Kibbutzim To Capitalism

Israel started with a clear socialistic ideology. How did it then turn itself into a vibrant capitalist economy?

- Shreyas Bhardwaj

THE OUTLIERS IN any index usually have a wonderful story to tell” is a phrase which a smart relative of mine has a habit of repeating. The Bloomberg Innovation Report of 2017 has quite a few outliers with the most interesting being the state of Israel. This tiny country, barely the size of the Indian state of Manipur, with a rank of 10, stands ahead of the UK, Canada, China, France and Norway! It topped the list on researcher concentration, was runner up on Research & Development (R&D) intensity and ranked number three on hi-tech intensity. Israel is perhaps one of the very few modern economies which, despite having made a transition from developing to a developed one, grew at the rate of 4 per cent in 2016, according to IMF data, while the OECD countries, according to their own data, had a combined growth rate of 1.7 per cent. Israel’s leaders are confident of further accelerating economic growth on the back of ever growing technology clusters in the country. The country’s impressively skilled workforce does not suffer from the above-normal unemployment rates that the western European nations do.

How is it that Israel has managed to achieve all this when the founding principles of the nation state, Zionism, came with an inherently socialist form of communal organisation (kibbutzim) is a question that deserves to be discussed, given how many other nation states founded in the same period with similar economic principles as those of Israel haven’t been able to get out of the clutches of socialism. For example, India. The answer, according to this author, lies in the able leadership that Israel was fortunate to have which understood the importance of changing with the times rather than clinging on to failed ideologies.