The Lean Years
MVZ248 Week 3
Building an Economy
Lacked foreign currency reserves
Export revenues was less than a third of costs of Imports
Deficit covered by Jewish loan system “Collections”
Financing obtained by foreign banks and gas companies who refused by 1952 to
expand available credit.
Austerity implemented (1949-59)
Failure but with advantages of integration
Economic test
1950 immigration brought total 700,000 (doubled size)
Israeli government controlled and distributed necessary resources
Rationing (1,6000 calories a day)
Black market (success dispite Govt. Office and Courts)
War reparations
Germany
Reparations Test
Practical and Logical
Needed money + Foreign relations (enemy)
“Two approaches...one is the ghetto Jew’s approach and the other is of an
independent people. I don’t want to run after a German and spit in his face. I don’t
want to run after anybody. I want to sit here and build here. I’m not going to go to
America and take part in a vigil against Adenauer”
David Ben Gurion (Mapai central committee, 1952)
Agreement
Resettled 500,000 Holocaust survivors, absorbing costs
$3,000 per person (approx. $27,700 today)
Israel owed $1.5 billion dollars by Germany. Additionally, 6 billion dollars worth of
Jewish property had been pillaged by the Nazis
West Germany, Government of Israel, representatives of World Jewish Congress
Over 12 years, West Germany paid 3 billion marks ($111.5bn today)
Reparations Test: Protests and Riots
Public debate was fierce. “Did it forgive Germany and Nazis of crime?”
Against reparations were Herut and Mapam notably.
M. Begin led protesters after passionate speech.
Turned violent with arrests following stone throwing and police using gas
Riots resulted in 200 protesters and 140 police injured
Source: Yossi Sarid, “Israel’s great debate” Haaretz
Put to Good use
Reparations and loans and bonds paid for industrial and agricultural projects
leading to economic self-sufficient.
Aid paid for Hadera power plant and port development in Haifa, Ashdod and Eliat
Infrastructure projects
Industrial areas such as Ashkelon, the Negev and Galilee
Textile industry (cotton very profitable) one of the largest industrial branches
1950s and 1960s
Economic growth (10% annually)
International loans, also bonds
Reparations ( example 87% of Israeli income in 1956)
‘Pioneer ideal’
Political monopoly
Mapai (Labour)
Sinai and Suez campaigns
Foreign relations test: Suez
British and French
Economic and diplomatic positions
Strategic position
Canal (shipping, influence)
Military success
International humiliation
End of Empires
Foreign Relations: objectives
Canal was conduit of oil (UK and France). Additionally, stop anti-colonial Egypt.
Israel wanted re-open to Israeli shipping and strengthen its southern border and
weaken a dangerous, hostile state, attacks from Egyptian Gaza against Israeli
citizens (1,3000).
Narrow window of opportunity for all three nations to achieve its goals.
Realism theory
National self-interests
Chaim Herzog and Shlomo Gazit, The Arab-Israeli wars: War and peace in the Middle East from 1948 to the present (2008)
Enter America
Kennedy and Meir
‘Special relationship’
The 1967 Six-Day War
Neutrality ended
Hawk missile sale
Further reading
Nana Sagi (1986). German Reparations: A History of the Negotiations. Palgrave
Macmillan.
No. 2137 and No. 4961 (PDF) Treaties and international agreements. United
Nations Treaty Series.
Patrick Tyler (2012). Fortress Israel: The Inside Story of the Military Elite Who Run
the Country. Farrar, Straus and Giroux
Zeev Maoz (2008). Defending the Holy Land. The University of Michigan Press.
Barry Turner (2006). Suez 1956 The World’s First War for Oil. Hodder &
Stoughton.