Israel Economy is Entering a New Stage


Israeli economic history can be roughly divided into five stages.The first stage was prior to WWI.  The Jewish community was very small, impoverished, and most of the income was charity from abroad.  A few economic investments helped the community, but never showed a profit - Moshe Montefiore's workshops outside the Old City walls in the 19th Century, the Rothschild’s investments in winemaking, the first rail lines, etc...The second stage was roughly from the end of WW1 - to the establishment of the State in 1948.  This stage saw the first large scale movement of Jews to Israel, numbering a few tens of thousands at the beginning of this period to over a half a million at the end.  The Kibbutzim were established, factories and the standard of living went up dramatically, but never even to a level remotely on the level of developed countries.The universities were established, the main newspapers, roads were built.  Even today, many landmark buildings were constructed during this period.The third stage was from 1948 to the Russian Aliyah of the 1990s.  This period saw Israel develop into a second world country, with a quality of life roughly equivalent to those of Eastern Europe at the time.  Many goods were out of reach to the masses – cars, travel abroad, telephones, etc…  The population grew from 600,000 to roughly 4 million – an influx of people from nearly every country and culture in the world.  By the end of this period, Israel’s GNP per capita was about half of the developed countries (USA, UK, France, Germany).  The main export during this period was diamonds.The fourth stage began in the early 1990s and ended in 2015.  During this time, Israel developed dramatically.  The population rose from about 4 million to nearly 6 and a half million Jews, the economy evolved from a Second World communist level economy to an economy where the GDP per capita now exceeds that of France and Japan, and soon will surpass UK and Germany.  Massive infrastructure investments were carried out (rail lines, roads, new airport, etc…), dozens of new colleges opened, and the number of quality jobs expanded significantly.  Also, the Jewish birth rate rose to a level, where twenty five years later, the Israeli economy needs to create over 100,000 per year, just to keep up with demographic growth.  Also, during this stage, Israel’s net foreign debt became a surplus, meaning that Israel lends more money to the world than it borrows.  Finally, during this stage, must of the world’s technologies were developed in Israel, used by every company and country in the world – Cell phones, computer chips, medical technologies, operating systems, and much more.  The Shekel became a hard currency, and Israelis were allowed to invest abroad – in stock markets, real estate and much more.Tel Aviv, during this period, joined an exclusive club of the top twenty business centers in the world, and Israel joined the most exclusive economic group in the world, the OECD, attesting to Israeli economic achievements.The Fifth Stage of Israel’s economic development has begun.  Many things are certain, and other developments will come as “unintended consequences”, and this blog will follow these trends.In this stage, Israeli GDP will surpass all the countries in the world.  It is fast becoming easier to find a job in Israel than either the US or Europe, the GDP is rising dramatically.  Israel will become a true financial center, with Tel Aviv becoming one of the top ten financial centers.Today, the Muslim countries, 57 countries totaling 1.2 billion people, have a combined GDP of about $2 trillion.  Israel, a country of nearly 9 million people, has a GDP of nearly $350 billion, or about 1/6 of the total Muslim GDP.  Within a few years, this GDP will reach $500 billion, or about one quarter of the GDP of the entire Muslim world !!!!Already, Israel has transformed itself, according to PM Netanyahu, into an international superpower, ranking 8 in the world.  This trend will continue, as Israel will use its growing economic might, and newfound energy independence, to develop in ways unimaginable in the past.Will Israel develop its own space program ?  Will a new international stock exchange based in Israel become the world’s largest exchange for stocks and commodities ?  Will the best students from around the world study at Israeli universities?  Will a new EU-like regional grouping, based on Israel, be established, which will include Israel, Egypt, Cyprus, Greece, Turkey, Jordan, Saudi Arabia and the Gulf countries ?