The Israeli Economy: A Story of Success and Costs

Zeira (economics, Hebrew Univ. of Jerusalem) endeavors to answer the question of how Israel’s economy grew, from a small Jewish settlement under the British Mandate in the 1920s, to now, when it’s one of the richest countries in the world. His answer emphasizes factors like investment in public education to create “human capital”; the high educational attainment of the early post-1948 immigrants to Israel; and money coming into the economy from abroad. He also takes a positive view of governmental efforts to maintain aggregate demand. Zeira’s account, though, is not entirely a story of success; he asserts that Israel’s waging of wars has been costly, with drastic effects on standards of living. Zeira’s largely sympathetic-to-Israel account takes a more critical stance when discussing the years since the 1970s. Here he opposes neoliberal efforts to privatize parts of the economy formerly under government control and, along with this, to establish financial austerity. He maintains that these policies have weakened public solidarity and have promoted inequality.