Editing Economy of Israel (section)

==History==
[[File:GPD per capita development of Israel.jpg|thumb|right|Change in per capita GDP of Israel since 1950. Figures are inflation-adjusted to 2011 International dollars.]]
The British [[Mandate for Palestine]] that came into effect in 1920 aimed at restricting land purchases by Jewish immigrants. For this reason, the Jewish population was initially more urban and had a higher share in industrial occupations. This particular development resulted economically in one of the few growth miracles of the region whereby the structure of firms was determined mainly by private businessmen rather than by the government.<ref>{{cite book|author=Baten, Jörg |title=A History of the Global Economy. From 1500 to the Present.|date=2016|publisher=Cambridge University Press|page=227|isbn=9781107507180}}</ref>
The first survey of the [[Dead Sea]] in 1911, by the Russian Jewish businessman and engineer [[Moshe Novomeysky]], led to the establishment of Palestine Potash Ltd. in 1930, later renamed the [[Dead Sea Works]].<ref>[https://books.google.com/books?id=Sdje6L7rrRsC&pg=PA72 ''The political economy of Israel: From ideology to stagnation''] {{Webarchive|url=https://web.archive.org/web/20230405213027/https://books.google.com/books?id=Sdje6L7rrRsC&pg=PA72 |date=5 April 2023 }}, Yakir Plessner, p.72. Google Books. Retrieved on 8 September 2011.</ref> In 1923, the businessman and hydraulic engineer [[Pinhas Rutenberg]] was granted an exclusive concession for the production and distribution of electric power. He founded the Palestine Electric Company, later the [[Israel Electric Corporation]].<ref>{{cite magazine |title=The Seventh Dominion? |url=http://www.time.com/time/magazine/article/0,9171,737478,00.html |archive-url=https://web.archive.org/web/20071001004224/http://www.time.com/time/magazine/article/0,9171,737478,00.html |url-status=dead |archive-date=1 October 2007 |magazine=Time |date=4 March 1929 |access-date=24 May 2007}}</ref> Between 1920 and 1924, some of the country's largest factories were established, including the Shemen Oil Company, the Societe des Grand Moulins, the Palestine Silicate Company and the Palestine Salt Company.<ref>{{cite book|url=https://books.google.com/books?id=dEm8hueO88QC&q=lodzia+textile&pg=PA177|title=The Roots of Separatism in Palestine: British Economic Policy, 1920–1929|first=Barbara Jean|last=Smith|date=19 January 1993|publisher=Syracuse University Press|access-date=19 January 2019|via=Google Books|isbn=9780815625780}}</ref>

In 1937, there were 86 spinning and weaving factories in the country, employing a workforce of 1,500. Capital and technical expertise were supplied by Jewish professionals from Europe. The [[ATA (Israeli company)|Ata textile plant]] in [[Kiryat Ata]], which went on to become an icon of the Israeli textile industry, was established in 1934.<ref>Tsur, Doron. (12 October 2010) [http://www.haaretz.com/print-edition/business/when-the-guns-fell-silent-1.321522 "When the guns fell silent"] {{Webarchive|url=https://web.archive.org/web/20171022193526/https://www.haaretz.com/print-edition/business/when-the-guns-fell-silent-1.321522 |date=22 October 2017 }}, ''Haaretz''. Retrieved on 8 September 2011.</ref> In 1939, the cornerstone was laid for one of the kibbutz industry's first factories: the Naaman brick factory, which supplied the growing need for construction materials.<ref>{{cite news|url=https://www.ynetnews.com/articles/0,7340,L-3671806,00.html|title=Naaman factory: Settlement's building blocks|date=15 February 2009|website=Ynetnews|last1=Man|first1=Nadav|access-date=27 August 2020|archive-date=25 February 2021|archive-url=https://web.archive.org/web/20210225135630/https://www.ynetnews.com/articles/0,7340,L-3671806,00.html|url-status=live}}</ref>

The textile underwent rapid development during World War II, when supplies from Europe were cut off while local manufacturers were commissioned for army needs. By 1943, the number of factories had grown to 250, with a workforce of 5,630, and output increased tenfold.<ref>Encyclopaedia Judaica</ref>

From 1924, trade fairs were held in Tel Aviv. The [[Levant Fair]] was inaugurated in 1932.<ref>[http://lib.stanford.edu/eliasaf-robinson-tel-aviv-collection/city-work-and-prosperity-levant-fair "City of Work and Prosperity": The Levant Fair] {{webarchive|url=https://web.archive.org/web/20131224114205/http://lib.stanford.edu/eliasaf-robinson-tel-aviv-collection/city-work-and-prosperity-levant-fair |date=24 December 2013 }}</ref>

===After independence===
After statehood, Israel faced a deep economic crisis. As well as having to recover from the devastating effects of the [[1948 Arab–Israeli War]], it also had to absorb hundreds of thousands of Jewish refugees from Europe and almost a million from the Arab world. Israel was financially overwhelmed and faced a deep economic crisis, which led to a policy of [[Austerity in Israel|austerity]] from 1949 to 1959. Unemployment was high, and foreign currency reserves were scarce.<ref name= shilumim>{{cite web |url=http://www.mezia.co.il/articles/?idmsg=1663 |script-title=he:הויכוח סביב הסכם השילומים |language=he |access-date=15 October 2012 |url-status=dead |archive-url=https://web.archive.org/web/20111217093126/http://mezia.co.il/articles/?idmsg=1663 |archive-date=17 December 2011  }}</ref>

In 1952, Israel and [[West Germany]] signed an [[Reparations Agreement between Israel and West Germany|agreement]] stipulating that West Germany was to pay Israel to compensate for Jewish property stolen by the Nazis, material claims during the Holocaust, and absorption of refugees as a result. Over the next 14 years, West Germany paid Israel 3 billion [[Deutsche Mark|marks]] (around US$714 million according to 1953–1955 conversion rates<ref>{{Cite web|url=https://fx.sauder.ubc.ca/etc/USDpages.pdf|title=PACIFIC Exchange Rate Service|access-date=19 August 2023|archive-date=8 January 2023|archive-url=https://web.archive.org/web/20230108091347/https://fx.sauder.ubc.ca/etc/USDpages.pdf|url-status=live}}</ref> or equivalent to approximately US$7 billion in modern currency). The reparations became a decisive part of Israel's income, comprising as high as 87.5% of Israel's income in 1956.<ref name= shilumim/> Israel never had any [[East Germany–Israel relations|formal diplomatic relations]] with [[East Germany]]. In 1950, the Israeli government launched [[State of Israel Bonds|Israel Bonds]] for [[American Jews|American]] and [[History of the Jews in Canada|Canadian Jews]] to buy. In 1951, the final results of the bonds program exceeded $52 million. Additionally, many American Jews made private donations to Israel, which in 1956 were thought to amount to $100 million a year. In 1957, bond sales amounted to 35% of Israel's special development budget.<ref>{{cite magazine|url=http://www.time.com/time/magazine/article/0,9171,865644,00.html |archive-url=https://web.archive.org/web/20111101013614/http://www.time.com/time/magazine/article/0,9171,865644,00.html |url-status=dead |archive-date=1 November 2011 |magazine=Time |title=ORGANIZATIONS: Dollars for Israel |date=21 January 1957}}</ref> Later in the century, Israel became significantly reliant on economic [[United States aid to Israel|aid from the United States]],<ref>{{cite web|last=Mark|first=Clyde|title=Israel: US Foreign Assistance|url=https://fas.org/man/crs/IB85066.pdf|publisher=[[Congressional Research Service]]|access-date=19 July 2012|date=12 July 2004|archive-date=17 March 2016|archive-url=https://web.archive.org/web/20160317033210/https://fas.org/man/crs/IB85066.pdf|url-status=dead}}</ref> a country that also became Israel's most important source of political support internationally.

The proceeds from these sources were invested in industrial and agricultural development projects, which allowed Israel to become economically self-sufficient. Among the projects made possible by the aid was the [[Orot Rabin|Hadera power plant]], the [[Dead Sea Works]], the [[National Water Carrier]], [[port]] development in [[Haifa]], [[Ashdod]], and [[Eilat]], [[desalination]] plants, and national infrastructure projects.

After statehood, priority was given to establishing industries in areas slated for development, among them, [[Lachish]], [[Ashkelon]], the [[Negev]] and [[Galilee]]. The expansion of Israel's textile industry was a consequence of the development of cotton growing as a profitable agricultural branch. By the late 1960s, textiles were one of the largest industrial branches in Israel, second only to the foodstuff industry. Textiles constituted about 12% of industrial exports, becoming the second-largest export branch after [[diamond cutting|polished]] diamonds.<ref name= JVL>[https://www.jewishvirtuallibrary.org/jsource/judaica/ejud_0002_0019_0_19772.html "Textiles"] {{Webarchive|url=https://web.archive.org/web/20161111030658/https://www.jewishvirtuallibrary.org/jsource/judaica/ejud_0002_0019_0_19772.html |date=11 November 2016 }}, [[Jewish Virtual Library]]. Retrieved on 8 September 2011.</ref> In the 1990s, cheap East Asian labor decreased the profitability of the sector. Much of the work was subcontracted to 400 Israeli Arab sewing shops. As these closed down, Israeli firms, among them Delta, Polgat, Argeman and Kitan, began doing their sewing work in Jordan and Egypt, usually under the [[Qualifying Industrial Zone|QIZ]] arrangement. In the early 2000s, Israeli companies had 30 plants in Jordan. Israeli exports reached $370&nbsp;million a year, supplying such retailers and designers as [[Marks & Spencer]], [[Gap (clothing retailer)|The Gap]], [[Victoria's Secret]], [[Walmart]], [[Sears]], [[Ralph Lauren]], [[Calvin Klein]], and [[Donna Karan]].<ref name= JVL/>

In its first two decades of existence, Israel's strong commitment to development led to economic growth rates that exceeded 10% annually. Between 1950 and 1963, the expenditure among wage-earner's families rose 97% in real terms.<ref>The Challenge of Israel by Misha Louvish</ref> Between 1955 and 1966, per capita consumption rose by 221%.<ref>Israel: A History by Anita Shapira</ref> In the 1970s, investment began to shift from agriculture and basic infrastructure to industry and defense programs.<ref name=":4">Bay Area Economic Institute, ''Silicon Valley to Silicon Wadi, California's Economic ties to Israel'', October 2021 https://www.bayareaeconomy.org/files/pdf/SiliconValleyToSiliconWadi.pdf</ref> These latter investments would later become the foundation of Israel's technology sector.<ref name=":4" /> The years after the 1973 [[Yom Kippur War]] were a lost decade economically, as growth stalled, inflation soared and government expenditures rose significantly. Also worthy of mention is the 1983 [[Bank stock crisis (Israel 1983)|Bank stock crisis]]. By 1984, the economic situation became almost catastrophic with inflation reaching an annual rate close to 450% and projected to reach over 1000% by the end of the following year. However, the successful [[Economic Stabilization Plan (Israel 1985)|economic stabilization plan implemented in 1985]]<ref>[https://www.knesset.gov.il/review/ReviewPage2.aspx?kns=11&lng=3 Eleventh Knesset] {{Webarchive|url=https://web.archive.org/web/20151025065145/http://www.knesset.gov.il/review/ReviewPage2.aspx?kns=11&lng=3 |date=25 October 2015 }}. Knesset.gov.il. Retrieved on 8 September 2011.</ref> and the subsequent introduction of market-oriented structural reforms<ref>{{cite journal |first1=Michael |last1=Bruno |first2=Patrick |last2=Minford |title=Sharp Disinflation Strategy: Israel 1985 |journal=[[Economic Policy (journal)|Economic Policy]] |volume=1 |issue=2 |year=1986 |pages=379–407 |jstor=1344561 |doi=10.2307/1344561 }}</ref><ref>[https://www.jewishvirtuallibrary.org/jsource/isdf/text/Melnick_Mealem1.html Israel's Economy: 1986–2008] {{Webarchive|url=https://web.archive.org/web/20170107172311/https://www.jewishvirtuallibrary.org/jsource/isdf/text/Melnick_Mealem1.html |date=7 January 2017 }}, Rafi Melnick and Yosef Mealem</ref> reinvigorated the economy and paved the way for its rapid growth in the 1990s and became a model for other countries facing similar economic crises.<ref>{{cite journal |last=Fischer |first=Stanley |year=1987 |title=The Israeli Stabilization Program, 1985–86 |journal=The American Economic Review |volume=77 |issue=2 |pages=275–278 |publisher=American Economic Association |jstor=1805463}}</ref>

[[File:Money IL WV.JPG|thumb|[[Israeli new shekel]] banknotes and coins]]
Two developments have helped to transform Israel's economy since the beginning of the 1990s. The first is waves of [[Aliyah|Jewish immigration]], predominantly from the countries of the former [[Soviet Union|USSR]], that has brought [[Russian immigration to Israel in the 1990s|over one million new citizens to Israel]]. These new Soviet Jewish immigrants, many of them highly educated, had a wellspring of scientific and technical expertise to help spur Israel's burgeoning technology sector, now constitute some 15% of Israel's population.<ref>{{cite news |last=Sherwood |first=Harriet |title=Israel's former Soviet immigrants transform adopted country |newspaper=The Guardian |date=17 August 2011 |url=https://www.theguardian.com/world/2011/aug/17/israel-soviet-immigrants-transform-country |access-date=25 February 2018 |archive-date=12 March 2020 |archive-url=https://web.archive.org/web/20200312190713/https://www.theguardian.com/world/2011/aug/17/israel-soviet-immigrants-transform-country |url-status=live }}</ref> The second development benefiting the Israeli economy is the [[Israeli–Palestinian peace process|peace process]] that begun at the [[Madrid Conference of 1991|Madrid conference]] of October 1991, which led to the signing of accords and later to a peace treaty between Israel and [[Jordan]] (1994).

[[File:השטרות החדשים של ישראל.jpg|thumb|Israeli New Shekel, new banknotes since 2018]]
During the early 2000s, the Israeli economy went into a downturn due to the crashing of the [[dot-com bubble|global dot-com bubble]] which bankrupted many startups established during the height of the bubble. The [[Second Intifada]], which cost Israel billions of dollars in security costs, and a decline in investment and tourism,<ref>{{cite web |url=http://repub.eur.nl/res/pub/10558/EI%202007-39.pdf |title=Economic consequences of intifada: a sequel |last1=De Boer |first1=Paul |last2=Missaglia |first2=Marco |date=September 2007 |work=[[Econometric Institute]] Report |publisher=Erasmus University Rotterdam |access-date=15 October 2012 |archive-date=10 May 2013 |archive-url=https://web.archive.org/web/20130510052453/http://repub.eur.nl/res/pub/10558/EI%202007-39.pdf |url-status=live }}</ref> sent unemployment in Israel to the double digits; growth in one quarter of 2000 was 10%. In 2002, the Israeli economy declined about 4% in one quarter.  Afterward, Israel managed to create a remarkable recovery by opening up new markets to Israeli exporters farther afield, such as in the rapidly [[Economy of East Asia|growing countries of East Asia]]. This was possible thanks to a rebound in the Israeli tech sector, spurred on by the gradual bottoming out of the dotcom crash and a growing increase in demand for computer software, which in turn was due to burgeoning rates of global internet usage at this time. The explosion in demand for security and defense products following 9/11 also allowed Israel to sell even more of its technologies abroad – a situation only made possible due to Israel's prior investments in the technology sector in an effort to curb high levels of domestic unemployment.

In the 2000s, there was an influx of [[Foreign direct investment|foreign investment]] in Israel from companies that formerly shunned the Israeli market. In 2006, foreign investment in Israel totalled $13&nbsp;billion, according to the [[Manufacturers Association of Israel]].<ref name= w>"Israeli Growth", ''Dateline World Jewry'', September 2007</ref> The ''[[Financial Times]]'' said that "bombs drop, yet Israel's economy grows".<ref>[http://www.ft.com/cms/s/bd1cb7ba-fcb1-11db-9971-000b5df10621,dwp_uuid=f98b03ba-4d11-11da-ba44-0000779e2340.html / Middle East / Arab-Israel conflict – Israeli economy shrugs off political turmoil]. ''Financial Times'' (7 May 2007). Retrieved on 8 September 2011.</ref> Moreover, while Israel's total gross external debt is US$95&nbsp;billion, or approximately 41.6% of GDP, since 2001 it has become a net lender nation in terms of net external debt (the total value of assets vs. liabilities in debt instruments owed abroad), which {{as of|2012|6|lc=y}} stood at a significant surplus of US$60&nbsp;billion.<ref>{{cite web |url=http://www.bankisrael.gov.il/en/NewsAndPublications/PressReleases/Pages/19092012.aspx |title=Israel's International Investment Position (IIP), June 2012 |date=19 September 2012 |publisher=Bank of Israel |access-date=15 October 2012 |archive-date=16 January 2013 |archive-url=https://web.archive.org/web/20130116083309/http://www.bankisrael.gov.il/en/NewsAndPublications/PressReleases/Pages/19092012.aspx |url-status=dead }}</ref> The country also maintains a [[Current account (balance of payments)|current account]] surplus in an amount equivalent to about 3% of its gross domestic product in 2010. In 2023, Israel's account surplus was 25.3 billion U.S. dollars.<ref>{{Cite web |title=Israel's current account surplus rises to 25.3 bln USD in 2023: report-Xinhua |url=https://english.news.cn/20240313/96b4ce27110a47488d24c51331600b85/c.html#:~:text=JERUSALEM,%20March%2012%20(Xinhua),annual%20balance%20of%20payments%20report. |access-date=2024-06-29 |website=english.news.cn}}</ref>

[[File:BankIsrael01 ST 06.jpg|thumb|[[Bank of Israel]]]]

The Israeli economy weathered and withstood the [[late-2000s recession]], registering positive GDP growth in 2009 and ending the decade with an unemployment rate lower than that of many of its Western counterparts.<ref name= hanews>{{cite news |title=GDP, jobs figures end 2009 on a high |first=Moti |last=Bassok |url=http://www.haaretz.com/print-edition/business/gdp-jobs-figures-end-2009-on-a-high-1.260636 |newspaper=Haaretz |date=1 January 2010 |access-date=17 October 2012 |archive-date=17 April 2016 |archive-url=https://web.archive.org/web/20160417140704/http://www.haaretz.com/print-edition/business/gdp-jobs-figures-end-2009-on-a-high-1.260636 |url-status=live }}</ref> There are several reasons behind this economic resilience, for example, the fact that the country is a net lender rather than a borrower nation and the government and the Bank of Israel's generally conservative macro-economic policies. Two policies, in particular, can be cited, one is the refusal of the government to succumb to pressure by the banks to appropriate large sums of public money to aid them early in the crisis, thus limiting their risky behavior.<ref>{{cite journal |last=Benchimol |first=J. |year=2016 |title=Money and monetary policy in Israel during the last decade |journal=[[Journal of Policy Modeling]] |volume=38 |issue=1 |pages=103–124 |doi=10.1016/j.jpolmod.2015.12.007 |s2cid=54847945 |url=https://mpra.ub.uni-muenchen.de/69587/1/MPRA_paper_69587.pdf |access-date=11 December 2019 |archive-date=29 July 2020 |archive-url=https://web.archive.org/web/20200729214008/https://mpra.ub.uni-muenchen.de/69587/1/MPRA_paper_69587.pdf |url-status=live }}</ref> The second is the implementation of the recommendations of the Bach'ar commission in the early to mid-2000s which recommended decoupling the banks' [[Commercial bank|depository-]] and [[Investment banking]] activities, contrary to [[Decline of the Glass–Steagall Act|the then-opposite trend]], particularly in the United States, of easing such restrictions which had the effect of encouraging more risk-taking in the financial systems of those countries.<ref>{{cite news |script-title=he:כך ביזבזנו עוד משבר ענק |first=Guy |last=Rolnik |url=http://www.themarker.com/wallstreet/1.549518 |newspaper=TheMarker |date=31 December 2009 |access-date=17 October 2012 |language=he |trans-title=How another Giant Crisis was Wasted |archive-date=6 July 2014 |archive-url=https://web.archive.org/web/20140706000902/http://www.themarker.com/wallstreet/1.549518 |url-status=live }}</ref> American investors today make up the most significant portion of investors in Israel.<ref name=":4" />

===OECD membership===
In May 2007, Israel was invited to open accession discussions with the [[OECD]].<ref>{{cite news |url=http://www.ynetnews.com/articles/0,7340,L-3400955,00.html |title=Israel invited to join the OECD |newspaper=Ynetnews |date=16 May 2007 |access-date=21 May 2007 |archive-date=3 March 2016 |archive-url=https://web.archive.org/web/20160303194937/http://www.ynetnews.com/articles/0,7340,L-3400955,00.html |url-status=live }}</ref> In May 2010, the OECD voted unanimously to invite Israel to join, despite Palestinian objections.<ref name= BBC/> It became a full member on 7 September 2010.<ref name= OECD/><ref>{{cite web |url=http://www.oecd.org/about/membersandpartners/ |title=Members and partners |publisher=Organisation for Economic Co-operation and Development |access-date=15 October 2012 |archive-date=17 May 2019 |archive-url=https://web.archive.org/web/20190517031319/http://www.oecd.org/about/membersandpartners/ |url-status=live }}</ref> The OECD praised Israel's scientific and technological progress and described it as having "produced outstanding outcomes on a world scale."<ref name= BBC>[http://news.bbc.co.uk/2/hi/8672304.stm OECD members vote unanimously to invite Israel to join] {{Webarchive|url=https://web.archive.org/web/20200605205837/http://news.bbc.co.uk/2/hi/8672304.stm |date=5 June 2020 }}. BBC News (10 May 2010). Retrieved on 8 September 2011.</ref>