Israeli Marxism

Steven Plaut is a native Philadelphian who teaches business finance and economics at the University of Haifa in Israel.  He holds a PhD in economics from Princeton.  He is author of the David Horowitz Freedom Center booklets about the Hamas  and Jewish Enablers of the War against Israel.


It is difficult to explain to people living outside of Israel, and especially to Americans, the extent to which Israelis truly believe in communism.

Sometimes they call it socialism, but they basically mean communism.

This is not to say that they behave as communists in their private lives. Quite the contrary, Israelis live as the ultimate ideal of capitalism. They are enormously individualist. They are exceptionally good at starting and managing businesses, and of development and marketing innovations. Israel as a country has more start-up businesses than all of Europe. It registers more patents than any European country.

Yet those very same Israelis, who demonstrate every day their skills in succeeding in markets, hate markets. The word “socialism” carries enormously romantic and positive implications for Israelis. Especially among educated (non-Russian-born) Israelis. The word capitalism is something of an obscenity for most Israelis. I suspect that someone arrested for assault could get himself off in court if he claimed the victim had called him a capitalist, it being a form of hate speech. The Israeli media invariably use the word “capitalism” in conjunction with the word piggish. (Ironically, the one exception is the business editor of Haaretz, who supports market capitalism, while the rest of the same newspaper yearns for communism.) The only conceivable form of market economy in the minds of the Israeli chattering class is “piggish capitalism.” You would not believe the portion of Israeli professors and intellectuals who use that expression. The head of the Histadrut, Israel’s largest organized crime family, uses it, being a loyal believer in piggish communism.

In normal countries, pointing out that someone is a card-carrying member of the communist party is usually more than enough to discredit that person. Not in Israel. Carriers of communist party membership cards do so with pride. Most of the members of the history department at Tel Aviv University are such communists. So are oodles of other academics.

On the one hand, the operation of markets is what makes Israel a successful viable country, one incidentally that experienced almost no implosion at all during the global financial collapse of the past 4 years. But on the other hand, markets are things Israelis claim they want suppressed. Literate Israelis insist in unison that markets are what is wrong with the world, and suppressing markets is the answer to Israel’s problems. Markets are evil, rewarding selfishness. Benevolent governmental bureaucrats controlling the economy are what is needed.

Not every Israeli, mind you. Russian-Israelis, who today are maybe a fifth of the population, have no patience for those preaching the wonders of communism. And they are notably absent in the current “social justice” rallies and marches, or what I have been calling the Woodstock along the Yarkon Festival. Orthodox Jews rarely mouth the slogans of nostalgia for Bolshevik central planning of markets, although there are exceptions. (The commentator on the Torah portion in Maariv cannot get enough of communism and insists that suppressing piggish-capitalism is the highest form of Jewish ethics.)

Israeli academics are almost universally anti-capitalism. I am on the list of a chat list of Israeli social science faculty members, and for the past few weeks it has carried hundreds of postings yearning for socialist controls and denouncing capitalism. The posteurs universally fantasize about Israel adopting Scandinavian-style “socialism.” Putting aside some doubts as to how pleasant life really is in Scandinavia (witness Norway recently), Scandinavian “socialism” is actually not. It is essentially free markets mixed with very high tax rates and a gargantuan welfare state providing cradle-to-grave welfare services at state expense. In other words, Scandinavia has always been far more capitalistic countries than Israel, certainly of Israel was before the 1980s. In addition, Israel has always provided Scandinavian-style welfare state services, but without the freeing of markets and liberalization of production that characterized Scandinavia.

Academic economists generally do not join the antlered herds in pining for bolshevism, but there are exceptions. Israeli economists are among the few who know what a market is, what a price is, what a wage is. The protesters never know these things. But Israel has a long history of academic prostitution and one can always find a few academic economists willing to endorse the most idiotic “ideas” of those who understand nothing about economics, if it earns them a shekel or advances their careers. Hence the most passionate supporter of RAISING the minimum wage is “economist” Avishai Braverman, the guy who turned Ben Gurion University into Hamastan, and one can find similar cases of street-walking economists endorsing rent controls, nationalizations, and other fundamental axioms of economic Bolshevism.

Most people are not aware of it but Israel began its existence as a country with a system of Bolshevik central control. In its first years Ben Gurion implemented a system of massive nationalization and near-universal price and wage controls. It differed little from the economic structure created by Lenin. Ben Gurion got away with it for a while because of the War of Independence and the national emergency. Like in that old joke about how communism in the Sahara would produce a shortage of sand, by the early 1950s everything in Israel was in shortage, buying anything and everything involved endless Soviet-style queues, and most products could only be obtained in the black markets.

To Ben Gurion’s credit, he realized by the early 1950s that the system of Bolshevik controls was unworkable. Curiously, Lenin had also understood this and took steps to dismantle the controls, except that he died and was replaced by Stalin before serious reform took place in the Soviet Union. Lenin called his plan for partial de-Bolshevikation of the economy the “New Economic Plan” or NEP, exactly the SAME name adopted by Ben Gurion for HIS reforms in the early 1950s. (No coincidence!)

While most price controls were ended, other forms of economic Bolshevism were retained by Ben Gurion and his MAPAI party comrades. Huge portions of Israeli industry were nationalized, and much of what was left was semi-nationalized and grossly mismanaged by turning it over to the Histadrut trade union federation.

Economic policy sought to suppress competition everywhere. It strived to maximize the number of monopolies and cartels in the economy. The government controlled enormous amounts of resources, which it handed out as political favors, often to cronies and party oligarchs. Tax rates were enormous and sometimes exceed 100%. Profits by enterprises were derived mainly from government subsidies and handouts. Government policy was protectionist and anti-competitive. The capital market was suppressed and nationalized. The government’s working philosophy demanded that Israelis essentially turn all their income, savings, and wealth over to the government, and then the government bureaucracy would take care of the needs of the public and of citizens.

The result was a Third World economy, albeit one dominated by a political system that actually involved elections and parliamentary processes. Israel was pauperized by the Bolshevism. It remained poor and underdeveloped.

Things only began to change in a significant manner in the 1970s. Israel was being coerced into liberalizing its economy and removing some of the socialist controls because of Israel joining and signing various international trade agreements. The treaty partners refused to allow the Israeli government to continue its policies. The long period of zero growth following the Yom Kippur War also woke some people up to the necessity of having a functional economy.

In the 1950s and 1960s it was not unusual for people to lump Israeli economic policies and conditions together with those in Egypt and other Third World backwaters.

Things changed remarkably starting in the 1980s. Most of the nationalized industry was privatized, largely because state enterprises were losing so much money. Partly, this was due to the change in public willingness to tolerate the controls. Partly it was because of the growing number of people who had taken freshmen economics and understood the idiocy of Bolshevik controls. Partly, it was because of the growth of high tech, which the government could not control or understand. Partly, it was because of international trade treaty pressures.

There are still plenty of Bolshevik controls in place. Israel has a single-payer health system with four tightly regulated HMO-style providers. It works a lot better than you would expect, for some extraneous reasons (Israel has a young population that eats well and huge numbers of MDs). There are still oodles of monopolies and cartels. Agriculture is still largely anti-competitive and inefficient, dominated by government-erected cartels. Taxes are too high. The government owns a large portion of the land in the country. Some sectors are still distorted by protectionism, especially food.

The Woodstock on the Yarkon protesters are by and large leftist secularist Israelis demanding a return to the Bolshevik controls of the 1950s. They pine for the shortages and the rationing of that era because they figure that in a shortage THEY will be granted priority. The central demand of the protesters is rent controls. This will end up destroying the Israeli housing stock and pauperizing elderly owners of rental property who purchased those units with the intention of earning rental income in their old age. Like in New York and other cities having rent controls, the controls will create shortages, where the true cost of obtaining rental housing actually goes UP, not down.

The protesters pine for the Soviet steppes. They demand other forms of price controls so that Israel can turn into a Brezhnev-era style of country, where people spend their days waiting in lines for commodities in perpetual and growing shortage. They want markets to be suppressed, where squads of social justice commandos can decide who gets to live in which apartment, who gets to consume those commodities in shortage, and who earns what. They insist that wages be set based on what the protesters think people deserve to earn. Since there is not a single person in Israel who earns what he thinks he deserves to
earn, this amounts to a demand for a Soviet-style wage board that fixes wages for all professions, starting with those who are on strike, like the MDs. In other words, wages in the opinion of the protesters do not have to clear markets and signal where shortages and surpluses are. Wages should be arbitrary measures of “fairness.” Try to imagine just what happens when half the jobs in Israel attract no applicants because the fair wages there are insufficient to draw workers, while the other jobs have six applicants for each position because the fair wages there are much too high to clear the market. Try to imagine what life would be like if a Marxist sociologist or a caring social worker were appointed as economic dictator to decide all economic matters and decisions in Zion.

Every society on earth and every society in human history has people living in hardship and in poverty. There are poor people in all countries, including Scandinavia. Mankind has not discovered an innovation that eliminates poverty and hardship.

Yet the caring dreamers about Bolshevism along Rothschild Boulevard in Tel Aviv (note the irony of the name) demand an instant magic pill that will eliminate all hardship and inequality. And the failure of the government to provide one is proof that the evil “tycoons” are in charge and preventing the government from serving the people. “People not profits” is the slogan of choice used by those who are too stupid to understand that the only way to make producers serve the people and produce things the people want is for them to make profits doing so. Outlaw profits and you create mass starvation.

The tycoon fetish continues to dominate the protests. I have suggested that Mikey Lerner even change the name of his idiotic magazine from Tikkun to Tycoon. Many Israeli tycoons, at least outside high-tech, were made tycoons because of sweetheart deals with
the political establishment, particularly back in the days of MAPAI socialism.

The other irony is that the only “reform” the protesters have extracted from Netanyahu is the setting up of “Planning Speed-up Commissions.” And the most ironic part of this irony is that the main effect of those commissions will be to fatten up the “tycoons.”

Israel’s municipal planning and regulation of construction is a fever swamp of corruption and inefficiency. It takes two years to get a license to put windows in your porch and you may have to bribe city officials to get it. The endless bureaucratic pencil pushing and bickering does indeed slow down construction, affecting housing prices and availability. At the same time, these planning dinosaurs DO allow a certain amount of public involvement and intervention, especially when it comes to combating corrupt sweetheart dirty deals between municipalities and construction contractor “tycoons.” Corrupt municipal officials are constantly attempting to get approval for construction projects that will enrich contractor cronies, even when these are illegal, harmful to the public interest, ugly, and in some case built on public park lands and beaches. The officials attempt to bend zoning laws and regulations to “help their buddies.”

As a sop to the demonstrators, Netanyahu has proposed and the Knesset just passed the creation of “Planning Speed-Up Commissions,” to cut through the red tape and bureaucracy. The problem with the idea is simple: it will still take two years and possibly some bribes if you want to put a window pane on your porch. But the oligarchs will be able to use the Speed Up mechanism to push aside public opposition and suppress sensible zoning and planning regulations. The oligarchs are also being offered by Netanyahu public lands at below-market prices, where Netanyahu insists this will lower housing prices. The reality, as any freshman econ student can tell you, is that it will not lower housing prices by a shekel, and instead will only inflate the profits of the cronies getting in on the deal.

  • http://www.resonoelusono.com/NaturalBornCitizen.htm Alexander Gofen

    It seems inexplicable that in the XX century the Free world (including Israel) happened to be so much infected with communism: the very Free world, where circulation of the truthful information was legally possible. The true image of the communism was known already in the 1950s (e.g. "The Naked Communist" by Skousen). Yet it seemed that no amount of truth can affect the paradigm that overwhelmed the (rotten) minds.

    With bitterness we must conclude that communistic infection became pandemic due to deeply rooted baseness of the human condition such as envy and refusal to take responsibility. The human baseness quickly surfaces up as soon as God is abandoned.

    I was struggling with myself rejecting the thought as though the Jewry could take a "special role" in that ungodly mission, yet this fresh account of Dr. Plaut points again into this direction. But patience and mercy of God may sometimes get exhausted so that again He comes to the conclusion that alas, also this experiment with humanity has failed…
    http://www.resonoelusono.com/ApostasyOfJewry.htm

  • Tziona

    So what's the solution Mr. Plaut? You diss the communism of the "protestors" (rightly so) and you also diss Bibi's "speed-up commissions" but you end the article without offering an alternative. What's your solution?

  • Rene

    Well, Tziona assumes that there exists a problem. Having housing prices in northern Tel Aviv that are beyond the budget of most young Israelis is not a problem. Just a fact.

    • Tziona

      Oh there's definitely a problem, Rene, and it doesn't just affect elitist posers in Tel Aviv. I made yareidah (moved from Israel) in 2003 because I could earn four times as much for the same IT job in London as I was doing in Jerusalem, and pay only 1.5 times the rent. Food (specially in restaurants and cafes) and public transport are cheaper in Israel, but salaries are so much lower the benefit is minimal unless you are in social housing.

      • nina

        So how do you like London?

        • Tziona

          Don't live there anymore.

  • http://jewishdefense.org AJ Weberman

    All the filthy Israeli capitalists care about is themselves. They have no love for other Jews as it says in the Torah that one should. Plaut are you Israeli or just a puppet for the same morons who tried to justify the mass murder in Norway by linking these kids to pro-Palestinian activities. These Israelis are NOT communists, they are just tired of the sabra elite exploiting them. I lived in Israel for about a year, have dual citizenship and first visited there in 1959. The Jews are Communists? Didn't Hitler say the same thing.

    • Tziona

      The Jews are filthy capitalists? Didn't Hitler also say that?

      • Idiot Savant

        no you disinformed individual, the first group of people that Hitler targeted and sent to concentration camps were left-wing radicals (socialists, communists, anarchists, etc) that were critical to the rising nazi party, which, it just so happened, were mostly of jewish ancestry.

    • Raymond in DC

      Actually, AJ, many of them *are* communists or were raised by self-described communists, and even today tend to vote for the Arab and leftist parties (Meretz, Hadash and the Arab List). They are far outside the Israeli mainstream or consensus, yet remain very influential within the media, academia (esp. in the Humanities and Social Sciences), and courts.

      I also lived in Israel on an (mostly) off in the 1970s, when we foreign students kept our funds in foreign currency as long as possible, in anticipation of the inevitable next devaluation. Yes, there was more "equality" – most were "equally" struggling.

    • http://www.resonoelusono.com/NaturalBornCitizen.htm Alexander Gofen

      Nobody owes you any love, you filthy Commie! Torah teaches you to not covet! Yes, Torah admonishes Jews to help their brethren in need by offering about 10% of one's income. However the socialist taxes "on the rich" are many times higher than that.

  • 58TROJAN

    To Weberman and any others who take issue with this article— accept reality. Israel and the citizenship has experienced the strong "world" economy because of free enterprise entrepreneurship. The only explanation for some improvement in the living status of some Chinese is the introduction of your bad word concept, capitalism. I traveled extensively in communist East Europe, including Russia. I never saw anything resembling prosperity. Why were people fleeing to the West——— and not to the East?!?

  • aspacia

    Much of this article is correct, except the section regarding the land protests. The Israelis want more individual control of land instead of government control. This is not communism.

  • Raymond in DC

    Kudos to Prof. Plaut for this historic overview. Yet another trigger for the economic reforms was the run of inflation in the early 1980s. Much progress has been made since then, including during Netanyahu's time as PM in the late 1990s and later as Finance Minister. Gilder in "The Israel Test" notes how Bibi took advantage of demands coming from US Treasury Secretary Snow to further open up the market.

    And oh how different Israel is today than in its early days. People used to mockingly declare that the way to achieve a small fortune in Israel was "First, start with a large fortune…" Indeed, one Israeli scholar of the early immigration from Arab lands long ago told of warnings to potential immigrants with merchant skills *not* to come to Israel because they would lose everything. Their skills were derided as "galut" (diaspora) occupations, the taxes and regulations would make business success hard to achieve. Many of them, when given the choice, elected to go to France, Canada, or South America. Those who went to Israel still today comprise much of its underclass.

  • Yehuda

    No, of course Jews are not "communists." The article's point was that there is a lot of economic ignorance and nostalgia for "socialism" in Israel, as there is (by the way) in most of Europe as well.

    For Tziona – no one says you get to live by the prices and wages in country A when you live in country B. Your salary in London is not relevant, any more so than what your salary would be in Laos. You are not in Laos.

    The anti-Semites screaming about Jews being communists are just that – bigots and anti-Semites.

    Jewish liberals are naive. Anti-Semitic cowards are vermin.

    • Tziona

      The actual values of the salaries are not relevant, but the differential between income and expenditure is. As I said (if you'd bothered to read more carefully), my salary in London was four time what it was in Jerusalem, but my rent in London was only 1.5 times what it was in Jerusalem. Ergo, my disposable income (the ratio between income and expenditure) was far greater in London than in Israel.

  • Martha

    Still, there has to be some equity. The gap between the haves and the have nots is immense. When the cottage cheese strike began, it was, IMHO, justified. Prices of basic foods here in Israel keep going up but without any reason that I can determine. Bibi said that it was because the food industry is in very few hands and that those conglomerates should be broken up. Whatever it takes to get prices down to a reasonable level. Why should Israelis have to pay more for that same Tnuva cottage cheese than some person in NYC? How is it possible that we pay more without the shipping costs than New Yorkers do?

    Something definitely needs to be done. I don't think that going back to socialism is the answer, but gluttonous capitalism is not the answer either!

  • Yehuda

    No, of course Jews are not communists, although liberal Jews, in Israel and the US suffer from naive romaticizing about "socialism," as do most people in Europe. Those who accuse Jews of being communists are ignorant bigots.

    I think that was the article's point – that there are a lot of people in Israel who have European style naivete when it comes to socialism.

    As for Tziona, your wages and prices in London are not relevant, any more than wages and prices in Laos would be. You cannot expect to carry wages and prices from country A with you into country B.

  • Stephen Wille

    this sounds like battered wife syndrome.

  • mcrobbins

    Israelis are idealists. They had to be to create their sparkling state from the ideological stream of nineteenth century Zionism. Every society has its eccentricities and contradictions. I think this socialist sympathy is like the religious notion of sobornost among the Russians. The hope for peace among the Israeli public testifies to this idealism. However, Israelis are hard realists too. They had to be to survive the wars and terror that were inflicted upon them.

  • g_jochnowitz

    Marx thought he was writing about the economy. He was wrong. Marx was wrong about everything. He was writing about a time when everybody would think alike. To achieve this era–the final stage of communism–one needed to enforce thought control. Marxism is about thought control, not economics.
    China is committed to Marxist capitalism. It sounds like a contradiction, but it isn't. China is obsessed with earning money, and at the same time suppresses free thought. http://www.jochnowitz.net/Essays/MarxMoney.html

  • Steve Chavez

    Here in Santa Fe, a group called "Creativity for Peace" invited Palestinians, Christians, and Jews to a summer camp. Sure enough, the group is a far left wing anti-Israeli group according to a google and facebook search. We all know too that there are anti-Israeli/peace groups in Israel all connected to Communist organizations in the Middle East and with our Communist Party USA. Last night, the group was invited to speak at the Albuquerque Peace and Justice Center which confirms the Communist connection and tilt of their group. SURELY, THE VISITORS ARE CHILDREN OF THE PRO-TERRORIST FAKE JEWS!

  • openeyes

    A couple of comments. The opinions described are held more by the secular left, who control most of the media, the judicial system and the education system including higher education (sound familiar?).
    My greatest shock came when I heard the chants from the demonstrations. They were using the same rhythm as the Palestenian chant "with blood, with fire, we will liberate Falastin".
    Considering information I have read that the organizers are linked to the New Israel Fund, this is no surprise. They are trying to duplicate "Arab Spring" in israel, but that will not succeed.

  • Maxie

    In his excellent book "Heaven on Earth: The Rise and Fall of Socialism" Joshua Muravchik has documented the commune system that came, fluorished briefly, and largely foundered on the rocks of reality in Israel. History has shown there and elsewhere that socialism is sustainable only in relatively small population (150-200) communities with a common culture and WORK ETHIC and best suited to an agrarian existence. By the third generation that cohesion and committment tends to disintegrate. Human nature rears its ugly head. Someone tell Karl Marx.

  • Maxie

    In his excellent book "Heaven on Earth: The Rise and Fall of Socialxxx", Joshua Muravchik has documented the commune system that came, fluorished briefly, and largely foundered on the rocks of reality in Israel. History has shown there and elsewhere that socialxxx is sustainable only in relatively small population (150-200) communities with a common culture and WORK ETHIC and best suited to an agrarian existence. By the third generation that cohesion and committment tends to disintegrate. Human nature rears its ugly head.

  • Maxie

    The deliberately mis-spelled words in the above post were necessary to get it past the ridiculous built-in editor in place on this site. Absolute nonsense.

    • mlcblog

      I don't think I have run into this editing while contributing to this site. Perhaps it is internal with your computer or setup.

  • g_jochnowitz

    You'e right, Maxie.

  • nina

    Israelis/Jews are Communists, Israelis/Jews are Capitalists. They are religious, they are irreligious. They are just like other people in democracies in the twenty first century, even more so.

    • g_jochnowitz

      You are absolutely right.. Jews and Israelis exhibit the same variety as people everywhere do. And that's why Jews and Israelis are hated as nobody else ever has been.
      It's a miracle. There IS a god, and He's an embittered anti-Semite. http://www.jochnowitz.net/Essays/AfterTheBinding….

  • Jonathan

    Israelis are not communists and not socialists. Most Israelis do like the market and capitalism, just ask them. The fact that the "elites" have some kind of nostalgic feelings for the "good-old-time" does not mean: a/ that they really want to go back to that time, b/ that the rest of the population share the same feelings. In fact they don't.
    The free market ideology is on the contrary very strong in Israel, much more than in Europe at least.