Israel (3)

The growing country

Y. J. Taub

Israel is a fast growing country, economicallY and demographically speaking. The 'growth school' that used to dominate the international merit league of a country's (and a government's) performance is not as popular as it used to be. Nevertheless, in Israel it Is still a very important yardstick for measuring, our material performance as a nation. Israel has been in the first division of the world growth championship since its inception. It more than doubled its total output of goods and services over the first 7-8 years of its ex; istence, and the basic pace has not slacken& since. The GNP growth in real terms has been about 9 per cent per annum. Twice Israel tried its own ver§ion of ston.

go-manship and didn't like it. Its durable Politicians, and apparently the public at large, Prefer permanent growth as a basic policy, and this hopefully will reduce in time the relatively heavy burden of defence to Which about one quarter of the total GNP has been devoted since the 1967 war.

People feel that this expansion has secured for the average Israeli an almost European standard of living compared to the standard of the Jews in mandatory Palestine and in the countries of origin from which most immigrants came. The economy's expansion enabled the state to carry the ever-growing defence outlays and to absorb immigration, housing and feeding immigrants while they were integrated into the productive process. Growth also provided some of the goods needed to pay for Israel's chronic balance of Payments deficit. But 'this last item is far from being settled. Although exports have increased, imports have risen even more in ab solute terms; and the dollar gap in Israel's total foreign currency transactions is very high, now running at more than a billion dol lars per annum, much higher than even ten Years ago. Here also defence rears its ugly head again. How was it done? Who conceived the grand strategy that produced these laudable tan gible material achievements? It would be nice to say there was such a plan, and pleasant to be able to refer to the person or personalities behind it as further proof of the eternal wis dom of the people of the Bible. But alas, no such plan ever existed. Whatever central Planning there has been in Israel, its in fluence on practical policy has been and remains marginal. The present was neither foreseen at the time nor planned for. If one looks through the ' visionary ' speeches of bavid Ben-Gurion at the time (and some of

his directives to his economic aides at his office) one finds a tendency towards a small agriculture-oriented pastoral autarkic econo91Y. This indeed was the legacy of past Zionist propaganda and ideology.

The early years of the state were typified by mass immigration, high unemployment,

wide-ranging shortages and short-sighted reMedies of rationing, price controls, stringent f°reign-currency allocation, etc.

With the irresistible widsom of hindsight, I think that it was the instinctive improvisa

tion and the deep-rooted pragmatism of the 1s1ae1is in adversity which brought about the

local version of the economic miracle. In the

early 'fifties things started to move when the Practical people got their way in running the

economy along generally rational lines, men

Such as David Horowitz (former Governor of t-j!e Central Bank) the late Levi Eshkol (who 'came Prime Minister) and the most deterrnined pragmatist of them all — the present Inister of Finance, PinhasSapir(who outside Israel is better known nowadays as the

strong-man of the Labour Party, king-maker and the country's leading dove).

Such men improvised policies, and always concentrated on priorities as they saw them — at the beginning expanding agricultural production to feed the ever-growing population and soliciting innumerable foreign assistance schemes (such as the urgent defreezing of Palestinian sterling balances, German reparation, various American and international aid schemes and, above all, the enormously successful mobilisation of world Jewry to assist Israel on a more or less permanent long term basis). After agriculture was nurtured to take-off point, when it fed amply the populace and started producing surpluses, it was pushed to seek export markets for its very wide range of products. I think it would not be an empty boast to claim that Israeli agriculture (Jewish and Arab alike) is one of the most modern and technologically innovation-minded and market-responsive in the world. (A local crack has it that Israeli agriculture is of the twenty-first century, its industry of the nineteenth century and its services below comparison.) Industry and infrastructure were the next target. When Mr Sapir became minister of trade and industry almost twenty years ago he devoted his legendary energies singlemindedly to industrialising the country. His bulldozer-renown stems from those days when he tried to bring industry and an industrial mentality to the remotest and most backward towns. Some ventures of those early years turned out to be white elephants, unviable in the long run. But they created employment in every part of the land and imbued the country with the dynamics of an industrial society.

All this has not been done without paying the price: the continuous dependence of prosperity on the very big deficit in the foreign accounts and a very big foreign currency debt outstanding (at present about US$4.5 billion); (the corollary of which are the five devaluations carried out by the government despite the fact that mere mention of the word is considerered ' dirty ' by the politicians); and, according to some, the highest price that despite the increase in the national wealth and despite the state's egalitarian rhetoric the growing wealth has been shared increasingly on an unequal basis. Some people — the elderly, the newcomers, the uneducated — have got less than fair sha res. While everybody has been busy with more development and defence a time bomb has been quietly ticking away under the so cial fabric. Those contributing most to the na tional priorities demanded and got better and higher material rewards for their effort.

Those whose contribution was lower or noneexistent were left behind. It was not only skills that got the upper hand. Many an entrepre

neur provided with cheap government funds made a very nice bundle for himself. The American-Jewish joke — how to make a small fortune in Israel (' bring a big one ') — was very true in the reverse.

Even the most casual reader should have noticed by now that I have failed to mention the present geo-political situation, that is of Israel occupying vast Arab territories and ruling over populations sizeable compared to its own small dimensions. The main reason for this neglect on my part is the economic insignificance of this problem. The total GNP of all occupied territories is only about 4-5 per cent of Israel's. Only in one respect is it worthwhile mentioning — labour. About 5 per cent of our labour force now crosses into Israel proper from the occupied territories. This situation is not dissimilar to the prevailing 'guest worker' arrangements in western Europe. The difference is that the Arabs are somewhat happier, being able to return to their families every night.

As for the economic burden: neither the west bank nor the Gaza Strip weighs heavily on the defence budget, nor does either trouble the balance of payments. The Sinai is uninhabited desert which produces some oil, and certainly isn't burdensome. If the question of the occupied territories is raised at all, it is by those interested in social problems, by many dovish Israelis who resent the heavy dependence of the country on cheap imported labour contrary to three generations of Zionist preaching.

Given peace, Israel can perform during the next twenty-five years easily as well as it has during its first twenty-five years. It probably also could spread its prosperity through the poor neighbouring regions. It certainly would be more welfare-oriented internally. But even the continuation of the present 'no war no peace,' with its associated heavy defence burden, will not slow down Israel's economic growth much. Unfortunately, without peace, the use of much of Israel's effort will continue to be wasted in dangerous hardware.

Y. J. Taub, at present in London on a 'sabbatical,' writes as a private citizen of Israel, not in his official capacity as senior adviser to the Bank of Israel.