Economy
Israel has a mixture of government ownership and regulation, private enterprise, and cooperative and communal enterprises. From the founding days of Israel, the government has played the decisive role in economic development.
Working closely with the government are such national institutions as the Jewish Agency and the Jewish National Fund. Both raise funds abroad and are jointly involved in land development, settling of immigrants, and related social and economic matters. About 90 per cent of all the land in Israel is owned by the state and the Jewish National Fund. Also playing a major role in the economy is the Histadrut (General Federation of Labor). It represents about 85 per cent of the labor force and operates many businesses.
By applying great skill and much energy, the Israelis have greatly improved their once impoverished land and expanded their economy. They have contended with many difficult problems, including a severe lack of natural resources, the absorption of some two million immigrants, enormous defense expenditures, and the continuing threat of war.
Growth of the economy was exceptionally rapid during 1948–72. Much of Israel's development has been made possible by the vast sums of money contributed by Jews in other countries, especially the United States. Large amounts were also contributed by West Germany during 1953–65 as restitution payments for Nazi atrocities. Loans, grants, and other kinds of aid from the United States and other foreign governments have also been significant.
Since 1972, Israel's economic growth has slowed considerably, largely due to rising rates of inflation, mounting trade deficits, declining foreign reserves, and vastly increased military spending.
was poorly developed at the time of the state's creation, but it has grown to be the leading economic activity. It generally provides employment for about a fifth of the labor force and is responsible for a similar share of the gross domestic product (GDP). The largest concerns are owned primarily by the government or the Histadrut. Tel Aviv and the surrounding area form the chief industrial center.
Israel's heavy industries include petroleum refining, metal smelting, and the manufacturing of cement, chemicals, and fertilizers.
Most of the heavy industries are in the Haifa area. Israel began to rapidly develop specialized manufacturing industries in the late 1960's, after the 1967 war. They were planned specifically to provide new products for export and for the military in order to gain greater national security. Many of these industries are technical and scientific, linked to research at universities and institutes. Electronics, one of the fastest growing, now produces many products, both civilian and military, ranging from computer components to complex missile control systems. The manufacturing of small jet aircraft is important, as are metalworking and the making of such chemicals as pharmaceuticals and pesticides.
Of particular importance, especially because of its export significance, is the multimillion-dollar diamond cutting and polishing business. It began with the immigration of highly skilled craftsmen fleeing Europe after World War II. Today, Israel is one of the world's largest suppliers of cut diamonds.
In the early years after independence, Israel was largely an agricultural country. Although farming has expanded greatly since then, its relative importance has declined because of the growth of other industries. Agriculture now accounts for about 5 per cent of the labor force and a slightly smaller share of the GDP.
Only about a fifth of the land is suitable for farming, and of that about half is irrigated. The rest of the country is too dry and has little or no potential for irrigation because of limited water supplies.
Israel's farms provide most of the country's food needs, and there is a surplus of some products for export. The production of grains, vegetable oils, and beef falls far below national needs. Many kinds of fruits are grown, including citrus fruits, table and wine grapes, olives, avocados, and bananas. Citrus fruits, particularly Jaffa oranges and grapefruit, are especially important and make up a principal export. Vegetables are also widely grown. Commercial crops include sugar beets, cotton, peanuts, and tobacco. Poultry, cattle, and sheep are the chief animals raised.
Some farms in Israel are privately owned and operated, but most farming is done by cooperative settlements on land leased for long terms from the state or the Jewish National Fund. Two kinds of settlements account for most of the farm population and acreage. They are the moshav (plural: moshavim) and the kibbutz (kibbutzim). A moshav is a cooperative settlement where each member family lives individually and works a separate piece of land, but buys and sells everything through cooperatives. A kibbutz is a settlement where living is communal, property is held in common, and work is shared equally by members. Since the late 1960's many kibbutzim have established factories and processing plants on their land to supplement farm income.
Fishing is a small but moderately growing industry. The domestic catch is gradually replacing imported fish; it comes mainly from Mediterranean waters, from the Sea of Galilee, and from ponds, where fish are raised scientifically.
Forests are virtually nonexistent and there is no lumbering industry. Only small groves and the remnants of native forests are found today, mostly in the higher parts of Galilee. Reforestation programs are carried on by the government and the Jewish National Fund. Most of the trees planted have been pine, cypress, and eucalyptus.
Minerals occurring in commercially usable amounts are very limited. Phosphates are mined in the central Negev, and the Dead Sea's water, which contains about 25 per cent salt, yields mainly potash, bromine, and magnesium chloride. A large chemical plant near Arad utilizes Dead Sea salt and phosphate rock from the desert. Only minor crude oil and natural gas deposits have been discovered and tapped. All mineral resources are the property of the state.
Israel has an extensive system of roads and highways. Routes are most numerous in the northern and central sections. The few roads that serve the Negev are largely unpaved. Trucks are the chief carriers of cargo; buses provide most of the passenger service.
Railways, which are state-owned, are not heavily used except on the Tel Aviv-Haifa run. Other lines go to Jerusalem and as far south as the Beersheba area, where the railway is gradually being extended into the Negev, toward Elat.
The Israeli merchant marine is relatively large and growing rapidly. Chief ports are Haifa and Ashdod on the Mediterranean Sea. Together, they handle most of Israel's foreign trade, excluding imports of petroleum. Elat is Israel's major petroleum port and handles Asian and African trade. Pipelines carry petroleum from Elat to the Mediterranean ports, where the oil is either transshipped or refined for domestic use.
El Al is Israel's international airline; Arkia provides domestic service. The only international airport is at Lod (Lydda), southeast of Tel Aviv.
are well developed in Israel. In addition to providing news, information, and entertainment, the media are a principal means of promoting patriotism and a feeling of unity among Israel's culturally diverse people.
The Israel Broadcasting Authority (IBA), which is owned by the government, is in charge of civilian radio and television broadcasting. Programs are mainly in Hebrew, but some are in Arabic and other languages. The IBA also beams radio programs abroad.
Postal, telephone, and telegraph services are operated by the government. The press is run privately and is free of government control, except in matters of military security.
One of Israel's major problems is a large gap in its annual balance of payments. It is caused mainly by heavy defense spending abroad and the importing of large amounts of raw material, industrial goods, and machinery. Their high total cost is only partly offset by Israel's exports, tourist trade, foreign contributions and loans, and reparation payments. Exports include polished diamonds, citrus fruit, processed foods, textiles, clothing, electronic products, and chemicals.
The United States is Israel's most important single trading partner, both for imports and for exports. The bulk of the nation's foreign trade, however, is with the countries of the European Union.
Israel's basic currency unit is the new shekel.
