To many, Israel today is the Start Up nation, a wealthy, and a militarily powerful state. It did not become that overnight. Some radicals anti-Israel voices describe Israel erroneously as “white.” The facts however are different. There are over one hundred thousand immigrants from Ethiopia, African economic migrants in the thousands, and Mizrahi Jews from the Arab Middle East, who comprise about half the population. Israelis of all colors and creeds made the desert bloom, overcoming the hardships of wars, terror, and absorbing millions of Jewish refugees without any natural resources.
Known today for its unique entrepreneurial and innovative spirit, Israel started its independence in 1948 as a country bereft of natural and financial resources. A pervasive joke in the country went like this… “Moses made a mistake in direction. Instead of leading the Israelites from the Sinai to the Land of Milk and Honey northeast of the Sinai, he should have gone East across the Red Sea to Saudi Arabia. That way, we would have oil and wealth.”
Joking aside, the Jewish State in the early years had no monetary reserves, little economic infrastructure, and few public services. In the 1950’s the government instituted rations known as the “Tzena” (austerity) era. Families were allocated food stamps that allowed them to buy limited amounts of sugar, flour, and oil, as well as eggs a month. Meat was rationed as well, and red meat was rare and expensive to serve at the time. As a small child in the 1950’s and early teenager in the 1960’s, I remember the paucity of toys available for children. This reporter played with matchboxes which became imaginary Israeli tanks that liberated Auschwitz and saved the Jews. I grew up with families of Holocaust survivors including my own. Their ordeals shaped the minds of children, including this reporter.
Israel at that time had a quasi-socialist economy, lacking major private ownership of economic entities. Banks, the national airline - El Al, Israel’s shipping fleet - ZIM, were government owned and run. And, what the government did not own, the trade unions or Histadrut owned. This was a critical period in the country’s history, which coincided with a massive inflow of immigrants from Europe, the Middle East, and the Maghreb (North Africa), who had to be housed, fed, clothed, and employed. Given the shortage of capital, the burden of dealing with these problems fell upon the public sector.
It should be noteworthy that in Israel’s 1948 War of Independence, a full 1% of the Jewish population was killed, and the country’s infrastructure was in disarray. The U.S. and Britain imposed an embargo on the sale of arms during the war and afterward, while Israel’s enemies, Egypt, Jordan, (which was commanded by a British officer named Glubb Pasha) Iraq, Lebanon, and Syria were already established states, and could count on their existing large arsenals. The decades of the 1950’s and 1960’s were anything but peaceful. Fedayeen (terrorists) from Gaza crossed the Green Line into Israel with the aim to kill Israelis and destroy farmland and industrial facilities. Attacked were buses that killed many women and children. It eventually led to the 1956 Sinai Campaign, in which Israel defeated the Egyptian forces in the Sinai and reached the Suez Canal. The Six Day War, about a decade later, saw Israel performing a most stunning feat by defeating three major Arab armies in six days.
Following the war, the country’s narrow borders were now widened to provide more security for the small nation, erasing the previous narrow waistline of only 9 miles between the border and the Mediterranean Sea, where its main population centers and international airport were located. The euphoria of the Six Day War subsided as Israel faced 1969, the War of Attrition, in which this reporter’s cousin was killed. In that war, Israeli pilots tangled with their Soviet counterparts and shutdown a few dozen Soviet Mig’s in dogfights.
In the 1970’s, PLO (Palestinian Liberation Organization) terror dominated the decade, especially before the Yom Kippur War of 1973. A war in which Israel was attacked on its holiest day of the year, and fought back into victory, but at a very high cost in lives and materiel. At the end of the decade, in 1979, the miracle of peace with Egypt occurred. That same year also ushered the arrival of the Islamic Republic of Iran, the world’s leading state-sponsored terrorist regime.
The 1980’s saw two major wars in the region, the Iran-Iraq war (1980-1988), which claimed the lives of over a million soldiers and civilians. By comparison, the Second Lebanon War of 1982, was somewhat insignificant on the scale of death and destruction. Still, Israel removed the PLO menace from Lebanon. In 1981, Israel eliminated Iraq’s dictator’s (Saddam Hussein) nuclear ambitions by destroying the Osirak nuclear reactor in an operation codenamed “Operation Opera.”
In the economic sphere, the Israeli government Stabilization Plan of July 1985, reduced the government involvement in the economy, as well as public spending (from about 60% of the GDP to 43%). Debt was reduced from 163% to 78%. Additionally, defense expenditures were cut down from 20% of the GDP to 10%. U.S. loans to Israel for defense acquisitions were turned into grants. By the middle of 1986, inflation was brought down from three digits to double-digits of around 20%.
Beginning in 1990, the arrival of over a million immigrants from the former Soviet Union, dramatically increased domestic demand. This led to accelerated economic growth and a sharp increase in investments. The 1990’s witnessed the Oslo Accords between Israel and the PLO, signed on the White House lawn in September 1993. A year later, Jordan signed a peace treaty with Israel. The Oslo Accords notwithstanding, Yasser Arafat, the PLO chairman, incited Palestinian terror, which including homicide bombing, souring Israelis on the possibility of having a peace partner.
The 21st Century began with Arafat’s initiated intifada which lasted until 2004. Peace overtures and significant concessions by Israeli prime ministers Barak and Olmert in 2000 and 2008 did not lead to a breakthrough. The Palestinians rejected both opportunities. The Israeli economy, on the other hand, experienced a fantastic boom. Tyler Cowen, in a Bloomberg Opinion piece (June 6, 2019) wrote: “In the last half century or so, Israel went from being a relatively poor country to one of the 25 richest in the world, as measured by per capita income. Israel has done this largely by pursuing trade, integration into the global economy, liberalization of the economy, and heavy investments in the tech sector and in startups, often with government support.” In fact, Israel’s per capita income in 2018 stood at $41,581.119, its Gross Domestic Product at $392 billion, and its growth rate was an astonishing 4.4% in 2018. Israel has come a long way from exporting oranges and phosphates, to becoming a leading high-tech exporter, including water technology, medical devices, and sophisticated arms.
To get a perspective on how dramatically Israel has changed, on Capitol Hill, in a panel addressing Members of Congress and aides, this reporter pointed out that until recent decades a trip from Tel Aviv to Jerusalem would have taken two- and one-half hours. Today, with non-rush-hour traffic, that trip would only take about 30-35 minutes. Israel’s infrastructure has undergone tremendous expansion, with four lane highways across the country, and a comfortable rail service. Israel has not only become rich, it is a comfortable country to live in and tour.