Israel's Crisis and Economic Reform: A Historical Perspective
This article analyses the roots of the deep crisis that has afflicted the
Israeli economy since 1973 and the attempt at economic reform and recovery
since 1985. All of these are discussed against the background of the long-term
evolution in Israel's structure and growth process. At the center of the
analysis lie the implications of an oversized government and especially the
devastating effects on growth and inflation of the large and persistent public
sector deficit on top of the growing tax and public expenditure levels. The
norm of "living beyond one's means" at the public sector level has also
severely affected the norms of behavior of the private, household as well as
Since 1985 there have been signs of recovery originating from the
balancing of the budget and the relative stabilization of the currency. Labour
and capital markets are gradually becoming more flexible and real interest
rates are coming down. Even so, inflation rates are not yet down to
international levels, continued budget balance is not assured and excessive
wage increases have substantially diminished profit rates and investments in
the business sector. Structural problems, rooted in economic mismanagement of
the crisis years, are surfacing.
Resumption of a sustained growth process requires persistent budget
balance and a substantial additional reduction in public expenditure and tax
levels. Structural reforms, only barely started, have to be persistently
followed in the labour and capital markets, in the fiscal system, and in the
further opening up of commodity and financial markets to competition from both
home and abroad.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.