GaWC Research Bulletin 163

(A)

The Spatial Agglomeration of a Knowledge-Based Economy and the Elite: Tel Aviv on the Verge of Being a Full-Scale World City

B.A. Kipnis*

INTRODUCTION

KBE (knowledge-based economy) is credited as a vital stimulus for regional development, and is usually associated with major urban centers of [post-] industrial economies (Park, 2001) gifted with a range of 'psychological rewards', a sine qua non for a 'white collar milieu' (Buswell, 1983). This milieu is an incubator for the 'creative class' (Florida, 2002; 2004), the nuclei of knowledge-rich human agencies, acting as a pull anchor for a knowledge-endowed environment linked with the global economy. Park (2001) implies that the key role of knowledge in economic growth reflects a harmony between physical and intangible investments in the global economy, namely between the increased output of science and technology and progress in intangible investments in R&D and in knowledge-intensive producer services.

The concept of KBE envisions a link between knowledge 'creators' and 'users', the actors whose ingenious works restructure our contemporary 'global economy'. They comprise the quaternary sector of professionals, including R&D scientists and producers' service experts, and the quinary sector of decision-makers, who control and lead the globally linked KBE. The quaternary and the quinary sectors concur with Florida's (2004) three Ts: talent, namely the creative human capital reflected by the number of people engaged in creative occupations; technology, which measures the level of innovative activity associated with high tech concentration; and tolerance, reflecting the quality of a place as liberal and tolerant, one that is capable of attracting skilled people able to generate new ideas. Atop the creative class and the quaternary and the quinary sectors perch Beaverstock et al.'s (2004) global super-rich and Sklair's (1991; transnational capitalist class (TCC), a wealthy elite whose foremost objective is to secure the smooth functioning of the global economy.

This paper explores the functioning of a large urban agglomeration - - Greater Tel Aviv, with the status of a world city [in evolution or already one], that acts as the main gateway of Israel to the global economy (Kipnis, 2001; 2002; 2004). Greater Tel Aviv is also the home base of the country's 'innovative', 'knowledge-rich' experts and of its most influential economic elite - - the hard core of Israel's KBE.

This paper addresses the following issues:

1. What are the basics of a KBE, and what are the attributes of a host milieu for a KBE?
2. Which amongst the 'production factors' - - land, capital and human resources is a key factor in creating a KBE?
3. Does Greater Tel Aviv possess the required attributes for accommodating a growing KBE?
4. Whether Tel Aviv, the hard core of the Israel's KBE and of its essential human resources, i.e. the nation's economic elite, is at the threshold of becoming a full scale world city?

ATTRIBUTES OF A KBE

It is fashionable in contemporary urban and regional development literature¹ to credit KBE as an essential constituent of economic growth (Park, 2001; Van der Laan, 2001; Schamp et al., 2004). It has been claimed that firms and regions, by exercising their management's skills to organize knowledge, and by sorting out among knowledge providers, are capable of applying knowledge into their cognitive process that helps the firm/region to manage their spatially diverse world-wide networks. While carrying out this role the firm/region reveal a significant competitive edge over their competitors (Schamp et al., 2004). Schamp and his colleagues (2004) also asserted that effective attributes of knowledge ought to be set by social interaction, and that since a conflict of interests exists among firms, the initiation of knowledge processes is a complex endeavor, heavily dependent on the learning practice of the sectors involved. Park (2001) further suggested that the effect of knowledge mirrors the impact of the swift increase in the output of science and technology, and in intangible investments in R&D and in knowledge-intensive producers' services. All have led to the creation of new jobs in knowledge-intensive and knowledge-based manufacturing and producers' services, to the emergence of new sectors² of knowledge creators and users affiliated with the quaternary and the quinary sectors, and to the rapid application of information and communication technology (Park, 2002).

The concept of KBE has stimulated much discussion of its origins and vigor. On the positive side, Audertsch (1995; 2000) viewed R&D, employing high human and investment capital, as the main source of new knowledge. He stressed that knowledge is created by many modes of learning, including learning by doing or by interacting with suppliers and customers. Audertsch further pointed out that KBE is amplified by its R&D, its externalities and creativity, by targeting products to customers, and by recognizing the vital role of its human capital. In his 2000 manuscript, Audertsch regarded knowledge as having an inherently different production function input from the traditional inputs of labor, capital, and land. While the traditional inputs are relatively certain, he held knowledge to be intrinsically uncertain and he deemed its potential value to be asymmetrical across economic agents. The most important input, but not the only one, is R&D. ³ Others are the degree of human capital, skilled labor, and significant presence of scientists and engineers (Audertsch, 2000).

At the other extreme, Sheehan and Grewal (2000) observed knowledge economy as one that intensifies polarization effects as against spread effects, thus making knowledge a driving force of increased concentration of economic activity in a few large urban agglomerations. Still, probably as an outcome of agglomeration, these authors envisage the role of KBE as an environment in which goods and services are becoming more complex and knowledge intensive, both in terms of broad product capability and in terms of being tailored to the specific requirements of particular users. As such a KBE is characterized as one with increased externalities (linkages) and R&D intensity, one whose products are targeted to customers, and one that recognizes the vital role of human capital.

The value of human capital is emphasized by van der Laan (2001), who explored its significance at the supply-demand crossing point. The fact that labor has become heterogeneous is the leading attribute of labor on the supply side; labor demand generated by the KBE has led to its increased heterogeneity, thus to augmented supply, and to its expanded specialization, hence creating new concepts and scope for knowledge economy, labor markets, and communicative and creative abilities. Among the types of knowledge identified by van der Laan are these:

1. Knowledge as economic capital is a genuine entity, applied primarily in R&D. Most of the economic capital is generated in dense urban agglomerations.
2. Knowledge as social capital (also known as "relationship capital") is an essential resource that helps, using communicative capabilities, to deal withpeople, groups and organizations. It mirrors the value of interaction with suppliers, allies, and customers, relying heavily on trust and consensus.
3. Knowledge as cultural capital, is an essential knowledge assets which reflects the ability of a person to select out of a mass of information the meaningful pieces and to ascribe to them the meaning needed to generate new ideas (Nonaka et al., 1996; van der Lann, 2001).

The competitive advantage of KBE is measured by network and knowledge, and is immensely contingent on human capital; people act as agencies of the social and cultural capital. These are the knowledgeable laborers, engaged, inter alia, in software development, advertisement, consulting, and research work; they employ soft technology that increasingly relies on logistics, marketing, and organization, and on cooperation among people. The following section seeks out the attributes of a host milieu for a KBE, and which of the 'production factors' - - land, capital and human resources, are the key factors.

Considering the above, one may assume that knowledge is nested in most advanced economic activities, in both the producing and in the servicing industries (Enright, 2000). This postulation is valid even though a given firm does not have the required knowledge-creating capacity. However, if knowledge is a place- or firm-specific phenomenon, hence an essential resource with competitive advantage, how can a knowledge-intensive firm with little or no R&D obtain its knowledge input? In solving this dilemma Audertsch ( 2000) proposes a spillover of knowledge, which takes place as a diffusion or transfer of knowledge from firms that conduct R&D to those (usually small) . that do not. Such diffusion happens when a firm adopts or develops a learning capacity of innovations developed by other firms; as a product of firms' networking or collaboration; or through workers' migration. Uncertain or sensitive knowledge is best transmitted face to face (Audertsch, 2000).

A GLOBALLY AFFILIATED POST-INDUSTRIAL ENVIRONMENT - A HOST MILIEU FOR A KBE

There is general consensus that KBE is a product of the global economy⁴ (for example Schamp et al., 2004; Park, 2001; van der Laan, 2001; Enright, 2000; Sheehan, and Grewal, 2000; Audretsch, 2000), closely linked with a post-industrial environment and usually associated with large urban agglomerations where timely knowledge, know-how and information cluster (Castells, 1996). Post-industrial globally linked economies differ from industrial ones in their 'mode development' (Castells, 1996) and in their hyper-specialized structures and functions (Crook et al., 1992). As producers of information and of knowledge-intensive goods and services, their factors of production are linked to science, technology, and management, and their knowledge-informational 'mode development' is essential for integrating a centralized management of flexible global production systems, usually organized in global networks and alliances. Large urban centers, endowed with 'psychological rewards' (Buswell, 1983) and where the quinary sector meets the quaternary professionals, frequently face to face, provide a cutting edge in the competition among firms. An agglomerated urban milieu, employing quality and flexible short-production series, enables firms to quickly respond to changing market/production conditions (Illeris, 1991). Globally allied post-industrial society is plural and socially unequal, but those who possess the needed resources usually display rational consumption behavior and tend to assigns high value to leisure and to cultural activities in time and in other resources (Coffey, 1992). Leaders of a post-industrial globally linked economy are expected to assume the role of agency actors, committed to provide their public with most of their desired economic, social, cultural, and leisure needs all playing a part in forming 'psychic income and rewards', vital for KBE.

THE ELITE'S ROLE AS HUMAN AGENCIES OF A KBE - A CONCEPTUAL REVIEW

At issue then is who are the human agencies - - the 'divers,' who by creating knowledge, or by making use of it, mobilize the 'place' KBE. These agencies, for the most part affiliated with the quaternary and the quinary sectors constitute the local elite. A symbiosis between human agencies and a knowledge-intensive environment, a requisite for a viable KBE, is likely to occur in large urban agglomerations offering abundant 'psychological rewards' and exhibiting a 'good business climate'. This symbiotic environment is also the cradle of Florida's (2002; 2004) 'creative class'. Florida (2004) argues that the traditional economic growth models that assume that economic growth comes from companies, jobs or technology are incomplete. Florida would agree that technology is important, but only if it represents one of the 'three Ts':

1. Technology, measured by innovations and by high-tech concentration;
2. Talent, measured by 'creative capital', defined functionally by the number of people actually in creative occupations; and
3. Tolerance, present in a place that is open and tolerant, thus having an edge in attracting different people and generating new ideas.

In his 'Bohemia and economic geography' Florida (2002) found a significant correlation between bohemia and talent;⁵ a concentration of bohemians in one area creates an environment that attracts other types of talented people or high quality human capital. Florida named some of the bohemians the 'creative class', those who help establish a psychological rewards rich milieu, a cradle for the global elite of people belonging to the quaternary and the quinary sectors, or for those described by Sklair (1991; 2000) as the TCC - - the transnational capitalist class. The TCC are'global' elite, whose prime objective is to secure a smooth functioning of the global economy.

If globalization is explained as a capitalist globalizing ideology, the economic interests of its members (the global elite) are increasingly globally linked (Sklair 2000). Who then are those [globalized] members of the elite, and how are they related to KBE? Wikipedia, the Free on Line Encyclopedia, suggests that the term 'elite' derives from the French word for 'chosen' or 'elect'. This is a relatively small group within a larger community, comprised of people who as a result of privileged origin, access to education, money, etc., can be considered the 'elect'. Variation among the members of the group may be attributed to their level of academic qualifications, experience in a given field, intelligence, and natural gifts such as athletic physique, creativity, or good taste. Cambridge Dictionaries defines the elite as the richest, most powerful, best educated, or most highly trained group in a society.

Beaverstock and his associates (2004) broadened the scope of the contemporary elite. They state that in the classic Marxist model the elite were those who owned means of production. By contrast, in today's conceptual thinking the elite are perceived as those belonging to the professional and the managerial classes (the quinary and the quaternary sectors), who are described as the main beneficiaries of global restructuring. They have arisen since the 1960s in response to the emerging production strategies of major corporations that have become ever-more 'footloose', because advanced producer services have expanded their 'global reach' (Daniels, 1991) and are more dependent on specialized knowledge (Thrift, 2000).

Contemporary goods are produced by combining different forms of expertise to meet clients' specific needs, and for this firms constantly call upon the expertise of their own employees; or they outsource to trouble-shooters, consultants, and policy-makers, who tend to agglomerate in 'world cities' (Sassen, 1991; 2002). These knowledge-rich individuals are the crucial mediators and translators of the flows of information, capital, people and goods that circulate in the world. For Beaverstock et al. (2004) the global elite encompass two main classes: management and the super-rich. The managers, who are rich too, lack the global outlook and mobility of the super-rich. Yet the two should be seen as an integrated entity: the global managers are key actors in a global economy, in charge of the smooth global flows that are channeled between the hubs of the global economy. The super-rich, who seem to overshadow the managers in magnitude, constitute the real transnational capitalist class, the TCC, as defined by Skalir (2000).

Sklair's (1991; 2000) TCC, a product of the capitalist globalizing ideology, is made up of four main groups, which may somehow overlap, although each plays a distinct role in the capitalist global system. The four groups are trans-national corporation (TNC) executives and their local affiliates; globalizing bureaucrats; globalizing politicians and professionals; and consumerist elites, or merchants and members of media. The TCC, who strive to ensure a smooth functioning of the global economy, maintain a cosmopolitan lifestyle, share similar patterns of consumption of luxury goods and services, visit exclusive restaurants, private clubs, and ultra-expensive resorts, and use English as their main language. In contrast to Beaverstock and his associates' (2004) perception of the 'managers' and the 'super-rich', Sklair's (1991;2000) TCC should be perceived as the 'knowledge-rich' and 'asset-rich' elite, who win their power and influence by virtue of their role of running the global economy.

In The Rise of the Network Society, Castells (1996) highlights three elite groups: the 'cosmopolitan elite', namely the new professional and managerial classes living symbolically in a global frame of reference, unlike most of the people in their country; the 'managerial elite', namely the technocratic-financial elite who occupy leading positions and reveal specific spatial requirements regarding the material and spatial support of their interests and practice; and the 'communication elite', namely those who help diffuse the use of information and ideas. The first two groups have played a major role in the enhancing the multi-dimensional inequality in our society. The last, the communication elite, also known as the 'ratings elite', is probably the strongest and the most dangerous group in the sense that it also controls the ratings-seeking politicians, who are forced to behave in a way that can further boost the ratings of the communication elite as well (Weiman, 1999).

ISRAEL AND [METROPOLITAN] TEL AVIV

Israel's entry into the post-industrial age and its integration into the global economy accelerated during the 1990s as a result of the absorption of more than 1,000,000 immigrants, and of the evolving peace aspirations in the Middle East. This was accompanied by profound structural shifts in employment and in industrial mix, a large increase in FDI, and enlarged exports in quantities, mix, and destinations. Since the late 1980s industrial production has more than doubled, mainly in high-tech and the percentage of its R&D expenditures. In the second half of the 1990s Israel was listed among the leading high-tech, startup-intensive countries (Kipnis, 2004). Israeli innovations are installed in many products of multinational firms engaged in computers, optics, communication, information systems, medicine, software, and even consumer goods. High-tech giants like Intel, Microsoft, Digital, and IBM have located their R&D laboratories in Israel, striving to bud their future generation products. Finally, the country enjoys the status of an 'export bridge' between the EU and NAFTA⁶, with some 80% of its exports and imports designated for or originating in the global mega-markets. Having experienced all these, Israel has become an 'investment paradise' for the global economy.

The speedy recovery from the 2000-2002 high-tech crisis is being felt in many spheres. Most impressive is the fact that the 2004 FDI reached the $4,000 million mark. Concurrently, 2004 investments in startups⁷ increased by 40%, venture capital recruitments are estimated at 1 billion, and high-tech labor demand rose by 20%, mostly for high-skilled workers (Hermony, 2005). The year 2004 also marked a change in technological orientation, from the late 1990s' focus on communication and microchips to technologies and applications aimed at the final users. Special emphasis moved toward medical instruments, medications, biotechnology and the emerging new applications to video, TV, and to MP3. This switch from 'core' to 'end user' technologies also led to new global alliances with India and China (Hermony and Dar, 2005).

Tel Aviv City, alongside Greater [metropolitan] Tel Aviv, has already crossed the threshold of going global, notwithstanding its frontier location in its region (the Middle East) and its position at a dead-end relative to the global economy (Kipnis, 2001). The 2003 population of Tel Aviv City was 362,000, and that of the metropolis close to 3 million, or 44% of Israel's total. The land territory of the metropolis is 1,276 km² or 7% of Israel's total, and it is the most densely populated area in the country⁸. At the start of the 21st century, Tel Aviv dominates almost all aspects of Israel's socio-economic, cultural, and political life. After 45 years of relentless effort to alter a pre-state polarized settlement structure by means of a vigorous population dispersal policy, the 1990s marked a retreat from it in the adoption of a national urban development strategy centering on the four metropolitan areas: Tel Aviv, Jerusalem, Haifa, and Beer-Sheva. Of these four, metropolitan Tel Aviv, possessing abundant free production factors, has evolved into an extremely polarized national hard core of Israel's economy, society, and cultural life, metaphorically described as "greater Tel Aviv - - a body with a huge head with no mass [body]".

Globalization has had powerful effects on many aspects of Tel Aviv's urban life. All have contributed to the evolution of Tel Aviv, or rather metropolitan Tel Aviv (figure 1), as the hard core of the national economy and its KBE. There are quiet a few evidences thar Tel Aviv City has already crossed the threshold of going global to become a full scale 'world city'.This process has intensified in recent years due to the swift development of Israel's north-south dual railroad track and its feeder systems of bus and metropolitan rail lines, and by the expansion of its limited exit HWY system, notably the Ayalon FWY, HWY 6 - Israel's new north-south toll road, and perpetual improvements to HWY 1 (connecting Tel Aviv and Jerusalem) and HWY 2 (between Tel Aviv and Haifa).

Going global has left its imprint on the city's and the metropolis's spatial structure; it has accelerated the restructuring of their economic and cultural spaces and their socio-demographic and ethnic pluralism and dichotomy. The most visible spatial effects have been the evolution of Tel Aviv skyline, the restructuring of the metropolitan CBD, and the emergence of post-modern multiuse cultural nodes (Kipnis, 2001; 2004; Shachar and Felsenstein, 2002; Felsenstein et al., 2002). Until late 1960s most of Tel Aviv's CBD activities were centered on the historic CBD, located at the hub of Tel Aviv's 1909 point of origin (Shachar, 1968). Thereafter, the main functions of the CBD diffused into newly developed sub-centers (Greicer, 1991) to form the 'three nuclei': metropolitan CBD - the historic site; the New City, situated on the Mediterranean shore; and the eastern satellite, extending along King Saul street that has gradually sprawled over into the industrial zones of western Ramat Gan and the Ayalon basin, replacing in an 'invasion and succession' process rundown industrial structures by class A office towers⁹, to form the Bursa office complex¹⁰ in Ramat Gan and the Ayalon¹¹ office strip in Tel Aviv, benefiting from the fact that the Ayalon, the sole limited-exit FWY of the metropolis, is Israel's major intra-metropolis, intercity, and inter-region highway-railroad artery, and the main connection to Ben-Gurion international airport (figure1). Much of the construction along the Ayalon has been occupied by rent-sensitive producers' services and by software houses and R&D laboratories. Some of this development also diffused into the Herzeliya industrial park, the most viable park in metropolitan Tel Aviv (Kipnis and Noam, 1998; Kipnis and Borenstein, 2001). At the same time, the increased office space at the historic CBD was mainly taken by FIRE (finance, insurance, and real estate), by finance-oriented producer services, and by head offices of high status firms. Today the historic CBD is the hard core of Israel's financial activities (Sadan and Lewental, 2002). Since 2000, the banking activities of Israel have crossed the threshold of going global. The historic CBD, and more so the Ayalon corridor down to Herzeliya industrial park, have taken the lead as the hard core of Israel's KBE.

The influence of globalization on Tel Aviv, determined to establish its 'white collar' milieu and rich 'psychological rewards', also led to the development of a hierarchy of multiple use cultural centers, many in a postmodern style. One of the qualities of Tel Aviv's economic and cultural assets is its image as 'a city that never stops' or 'a 24-hour city', a prerequisite for those who produce and run a viable KBE¹². At the top of the multiple use cultural centers is the newly built Golda Art Habitation, and it includes an opera house, an art museum, a library, class A offices, a gourmet restaurant, and high status residences. All operate pretty much around the clock. Other notable postmodern multi-function complexes are the Suzan Dalal, old Jaffa, the renovated old Opera House and the Cinematheque.

Of value for Tel Aviv as Israel's hard core of the KBE is that Tel Aviv is the hub of Israel's road and rail systems, and that it enjoys a prime location relative to Ben-Gurion International Airport, 15 kilometers away, and now served by Terminal 3 inaugurated in November 2004. Most major airlines fly into and out of Ben-Gurion, which facilitates access to the world's major KBE centers. El Al, Israel's airline, offers direct flights to a few remote destinations on the West Pacific Rim, in North America, and in Europe. Telecommunication and air communication from Israel, primarily from Greater Tel Aviv, has been a central factor in the opening of Israel's KBE to the main KBE nodes of the world.

Globalization is also associated with accelerated inequality, which prevails in many facets of urban life. The most unfavorable, but in a way a requisite for a KBE, is the 'dual labor model'.¹³ According to this model each high level job tends to produce four or five low level ones. Tel Aviv is no exception,¹⁴ and among the members of its huge army of low paid workers one may find newly arrived immigrants, structurally unemployed veterans, Israeli and Palestinian Arabs, and some 60,000 migrant (foreign) workers who reside in a few rundown sections of south Tel Aviv.

Greater Tel Aviv - the Hub of Israel's Globalized Economy

Knowledge presumably is nested in most advanced economic activities, in the producing and in the servicing industries alike (Enright 2000), and this postulate holds even when a given firm lacks the required knowledge-creating capacity Under these assumptions, two questions remain:.

1. Which are Israel's knowledge-rich industries and economic activities, and what is their distribution over Israel's national space?
2. Who are the leading human agencies?¹⁵ This question seeks out the creators of knowledge, those who help generate an environment rich in 'psychological rewards', so necessary for knowledge-creating agents, those
3. who, through their institutional power or their wealth, control and operate the place of knowledge-based industries.

We now employ data from a variety of resources. These are survey data from field studies carried out through the latter part of the 1990s; the Statistical Yearbook of Israel (Central Bureau of Statistics, 2004) and that of Tel Aviv (The Municipality of Tel Aviv, 2004); data published by the magazines The Marker and Forbes; lists of 'influential people' and of 'the best in Israel' published by Israeli newspapers; Internet sites of Israeli professionals' and artists' associations; and the Index of Hebrew Periodicals (IHP) produced by the library of the University of Haifa.

The Spatial Reach of Israel's Knowledge Rich Economic Activities

Table 1 shows the geographical distribution of a few selected economic activities - - in manufacturing, primarily high tech, in producers' services mainly FIRE and business services that include law, accounting and advertising, all are perceived as major knowledge creators and users (Enright, 2000). Observe how many of the globally oriented industries are located in Tel Aviv City and in the rest of the Tel Aviv metropolis. Two industries alone - electronics and hardware and securities' brokers - respectively locate 42% and 31% of their outlets in various parts of Israel away from Tel Aviv. All other industries are assembled in metropolitan Tel Aviv.

At issue however, is which of the Israeli knowledge-intensive industries have gone global. Until recently it was believed that Israel's high-tech's attachment to the global economy was so strong that it functioned simply as a 'node' of foreign interests, so its role in the Israeli economy in terms of growth-inducing linkages was marginal (Felsenstein, 2002). Felsenstein further asserted that Greater Tel Aviv's knowledge 'hot spot' had not yet evolved into an 'anchor', namely it did not maintain strong intra-regional linkages. Table 2 provides a contrary picture. Besides the strong local linkages with clients and suppliers, the producer services, startups, and R&D laboratories situated in the metropolitan CBD, as well as the firms located in Herzeliya industrial park, do maintain network linkages with firms abroad primarily through the establishment of joint service contracts, affiliation with multinational networks, and in some cases even through mergers.

The way to going global by FIRE has been much more convoluted. Until the end of the 1990s it was alleged that the orientation of FIRE, mostly of its banking community, was predominantly toward the Israeli market (Shachar and Felsenstein, 2002). The data presented in table 2 support this thesis. However, after 2000 Israeli banking going global moved into a higher gear when foreign banks began to operate in Israel. Table 3 shows that in 2004 some 34 foreign banks operated in Israel.¹⁶ All the foreign banks are situated in Tel Aviv City and provide diversified banking services, some have even played a pivotal role in competing with Israeli banks in underwriting. The very fact of the banking system going global obliges it to apply intensive knowledge inputs to bridge the gap between working under global operational risks and within global policies, an outcome of the digital age of global finance, and its aspiration to preserve its local advantages and competitive capacity, and meet its responsibility to conduct its financial operations in keeping with local codes.¹⁷

If metropolitan Tel Aviv and Tel Aviv City together indeed perform as Israel's exclusive core of advanced economy, presumably they are the nation's node of knowledge creators and users as well namely, the home base of the Israeli elite. The most important research on the Israeli elite of mid 1990s is Etzioni-Halevi (2000). Etzioni-Halevi identified some 1,000 persons who held sufficient power to influence the nation's destiny - - politicians, the wealthy, the heads of the economy, government bureaucrats, outstanding communication, judiciary, religious and intellectuals, and members of the high command of the Israel Defense Forces and the police,. Many of were political nominees, Ashkenazi males, who represented only a handful of social groups. They maintained their power through bestowing benefits and personal friendship.

A recent study by Adva Center for Policy Research (Sinai, 2005) reported that in 2003 the average gross annual household income of the tenth decile exceeded NIS 400,000, and highly correlated with the increase in GDP. At the same time, the figures for the sixth decile (NIS 100,000) and for the second (NIS 55,000) remained constant. Adva researchers concluded that the induced economic growth of Israel (4.2% in 2004) benefited the rich most, while the circumstances of the rest of the population were deteriorating.

The Elite who Mobilize Israel's KBE, and the Domination of Tel Aviv in the Spatial Distribution of the 'Creative Class' and the Global Elite

In keeping with global trends, today's human agencies in Israel, the members of its elite groups, belong to the quaternary professionals and the quinary decision makers who are the managers and the capital owners: Israel's super-rich. Besides these elite groups one should also consider the role of those whom Florida (2002; 2004) terms the creative class. They may be seen as the creators of the place's psychological rewards, an essential resource for economic growth, or on the other hand as nesting next to it. The ability of a place to attract, cultivate, and mobilize creative agents depends on its tolerance and openness, and on the provisions it makes to lower barriers to resources and services. Among the members of the creative class one may name scientists, engineers, architects, designers, writers, musicians, and others who make use of their creativity in their work and in business. They also include people engaged in education, health care, law, or some other professions that exhibit innovative creativity (Florida, 2004). The difference between the creative class and other classes is that its members are paid to create, but they also have considerably more freedom and flexibility. The values of the creative class are clustered in three groups: individuality, meritocracy, diversity and openness.

Table 4 shows how Tel Aviv and its metropolitan area dominate the distribution of a preliminary sample of the 'creative class' agents. All the sampled elements have more than 50% presence in Greater Tel Aviv, notwithstanding the fact that Greater Tel Aviv has but 44% of Israel's total population. A very high concentration is evident of stage performers, including actors, dancers, singers, musicians, producers, painters, and sculptors; also of Israel's top physicians, representing almost all medical specialties. Most of the listed MDs hold positions in Tel Aviv's Ichilov hospital or at the other four highly specialized medical nodes across the metropolis. Tel Aviv City accommodates some 57% of the plastic arts community of painters and sculptures. Gal-Ezer (1997), who stressed their association with urban cultural life, suggested that Tel Aviv City is the place where the artist is capable of maintaining close ties with other highly cultivated members of the upper middle class such as fellow artists, buyers, dealers, and critics. Tel Aviv City is "the artists'greenhouse, a place where he/she can evade his/her inherent deficiencies in education, family life, and economic achievements".

Among the main requisites for a 'creative class' hegemony, the most important ones are tolerance,¹⁸ (Florida,2002; 2004). These, together with the perception of Tel Aviv as 'a 24-hour city', have drawn highly educated and well trained young people, who go to Tel Aviv from all over Israel, and have considerably restructured the City's age cohort pyramid. Table 5 shows that between 1995 to 2003 there was a significant increase of the 25-29- and 30-34-year-old age groups, who increased their share in the city population by 30% and 55% respectively, significantly much more than the city average of 3.9%. At the same time Tel Aviv which until the late 1990s was viewed as the oldest city in Israel, showed a decrease in its older population cohort of people aged 65 years and older. This cohort declined by almost 8% between 1995 and 2003. A lot of the young people entering Tel Aviv took up residence in old 'gentrified' neighborhoods like Sheinkin and Florentine (Yuris, 2001). Many of them are DINKS or SINKS,¹⁹ meaning many single people. Tel Aviv City municipality recently initiated a program aimed at helping the young to adjust smoothly to city [of Tel Aviv] life. Tel Aviv City and the metropolis exhibit impressive spatial presence of the members of its elite groups affiliated with the quaternary professionals and with the quinary decision makers - - the managers and the capital owners, or Israel's super-rich. These, along with other powerful and influential groups - - the politicians and government officials, are those who mobilizes of Tel Aviv's global shift and its KBE. Table 6 reveals that Greater Tel Aviv has a larger share of all the above relative to its share in the total population. Significantly high is the presence of the affluent - - rich and super- rich, and of the most influential people (men and women) and of women in business. Apart from the fact that Tel Aviv City is these people's main place of business it is also their main place of residence. The latter fact seems to reflect a unique case of central city domination of the nation's social spatial system.

CONCLUDING REMARKS

Not long ago Tel Aviv was perceived as a 'world city in evolution' ((Beaverstock et al., 2000; Kipnis, 2001). However, much of the evidences revealed by this manuscript - - Tel Aviv's full command over the advanced elements the national economy, of its social and cultural life, and the its role as a principal home base of Israel's economic elite, suggest that the City of Tel Aviv, along with metropolitan region, have already crossed the threshold of going global as a world city. The advantages of Tel Aviv have been its control over the KBE in production, producers' services and in FIRE. All are nested within a psychologically rewarding environment, a prerequisite for the nation's economic elite who exercise a position of a human agency. The elite's main actors are engaged in R&D, they are the country's highly skilled professionals, scientists and engineers, and they are the owners of the active capital [wealth] that makes the economy run.

On the negative side, one ought to admit that a knowledge intensive economy, along with its link to human resources, i.e. the economic elite, result in intensified spatial 'polarization'. In a small country like Israel, extending over 21,000 km2 and revealing unique geopolitical and socio-ethnic conflicts, such a polarized environment might result in grave consequences for the well being of the rest of the country. If this spatial polarization continues, Israel, notwithstanding the fact that it has a world city of its own, might gradually evolve into a spatial entity of a huge head but no body.

A by-product of the emerged symbiosis between the spatial setup, the KBE and the elite is the expanding scope of the elite to include, on the one hand, elements of the 'creative class' defined by Florida (2004), and those identified by Beaverstock, et al., (2004) as the two layers of the global elite - - the professionals of the quaternary producers' services sector, whose role has been to create new knowledge and to help integrate and run the global economy, and on the other hand, the quinary decision-making sector of management and of the super-rich in charge on the actual execution of the world-wide operations of the global economy. If the members of the creative class contribute to the making of a ingenious milieu of psychological rewards, those of the quinary and the quaternary are in charge of the smooth operation of the national economy at the global arena, in charge of the decree: "think globally and act locally" (Gappert, 1989).

In order to carry out the above decree, and to lessen the impact of spatial polarization, more research is needed in order to explore the intra-and inter-regional spillover and diffusion of KBE attributes.

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Figure 1: Tel Aviv City's and the Metropolis' main activity nodes

Table 1: The location of main office of Israel's globally oriented economic activities (selected activities)

	The location of main office
The economic function	Tel Aviv City	The rest of the Metropolis	The rest of Israel	Reference year	N	Source of data
Hi-tech firms - total	16	79	5	2001	476	(1)
Communication firms	18	68	14	2001	152	(1)
Information technology	19	72	9	2001	143	(1)
Internet	20	71	9	2001	71	(1)
Electronics and hardware	58		42	2002	NA	(2)
Software	80		20	2002	NA	(2)
Major banks' headquarters	100	0	0	2002	NA	(3)
Small banks' headquarters	86	0	14	2002	NA	(3)
Trust funds' headquarters	100	0	0	200	NA	(3)
Securities brokers	58	11	31	2002	NA	(3)
Lawyers serving the global economy	69	15	16	2004	427	(4)
Advertising firms affiliated with Multinationals	86	14	0	2004	14	(5)
Accounting firms affiliated with Multinationals	100	0	0	2004	8	(6)
Israel 's best firms	13	73	14	2004	15	(7)
Israel 's best financial services	70	14	16	2004	14	(7)

Sources: compiled by the author from: (1) 600 high-tech firms in Israel (2001); (2) Israel Ministry of Foreign Affairs (2002 ; (3) Sadan and Loventahal(2002); (4) www.legal 500.com. (2004); (5) www.aaai.org.il (2004) and a list provided by the aaai office; (6) The Israeli Registered Accountants' Association library (2004); (7) The Yellow Pages (2004); Globes special issue, November, 2004.

Table 2: Linkages of Metropolitan Tel Aviv CBD functions by regions (percentages)

	Location in the metropolitan CBD						Location in Herzeliya industrial park
The Region	FIRE			Producers ' services, startups and R&D laboratories			High-tech, business services and commerce
	Clients	Suppliers	Networked and associated firms	Clients	Suppliers	Networked and associated firms	Clients	Networked and associated firms
Tel Aviv City	29	38	84	7	47	16
The rest of the metropolis	57	31	18	47	43	46	40	41
The rest of Israel	14	25	0	36	5	21	47	38
Abroad	0	6	0	8	3	14	13	21
Not Known	0	0	0	1	2	3

Source: For the metropolitan CBD - field survey 1995; For Herzeliya industrial park Kipnis and Noam (1998)

Table 3: Foreign banks operating in Israel by type of link and by the location of their main office 2002

Source: Bar et al., 2002 * South Africa; ** Deutsche Bank from 2001- - Source: Duns 100 (http://duns100.co.il ( 2004))

Table 4: Spatial distribution of creative class agencies - - Greater Tel Aviv VS the rest of Israel (percentages)

Sources: Central Bureau of Statistics 2004; (2) The Yellow Pages (2004); (3) www.org.il (2004); (3)www.artistael.co.il (2004); The best in Israel, Maariv 5 April 20

Table 5: Restructured age cohorts of Tel Aviv

Source: Central Bureau of Statistics, Statistical Yearbooks, 1996 and 2004

Table 6: Tel Aviv's domination of the spatial spread of economic and political elite groups (percentages)

Sources: (1) The Marker, (2004a); (2) Forbes 500 (100 Israelis) (2004); (3) The Marker (2004b); (4) Yediot Achronot (2004); (5) Central Bureau of Statistics (2003); (6) www.knesset.gov.il (2004). * Wealth of $1 million and more; ** Wealth of $100 million and more; *** Likud, Labor, Shinui, and Yachad.

NOTES

* Baruch A. Kipnis, University of Haifa, Israel baruch@univ.haifa.ac.il .

1 Park (2001) suggested that the notion of knowledge-based economy had acquired notable recognition long before.

2 The quaternary sector supplies professional producers and consumers services; the quinary sector engages in decision making and control. Both are vital for the efficient functioning of the global economy and have been a leading factor in the evolution of KBE

3. Audretsch (2000) proposed that a correlation between R&D and number of patents at the national level could be a performance indicator for the productivity of R&D.

4. In this paper globalization is viewed as the rising, highly centralized, world economy centering on the world's mega markets - - North America, the EU, and the West Pacific Rim, which control most of the 'crossed flows' of FDI (Foreign Direct Investments), over half of the world's production, and much of its trade (Dicken, 1998).

5. The correlation results were R=0.60 and  = 0.01 level of significance. Florida (2002) also refers to the bohemians as 'Bobos', namely bourgeois bohemians.

6. Israel has free trade agreements with both mega markets, allowing tariff-free or reduced admittance to them of products having some 40% Israeli value added.

7. Before the high tech crisis of the late 1990s Israel was fifth in the world in the number of manufacturing startups but first in the number of startups per 1000 population (Kipnis, 2004).

8. In 2003 the density in Tel Aviv City was 7,015 people per km2 and that of the metropolis at large was 2,290 per km2 (Central Bureau of Statistics, 2004).

9. Class A is medium-high office tower, charging high rents and maintenance fees, and occupied primary users such as headquarters, professional services, and high-tech outlets.

10. The Bursa, the Israeli Diamond Exchange, was among the first buildings erected in the area.

11. Adopting the name of the Ayalon river.

12. A survey of the Golda Art Habitation and of other major cultural centers described here, was carried out by graduate students in geography at the University of Haifa in the mid-1990s. The survey was supervised by the author.

13. Beaverstock et al. (2004) describe this dual social makeup as a two layer structure made of 'fast subjects' who dwell in transnational space and of 'slow subjects' whose lives remain localized and parochial.

14. Tel Aviv is at the top of Israel's socio-economic ladder with average gross monthly income in 2002 at NIS 6193 = 100%, compared with all Israel at 0.72 of that. In 2002 Tel Aviv's two upper deciles got 35.7% of the net income of the city's 'standard person'; the two lower deciles got only 13.6% of it. The 1999 ratios were 33.4% and 10.9% respectively. The share of the middle class (deciles 5-7) declined from 33% in 1988 to 28% in 1999 and to 26% in 2002 (Sinai, 2005; Tel Aviv Municipality, 2002).

15. A human agency is a person who possesses the capacity to act in the light of his/her experience and creativity in order to reinforce or reproduce social and economic restructuring or change (Clark, 2003).

16. Ha'aretz online of 31 January 2005 reported that Bank Leumi, the second largest commercial bank in Israel, had purchased all the capital stocks, as well as other business activities of the UK's Riggs Bank.

17. This dual responsibility of the banking system was described by Saskia Sassen in her presentation "Urban topography in a global digital age". It was given at a world cities colloquium in Ghent, Belgium, in January 2005, honoring Peter Taylor with the Francqui Foundation award.

18. Florida views the acceptancof a homo-lesbian community as a sign of tolerance. In his (2002) paper he reported on a relatively high and significant correlation (R=0.60 with = 0.01 level of significance) between the bohemian index (namely the creative class index) and the size of a local homo-lesbian community. Kama (2000) reported that 40% of his sampled Israeli homo-lesbians resided in Tel Aviv City.

19. DINKS= Double income no kids; SINKS= Single income no kids, and some 70% of males and 59% of females aged 25-29 years were bachelors in 2003. The respective percentages for all Israel that year were 54% and 20%.

Edited and posted on the web on 14^th March 2005