997
when it was three years old, but the typical firm listing now is 11.There is a backlog of 225 unicorns—private startups worth over
$1bn—which are supposedly worth a total of $660bn.
If firms are not acquired, they need to go public eventually.
Staff want to sell their shares. Their vcbackers are sitting on
bloated portfolios and need to return cash to their investors. The
push to clear this backlog began in 2019 and is gaining steam
again. As well as Airbnb and Palantir, many other flotations are
planned. In China stars such as Ant, a fintech giant, are listing,
too. The pandemic has led to more buzz about the digital econ-
omy—Walmart has just reported soaring e-commerce sales. Cen-
tral-bank stimulus has ginned up markets. And in America there
is excitement about alternatives to ipos.
In an ipoWall Street banks act as middlemen between the
firm and investors, negotiating a price. It’s a gruelling and expen-
sive ordeal. Investors and regulators grill managers for months.
Banks charge fees of 4-7% of the proceeds and sometimes sell
firms’ shares too cheaply in order to please their clients at invest-
ment funds, who get a quick profit, or “pop”, on the first day of
trading. Companies have thrown away $43bn of value in this way
in the past decade, reckons Michael Mauboussin of Morgan
Stanley. According to Bill Gurley, a vcinvestor, “that pop you hear
is money going out of your pocket.”Silicon Valley v Wall Street
Tech firms are taking advantage of frothy stockmarkets to experiment with new ways to go public. GoodTech IPOs