Travel Reference
In-Depth Information
SHARE OF CAPITAL IMPORTS IN TOTAL RESOURCES AND
GROSS INVESTMENTS IN ISRAEL, 1950-1967 (ANNUAL AVERAGE)
Ratio of
Ratio of
Total Loans,
Gross
Capital
Capital
Investments,
Total
Domestic
Imports to
Imports to
and Grants
Resources
Investment
Resources
Investments
($ millions)
($ millions)
($ millions)
(%)
(%)
1950 -1954
274
1,157
394
17.6
69.5
1955 -1959
398
2,071
497
19.2
80.1
1960 -1964
697
3,165
667
22.0
104.4
1965 -1967
805
4,399
834
18.3
96.5
Full period
515
2,620
572
19.7
90.0
Source:
Michael N. Barnett,
Confronting the Costs of War: Military Power, State, and Society in Egypt and
Israel
(Princeton, NJ: Princeton University Press, 1992)
Note:
Capital imports fi nanced nearly all of Israel's investment needs during the fi rst two decades of the
country's history.
Arabs in the 1948 war, leaving it in control of 95 percent of the country's land. A private sector
existed alongside the government-Histadrut economy, unmolested and even encouraged, but
constricted by regulations.
At times, these national imperatives came into confl ict with the government's offi cial so-
cialist ethos. In the late 1950s, Pinhas Sapir (who — together with Levi Eshkol— dominated
economic policymaking during Israel's fi rst three decades, serving fi rst as industry minister
and later as fi nance minister) blocked a plan by the Histadrut's industrial arm, Solel Boneh,
to greatly expand its empire by building a steelworks in Acre. Sapir saw the growing power of
the Histadrut as a threat to private enterprise. At about the same time, Sapir began recruiting
local businesspeople and foreign investors to develop the textiles industry. Indeed, Sapir was
instrumental in bringing private foreign investment by Diaspora Jews to Israel. But the state
decided where and what kind of factories would be built.
The years of rapid growth were briefl y interrupted by a recession from 1966 to 1967 that
was in part engineered by the government. Concerned that rising incomes were creating
unacceptably big trade defi cits and infl ation, the Finance Ministry tightened credit and re-
duced the state development budget. The timing was poor: a host of big infrastructure proj-
ects, such as the development of the Ashdod port and the construction of the National Wa-
ter Carrier (which pipes water from the Sea of Galilee to the highly populated center of the
country and to the northern Negev), were being completed, causing construction activity to
