What power do Zionists have in the world economy?


Sabine Hofmann

To person

Dr. oec., Graduate West Asian Studies, lecturer at the Free University of Berlin, Department of Politics of the Middle East.

For a long time Israel was mainly known for the Jaffa oranges, today the country is one of the leading nations in the field of high technology. How has Israel's economy developed?

The economy of Israel has been subject to many changes. Today Israel is integrated into the global economy. (& copy Hanna Huhtasaari)

In the 60th year since the founding of the 20,700 kmĀ² state with currently around 7.2 million inhabitants on the east coast of the Mediterranean, commentators from the country like to point to the outstanding results and growth rates of economic development: the population has increased eight times since 1948, the GDP sixty times; The GDP per capita is now around 24,000 US dollars and is in some cases higher than that of the southern EU countries. Initially the Israeli pound, and later the Israeli shekel, was only accepted as a means of payment in Israel's relatively small domestic market, both geographically and in terms of purchasing power Dollars appear as freely tradable and fully convertible. Knowledge-intensive branches, especially high-tech developments, are the engines of the export economy. Leading global corporations select laboratories in Israel for their development assignments, so Intel expands its presence and builds a new plant in Jerusalem; Israel's government applied for membership in the OECD.

But Israel today also shows increasing economic inequality and socio-economic polarization, increasingly visible impoverishment, especially child poverty not only in ethno-socially disadvantaged parts of society, a continuous decline in state benefits for society and, overall, a rigorous implementation of neoliberal economic structures. But what is behind these reports; what are the main features of the Israeli economic system and what changes have they undergone since the state was founded? [1]

Constant and changes in the main features of Israel's economic system

In the interrelation of political and economic factors, the development of Israel's economy was shaped less by the natural conditions of reproduction and economic parameters than by the political framework and political-economic ideas of Ashkenazi Zionist elites. The political dominance significantly influenced the development of specific political-economic and economic structures that are based on the fact that external factors (resources and actors) are included. These specifics include, among others. the economic role of the state and the Histadrut trade union, the inflow of financial transfers from abroad, the population increase due to a dedicated immigration policy by the government, the structures of foreign trade, foreign trade policy and, last but not least, the orientation not towards regional but rather that which has been practiced since the state was founded on the world market. Two traits have shaped the economy since the British mandate and are considered to be characteristics of the Israeli economy. Firstly, there are capital imports, now dominated by the USA, transfers from Jewish organizations and private donations, as well as state capital loans. [2] As a second point, the special situation of Israel as a country of immigration must be emphasized. This brought and still brings many problems in the economic and social area compared to the neighboring Arab states, but also the advantage of a strong influx of qualified workers and consumers.

The natural conditions are rather unfavorable for the economy of Israel: no availability of effective energy sources, acute water shortage, unfavorable soil conditions and no profitable raw materials. With a few exceptions, the country is therefore dependent on imports of raw materials. So Israel had to develop the areas in which it can use its comparative cost advantage - the know-how of its people; these are the knowledge and technology-intensive branches of the economy.

The location Israel has an internationally competitive industrial potential, modern agriculture with highly developed horticulture and a well-branched, well-functioning infrastructural network. In quantitative terms, the structure of the national economy corresponds to that of a modern service society, that is to say, the share of agriculture in the national product is lower, tending to decrease, the share of industry is relatively higher and is also tending to decrease, and the weight of the entire service sector is increasing significantly. The beginnings of this go back to the time of the British mandate well before 1948, when the starting conditions for the later Israeli state were created.

The development after 1948 can be roughly divided into three major periods: 1948 to 1967 was characterized by the phases of foundation, consolidation and rapid growth of the economy; from 1967 to 1989 there was an expansion and relocation of Israeli economic structures as well as a phase of stagflation; From 1989 onwards, there was a globally oriented systematic structural and systemic change with technology-based economic growth, but also the deepest economic crisis in Israel.

From rationing to development economics

After the founding of the state, the leaderships of the Zionist parties saw the opportunity to establish a viable Jewish state with the knowledge and ideas of the Jewish immigrants from the diaspora. It was not only Theodor Herzl's ideas from the "Jewish State" and "Old New Land" that were to shape the character of the economy of the Jewish state, but rather the ideas of the strongest Zionist movement at the time, which gathered in the Mapai under David Ben Gurion who represented the concept of Mamlachtijut (Hebrew, literally "statehood"). In consensus with the other currents, they pursued the goal of building a modern economic system ("mixed economy") with regulatory state interventionism and cooperative sectors, but also with protected private property and entrepreneurship.

Population growth in Israel in absolute numbers, 1948 to 2007
Until 1952, the Israeli economy had two main tasks to fulfill: on the one hand, supplying the population with funds for basic needs, and on the other hand, institutionalizing its own economic system. In view of the war of 1948/49 and its consequences and the more than 700,000 new immigrants who came to Israel in 1948-1951, the government initially worked according to an emergency program. With the "New Economic Policy" in 1952, it reduced rationing and price control, but remained the determining factor for the direction of economic development. During this time, the focus was on the extensive and intensive expansion of agriculture and construction.

After the Israeli government had established close ties with the USA in the Korean conflict, it also followed the socialist trends preferred at the beginning less intensively. Capital investments from abroad were subsidized by the state in a variety of ways, for example through the Investment Promotion Act of 1959. On the basis of the Luxembourg Agreement on financial compensation concluded with the federal government in 1952, Israel received a total of 3 billion D-Marks, which it received for twelve years from 1955 onwards The form of goods, services and fiscal transfers. After the basic supply was secured, the production base was expanded in accordance with state regulations, especially in industry and in the service sector. The expansion of the infrastructure was particularly necessary.

During this time, new companies were established, especially in the state sector. Compared to the more small private sector firms, these large firms absorbed a significant proportion of the immigrants. Growing demand stimulated the economy. The GNP grew by an average of ten percent annually from 1955 to 1965, while unemployment fell from 7.2 to 3.6%. The textile, food, building materials and electrical industries, as well as traditional diamond processing, experienced a rapid upswing. The government protected domestic production; The permanent foreign trade and balance of payments deficit should be limited by a strategy of import substitution and export promotion. This growth phase was suddenly followed by a phase of stagnation, Mitun (moderation) with low growth (1967: 0.2%, 1968: 2.2%) and an increase in unemployment (1967: 10.4%).