THE JEWISH state was baptized by fire.The Tuesday after the Friday (May 14, 1948) on which David Ben-Gurion read Israel’s Declaration of Independence, a squadron of Egyptian Spitfires emerged from Tel Aviv’s waterfront and bombed the city’s bustling central bus station, killing 50 and wounding hundreds.The bombing of Tel Aviv, which lasted two months and targeted boulevards, neighborhoods and open-air markets, punctuated four simultaneous invasions – Egypt’s from the south, Syria and Iraq’s from the north and Jordan’s from the east.Many doubted the newborn state’s ability to survive what it faced, and all – journalists, diplomats, academics, authors and filmmakers – saw the drama of its struggle as a predominantly military tale.Seventy years on, friends and foes alike still see the pinnacle of Israel’s achievements in its military victories. They are wrong.Yes, Israel’s accomplishments in making war, and also peace, have been remarkable.The bombers that descended on Tel Aviv were eventually chased away, the invading armies were forced to retreat and Israel won its independence despite being vastly outnumbered in manpower, money and materiel. Israel also produced great military legends like Yitzhak Rabin, who led the defeat of three armies in six days, and Ariel Sharon, who turned a war’s tide by crossing continents under fire before emerging at the enemy’s rear.Yet while such tales produced generals on par with Alexander, Hannibal or Napoleon and while four bloody Egyptian-Israeli wars were followed by one of history’s most dramatic peace deals, Israel’s domestic achievements dwarf all of these.The first domestic achievement is in the improbable realm of culture.Roaming Israel’s streets these days one seldom thinks of this, but when the first Zionist Congress gathered 120 years ago, Hebrew was an unspoken language, reserved for liturgy, religious study and academic research. So dead was Hebrew that poet Yehuda Leib Gordon (1830-1892), jotting Hebrew lines in Lithuania’s darkness in 1871, wondered, “For whom do I toil?” The following decade’s effort by journalist Eliezer Ben-Yehuda to write the first-ever Hebrew-Hebrew dictionary was met with ridicule, not to mention his decision to raise his child in Hebrew.Still, Ben-Yehuda’s experiment as a teacher to speak with Jerusalem’s kids the Hebrew they knew disjointedly from the prayer book worked, and by 1886 produced, in Rishon Lezion, the first modern Hebrew school.Hebrew then spread to dozens of kindergartens and schools in Ottoman Palestine, and from there to others in the Diaspora, often using words Ben-Yehuda derived from ancient roots for inventions like switch, locomotive and airplane, and for modern abstractions like depression, frustration and resolve.Now, while the United Nations reports that every year another several languages die worldwide, and while cultural activists struggle to revive languages like Basque, Gaelic or Welsh, the Hebrew that once was unspoken is spoken by some 10 million people worldwide.Thousands of children fill Israel’s playgrounds with Hebrew; universities teach and research in Hebrew everything from business and physics to chemistry and neurobiology; airplanes are flown in Hebrew, submarines are navigated in Hebrew, parliamentary deliberations and military exercises are run in Hebrew; films and plays speak Hebrew to packed theaters, Hebrew rock concerts fill stadiums to capacity while bookstores brim with Hebrew novels, travelogues and cook books – all of which add up to a cultural victory that is far larger than anything Israel accomplished on the battlefield. Even more mindboggling has been Israel’s economic journey since 1948.When those Spitfires flew over Tel Aviv, the Jewish state was probably the most economically challenged country in the world.Not only was it compelled to spend a fortune on defense, the new state was ostracized by its neighbors, and therefore unable to sell them whatever it produced.Worse, Israel’s neighbors threatened others not to do business with it, convincing, for instance, Japan’s major carmakers to shun Israel.MOREOVER, ISRAEL lacked natural resources, whether coal, gas, timber, precious metals, industrial metals or even water, not to mention oil.Meanwhile, Israel had to absorb immigrants at a ratio unparalleled elsewhere, as 600,000 Jews were joined within a decade by nearly a million newcomers from Europe and the Middle East.On top of all these came the Israeli founding fathers’ socialism, which created a dominant public sector in an economy where private enterprise was heavily taxed; imports were prohibitively expensive due to protective tariffs; and industry was challenged by omnipotent unions.True, central planning helped build new cities, roads and labor-intensive factories.But labor costs soon led low-tech plants to Asia, while the wars of 1973 and 1982 unleashed inflation. By 1985, inflation crossed 400 percent and national debt totaled 270% of gross domestic product.Israel was an economic basketcase. The shekel was ridiculed as paper money, and foreign currency reserves were shrinking so rapidly that the Jewish state was less than half a year away from losing its last dollar.A generation on, Israel is the global economy’s poster child. GDP growth since the beginning of the century has been the fastest and most consistent in the developed world. Inflation is 0.4%, unemployment is 4%, public debt is lower than Germany’s, the shekel is among the world’s strongest currencies, foreign direct investments since 1995 averaged nearly $5 billion annually and last year totaled $25b. in the last quarter alone.Per capita product, at $37,900, is higher than most EU members’ and is set to pass Britain’s and Japan’s. Exports last year crossed the $100b. mark, and the country that in 1985 was on the brink of spending its last dollar now sports a trade surplus and a record $113b. in foreign currency reserves.This phenomenal transition happened thanks to two major rounds of reforms – one, in 1985, led by then-prime minister Shimon Peres, and the other in 2003, led by then-finance minister Benjamin Netanyahu.The first round involved a deep spending cut, led by a 20% cut in the defense budget; the freezing and capping of all public sector hiring and salaries; abolition of subsidies for food and public transportation; cancellation of automatic salary adjustments to inflation; legislation that banned printing money to cover deficits; the transfer of responsibility for setting interest rates from the Treasury to the apolitical Bank of Israel; slashing of import duties; and the launch of a slow but steady process of lowering taxes.It was an act of political daring on par with military heroism. Israel’s ordinarily quarrelsome politicians set aside their differences, and through a joint Labor-Likud coalition made every economic player sacrifice something in order to jointly prevent economic catastrophe: the unions gave up salary indexation, the industrialists gave up protective duties, and the politicians – besides compromising by sharing power – gave up their power to print and price money.Consequently, inflation plunged by the end of the year to less than 30%, and then continued to steadily decline because the plan decimated the money supply and multiplied the amount of goods in the markets.Meanwhile, the politicians canceled Israel’s most expensive public works project at the time, the Lavie fighter plane project, while the unions agreed to privatize their bankrupt holding company, Koor, Israel’s largest employer at the time.Both moves resulted in mass layoffs and raised fears of a brain drain. Instead, newly jobless engineers launched technological start-ups, some of which successfully issued stock on Wall Street. These were the seeds of Israel’s start-up revolution, whereby thousands of Israelis would produce major inventions, from video pills and firewall software to satellite technologies and driving assistance systems, while hundreds of Israeli firms would be sold abroad for millions of dollars, some also for billions.The second round of reforms came in 2003, when Netanyahu slashed social spending, sharply cut taxes, raised the pension age, reformed the long-term savings industry, and sold almost every sellable state asset, from banks and oil refineries to the El Al airline.Controversial and painful though many of these measures were, Israel morphed since 1985 from a centralized, lethargic and nearly bankrupt economy to one of the world’s most dynamic, balanced and inventive economies. Like the Hebrew revolution, this transition far outshines Israel’s military successes.EVEN MORE unsung is Israel’s social success. The Jewish state’s founding elites were almost exclusively Ashkenazi, namely products of European Jewry like prime ministers Ben-Gurion, Golda Meir, Moshe Sharett and Menachem Begin, first Supreme Court president Moshe Zmora, or longtime Jerusalem mayor Teddy Kollek, born respectively in what now are Poland, Moldova, Ukraine, Belarus, Germany and Hungary.By the mid-1950s, a society whose politicians, academics, literati, journalists, jurists, bankers and captains of industry were predominantly Ashkenazi confronted a large Middle Eastern immigration.The new immigrants were mostly traditional or fully religious, as opposed to the frequently secular, and often anti-religious Israeli elite; the new immigrants were mostly penniless whereas the veterans had by then accumulated some property and savings; the immigrants were often undereducated compared with the veterans; and the immigrants had distinctive accents and often also darker complexions. Lastly, the immigrants were concentrated in specific neighborhoods, towns and villages, all of which added to the already visible social chasm a residential dimension as well.Social tension thus simmered daily, as immigrants from Morocco, Tunisia, Yemen or Iran encountered Ashkenazim daily as their school principals, army commanders, bank managers, doctors and judges, not to mention mayors, lawmakers and ministers.The European-Middle Eastern gap – memorably caricatured in the 1964 celluloid success “Sallah” about an affable and streetwise but stereotypically ignorant Middle Eastern immigrant’s struggles with Ashkenazi bureaucrats – soon produced violence.In what resembled the 1992 Rodney King riots in Los Angeles, in the summer of 1959, North African immigrants stormed storefronts and Labor Party offices in riots that spread from Haifa to Beersheba, after a policeman shot and injured a drunken immigrant in a Haifa slum.Though such violence was never repeated, the sense of discrimination and insult that sparked it remained a constant challenge for Israel’s leaders, so much so that some compared Middle Eastern Israelis’ alienation to what fueled American blacks’ struggle for civil rights.Half a century later, such fears are an anachronism. Israel’s corridors of power have long ceased to be Ashkenazi nature preserves, having included since the 1980s four defense ministers of Middle Eastern descent as well as three foreign ministers, five finance ministers, two presidents and hundreds of lawmakers and mayors.Ben-Gurion’s famous wish in 1954 that someday “we will live to see a Yemenite chief of staff” has yet to materialize, but over the past 35 years, half the IDF’s Chiefs of General Staff have been non-Ashkenazim, including the current Lt.-Gen. Gadi Eisenkot, son of immigrants from Marrakesh and Casablanca. As for Yemen, current police chief Insp.-Gen. Roni Alsheikh’s father is from Aden.In the business sector, Israel’s select class of self-made billionaires includes the likes of Libyan-born real estate and energy tycoon Yitzhak Tshuva, Egyptian-born media mogul Haim Saban, Iraqi-born financier Tzadik Bino and Iraqi-born insurance kingpin Shlomo Eliyahu.While these are exceptional success stories, a quarter of young Israelis are products of marriages between European and Middle Eastern families, and this share keeps rising.Geographically, there is no dividing line, whether national or urban, splitting between Israelis of both backgrounds.Yes, Israel has yet to have its first non-Ashkenazi prime minister, and yes, Middle Eastern Israelis’ average income has yet to fully catch up with the rest, as does their share of university professors, now about one tenth.However, Israeli kids increasingly cannot classify themselves as either Ashkenazi or Middle Eastern, and those who can seldom ascribe much significance to this aspect of their identity. A socially driven violent eruption of the sort that rocked Israel in 1959 is now altogether unthinkable.Like the Jewish state’s cultural and economic accomplishments, Israel’s welding of Jews from far-flung lands and disparate backgrounds into an increasingly harmonious society that prefers merit over lineage is an accomplishment far larger than its military victories.So is the Jewish state’s handling of what was arguably the most elusive of all the challenges it faced: the Jewish faith.THE DAY it was established, Israel had not only to fight invading armies but also to urgently make decisions concerning its religious heritage. The first dilemma involved the dietary laws.The first Jewish army since antiquity had to be fed. Most of the soldiers were not observant, but about a quarter were and demanded kosher food. Ben-Gurion, himself an avowedly secular Jew, had to decide whether to follow his liberal convictions and allow non-kosher food in the Israeli army’s kitchens, or let the minority impose its will on the majority.Meanwhile, the new state also had to decide about its matrimony laws. The secular majority wanted Western-style civil marriages, but the observant minority wanted to control matrimony so that all Jewish couples’ divorces would be authorized by rabbinical courts, as Jewish law demands, lest bastards – namely children of incest or adultery – marry into the rest of society.Lastly, the new state had to decide how to shape its Sabbath, a challenge that raised dilemmas Jewish law had never encountered about what to do with power plants, shopping centers, movie theaters and public transportation on the Jewish day of rest.On all these prickly issues, the newborn state’s secular majority chose a path of pragmatism, compromise, consideration and humility.Concerning the dietary laws, Israel decreed that all IDF kitchens would be totally kosher. Indeed, to this day, every IDF kitchen serves only kosher food, strictly separates dairy and non-dairy pots and pans, and if a soldier were to bring a piece of pork into an IDF dining room, he or she would get court martialed.On matrimony, Israel’s founders decided to allow marriage and divorce only through clergy, whether Jewish, Muslim, Druze, or a host of Christian denominations. On the Sabbath, Israelis are forbidden to employ Jews except in specific industries, like security and health; trains and most public buses don’t run on Shabbat, but taxis do; El Al doesn’t fly on Shabbat, but Ben-Gurion Airport operates; and local government is left to decide whether to open local theaters and restaurants on Shabbat.These compromises remain deeply disagreeable to many secularists, as does Orthodoxy’s control of conversion. However, most Israelis share Ben-Gurion’s basic rationale that if observant Israelis were alienated they would become a tribe, refraining from marrying other Israelis, whom they would suspect as bastards, and setting up their own military kitchens, suspecting the rest as non-kosher.Israel’s compromises between religion and state prevented this kind of fractiousness, and it has generally held for 70 years without religious-secular relations ever producing serious violence.To value this accomplishment, one must consider today’s intra-Muslim violence in the Middle East, and yesterday’s in Europe, when Catholics and Protestants slaughtered each other in the millions.Israel’s secular majority could have tried to impose itself on the observant minority, but instead chose to be inspired by the biblical dictum “not by might nor by power, but by my spirit” (Zachariah 4:6); much the way a 70-year-old Israel’s military victories are outshined by its welding of a new society inspired by a Hebrew renaissance and fueled by economic success of which its founders could only dream.