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champion of the European Zionists, who wanted the movement to buy land and sponsor agri-
cultural settlements. The Europeans took the view that Zionism was not a business enterprise
but a social revolution, which would be driven by the collective farmers of the kibbutzim and
moshavim. Conditions were too primitive for capitalism to work, they argued.
Weizmann and his allies prevailed, but private enterprise nevertheless remained a powerful
force in the years that followed. The next two waves of immigration mainly consisted of small
entrepreneurs and professionals. The fi rst were Polish Jews, many of them owners of small
businesses escaping the growing antisemitism of the early 1920s. They were followed in the
next decade by German Jews fl eeing the Nazis. These immigrants came with capital and skills,
which they used to set up small factories in the cities.
The Zionist institutions set up to realize the movement's socialist goals were ineffi cient
and underfunded. From 1932 to 1937 private capital accounted for 87 percent of all investment
in Jewish Palestine. Finally, World War II provided a boost to private industry: British forces
in the Middle East, isolated from their regular suppliers back at home, came to rely on local
factories and workshops for uniforms and other provisions. The stress on agriculture by the
Yishuv's offi cial institutions meant that the development of industry was left largely to the
private sector.
On the eve of the War of Independence, the Jewish population had overcome considerable
obstacles to create a small but quite modern economy. Fueled by immigration and the capital
that immigrants and Zionist institutions brought to the country, as well as by British invest-
ment in infrastructure and the war effort, the economy of the country's Jewish population
expanded an average of about 14 percent annually between 1920 and 1947.
A WAR-SHATTERED ECONOMY
The nascent Jewish state inherited the Yishuv's ideology. Even if its leadership never actively
pursued a sweeping program of creating the “New Jew,” its government took over nearly all
the economic institutions previously controlled by the Yishuv. Many of the biggest private
enterprises came under government control, though more because of the absence of private
investors than for ideological reasons. The Histadrut retained its business empire as well as
a key role in the economy and stood in the unusual situation of being both a union and an
employer.
In the fi rst years of the state, given the dominant ideology, the private sector and the profi t
motive were looked at suspiciously by the government, but offi cials were by no means deter-
mined to do away with the private economy altogether. Instead, economic policy could be
termed “national” in the sense that decisions were driven by what the government deemed
best for building the country.
In contrast to the conventional view today, capitalism was seen as wasteful and unproduc-
tive; capitalists invested resources where profi ts could be most easily made rather than where
they were needed by the nation. Small business was tolerated, though dismissed as fi lling a
socially useless role as “middleman” rather than making a useful contribution.
Whether the economy could have been developed with private enterprise — or, at the very
least, whether it could have been developed more effi ciently — remains a matter of debate. To
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