From 1948 until the early 1970s, life in Israel was dominated by the Histadrut, the federation of labour set up by Jews in the land  before the Jewish state was established. Cooperative  and collective settlements, such as the kibbutzim, were the way of life for the majority of Israelis. Marketing, distribution of consumer goods, housing  and construction, banking and many other areas of life were regulated by the Histadrut, which also worked closely with the government in providing  many services such as health, education and social insurance. Although free-enterprise was accepted it was expected that the national interest was primary to all citizens.

From 1948 to 1973 the economy grew by 10%  a year. Workers enjoyed relative prosperity, earning  middle class salaries, while unemployment was  about one percent. In the mid-sixties, three fifths  of the adult population of Israel was involved in  some way in the Histadrut. Differences between  the upper and lower strata of society were not great in the early years of the state, and social status had  little to do with income.

In government, socialist parties held the  majority of seats in the Knesset from 1948 to the  early 1970s. But by the late 1960s the economic  and social gap between oriental and western Jews  widened. Between 1967 and 1973 Israel prospered  as foreign capital flowed into the country creating  a wealthy elite which acquired wide influence in  decision making and had quite different aspirations  and interests to the early founders of the Jewish  state.

After the 1973 Yom Kippur war, prosperity declined, inflation increased and industrial unrest  spread. By 1977 Israel was experiencing escalating  defence costs, inflation over 30%, rising unemployment  and higher taxes. In government, this  led to the rise of the Likud (unity) bloc following  the 1973 war. A political bloc of the centre-right, Likud was able to form government following  the1977 elections and its leader Menachem Begin was appointed prime minister.

In 1985, responding to continuing high inflation (the annual rate was 445% in 1984)  and low economic performance, the government  reduced public spending and the following year  began to privatize public enterprises. Government  income support was cut by about 30%. Almost one quarter of the labour force was now employed in  industrial production. The kibbutzim, traditionally  based on agriculture, saw a rapid shift to industrial  production. About half their revenue now came  from industrial production and kibbutz factories  produced 5% of Israel’s total industrial output.

A large wave of immigrants began arriving  from 1990 (940,000 from the former Soviet Union  alone), which had to be absorbed. Initial outlays  were enormous, with unemployment temporarily  reaching 11% in 1992. The new arrivals soon began  to contribute to the growth and development of the  economy, however, so that unemployment fell below  6% a little over a decade later.

Although the standard of living in Israel today is  high and is constantly improving, Israel still suffers  from poverty. Israel’s National Insurance Institute  annual poverty report for 2011 states that one in  every four Israelis lives under the poverty line, the  unemployment rate is on the rise and many are in  fact desperately poor[1]. For many Israelis, 2011 was  a year of crisis. There were massive demonstrations  against social injustice in Israel that erupted  mid-July as activists began setting up tents in Tel Aviv to protest against Prime Minister Benjamin Netanyahu’s economic and social policies.

Professor Manuel Trajtenberg, head of the  Trajtenberg committee on socioeconomic change,  has said inequality in Israel is worse than in the  rest of the world, and that is an indictment against  Israeli society that has created a feeling of injustice[2].

The OECD reported that Israel’s economy grew  by 7.8% in 2010, outstripping that of the United  States, Britain, Japan, Germany and France, but  “poverty is almost twice as widespread in Israel,  19.9% of the population, compared to the OECD  average, 10.9%”, writes Nathan Jeffay[3]. Like other  modern nations, Israel desires to provide the  highest living standards for its people. As a modern,  progressive nation, interested in the well-being  and prosperity of its people, Israel struggles to find  solutions to the social and economic inequality that  is part of life today. Only the coming of the Lord  Jesus Christ will bring a lasting solution to Israel’s  troubles, for he “shall judge the poor of the people, (and) he shall save the children of the needy” (Psalm  72:4), and the blessings of his kingdom will extend  throughout the world.


Michael Adams (ed.). The Middle East : a handbook.  London : Blond, 1971.

Facts About Israel. Jerusalem : Ministry of Foreign  Affairs, 1985.

Facts About Israel [online version] (28 Nov  2 0 1 0 ) h t t p : / / a . g o v. i l /MFA/  Facts+About+Israel/Economy/ECONOMY-  +Challenges+and+Achievements.htm  ‘Israel’, in Encyclopaedia Britannica, 14th ed. (1969), v. 12.  Don Peretz. The Middle East Today. 3rd ed. New  York : Holt, Rinehart and Winston, 1978.

[1] “One in 4 Israelis lives under poverty line”, PressTv 11

September, 2011

[2] Eran Azran and Dror Reich, “Trajtenberg: The fruits of

economic growth reach only the rich” TheMarker, 8 November



[3] (Nathan Jeffay, “Prosperous but Unequal: OECD Report

Spotlights Alarming Trend”, Published April

22, 2011, issue of May 06, 2011