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Sam Lehman-Wilzig
Prof. Sam: Academic Pundit

National Viability & Vitality: The Israeli Case (5) – The Activist State

In last week’s installment of this series on Israel’s future prospects in the coming decades, I discussed in-depth the third of seven factors – “Shared (Equal) Opportunity” – (https://blogs.timesofisrael.com/national-viability-and-vitality-the-israeli-case-4-shared opportunity/). Here I will look in-depth at the fourth factor: The Activist State.

From the start, the Zionist movement had no choice but to be very actively involved in attracting immigrants and ensuring their survival (and later prosperity), given that almost Jews coming to Palestine were poor and the land itself had few natural resources. Thus, Socialist ideology and practice became dominant over the more western-style liberal economic approach, aka Revisionism. This continued after the State’s establishment, again due to the exigency of absorbing huge numbers of immigrants as well as defending the nascent, vulnerable state from attacks.

However, as time went on, Israel’s bureaucratic Socialist system became sclerotic. The Likud’s 1977 electoral victory was not only a political turning point but an economic watershed as well. Finance and commerce were liberalized, the bureaucracy was pruned back, and (after a disastrous early hyper-inflationary period) the economy took off, as Israelis’ brainpower and initiative were finally allowed greater reign.

Nevertheless, the state did not disappear. It remained active – more so in the realm of social welfare than in economics – providing a strong safety net, far more in line with Scandinavia than the U.S. or England. For example, Israel’s universal health care system is considered one of the world’s best, based on competition between four central HMOs, each providing comprehensive health services at very low cost to their patients (who pay a monthly health care fee based on income).

Moreover, given the continued external threats to the country, the State of Israel is highly active in developing a world class security apparatus: IDF, Shabak (internal security), and Mossad (external security). Serendipitously, this has proven to be very constructive, for two related reasons. First, a high-tech military-industrial complex has emerged, exporting high-tech arms to the world in huge terms per capita. Second, and nourishing this, are elite army units (cyber, intelligence, etc.) that provide a steady flow of the highest quality (wo)manpower to Israel’s high-tech sector, military and especially civilian (biotech, agritech, infotech, fintech, communications, artificial intelligence, etc.).

It is here that one finds the secret of Israel’s economic success: the state is activist but does so mainly in laying the foundation for free market dynamism, rather than controlling the economy from “on high.” True, this approach is not uniform across all sectors of the economy. For instance, the state still owns 90% of the land, leading (among other factors) to sky-high real estate prices. On the other hand, it has been gradually removing structural obstacles standing in the way of an efficient economy. Two quite different examples: a new BOT (Build-Operate-Transfer) port has been built in Haifa, to increase competition in this serious import bottleneck; agricultural tariffs have recently been removed – with huge subsidies to the farm sector for R & D in order to modernize itself in the face of inevitable import competition.

There is one area in which Israeli governmental activism is highly controversial: Religion & State. Actually, the government itself is not much involved, but it has delegated almost all activity related to marriage, divorce, and conversion to the Rabbinate. And yet here too we find an interesting phenomenon: increasing numbers of Israeli citizens are ignoring or bypassing the rabbinical establishment through several workarounds e.g., overseas marriages that have to be recognized by Israel (based on international treaty), local Conservative or Reform weddings without registering in the Interior Ministry (but many couples with a civil contract accepted by the secular legal system), and so on. This is a longstanding phenomenon on the Israeli scene, in which the Israeli public pushes back against structural, quasi-governmental activism – similar to what it has done with quasi-public Sabbath transportation, commercial stores opening on the Sabbath, etc.

In short, Israel continues to search for the ideal equilibrium between State intervention (or “encouragement”) and private market initiative – not only in purely economic affairs but also in social areas of life. The process might seem somewhat messy, but the active search itself is a sign of socio-economic health. In the final analysis, the proof is in the pudding: the Israeli economy (and currency) is one of the strongest in the world: unemployment is very low; national debt relative to GDP is low too; the economy continues to grow very impressively; and even the earlier bugaboo of high inflation has been kept low over the past few decades (today, it is only half of U.S. and European inflation rates).

There is still much to be done e.g., the cost-of-living is far too high. Nevertheless, Israel’s activist involvement in the economy and society seems to have reached a midpoint where the pluses outweigh the minuses by a wide margin. Should the country manage to continue along this middle-of-the-road approach that can best be described as “restrained activism,” the future of its economy should remain a major strength underlying the country’s continued flourishing.

About the Author
Prof. Sam Lehman-Wilzig (PhD in Government, 1976; Harvard U) taught at Bar-Ilan University (1977-2017), serving as: Head of the Journalism Division (1991-1996); Political Studies Department Chairman (2004-2007); and School of Communication Chairman (2014-2016). He was also Chair of the Israel Political Science Association (1997-1999). He has published three books and 60 scholarly articles on Israeli Politics; New Media & Journalism; Political Communication; the Jewish Political Tradition; the Information Society. His new book is VIRTUALITY AND HUMANITY: VIRTUAL PRACTICE AND ITS EVOLUTION FROM PRE-HISTORY TO THE 21ST CENTURY (Springer Nature, Dec. 2021): The book's description, substantive Preface and full Table of Contents can be freely accessed here: https://link.springer.com/book/10.1007/978-981-16-6526-4#toc. For more information about Prof. Lehman-Wilzig's publications (academic and popular), see: www.ProfSLW.com
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