Israel's Economic Development Strategy Study (1948-2011)

The State of Israel is characterized by a limited territory with a small populationof over seven million. Nevertheless, it is the sole superpower in the Middle East,boasting the most powerful military and economic capability. To probe the reasonbehind its overwhelming strength, the current literature has drawn four conclusionsand forged four schools: first, Israeli strength comes from its unique and favorablegeographical location, for it is located at the corridor of Asia, Europe and Africa,connecting both the Mediterranean Sea and the Red Sea; second, Israeli power comesfrom Jewish good practice of attaching great importance to education and hightechnology; third, some scholars believe Israeli strength hinges on its outstandingmilitary capability; and fourth, still others think the consistent US military andeconomic aid is the source of Israeli strength.This thesis, based on the previous study on the issue, argues that theabove-mentioned four schools of hypothesis are flawed, i.e. the geographic condition,educational and technological advancement, military capability as well as US aid areimportant factors contributing to Israeli power, but none is the key and crucialelement. Instead, the appropriate formulation and implementation of its economicdevelopment strategy is the key to Israeli power, and such strategy can be divided intofour stages, i.e. first, from1948to1973when Zionism and Socialism exerted aprofound impact on Israeli economy; second, the decline of planned economy from1973to1984; third, the transformation to a market economy from1985to1990, andfourth, an advanced market economy from1991to2011.The formulation andadjustment of Israeli economic development strategy has five features: havingdifferent stages, having strong ability of adjusting its mistakes, having a long-termprocess, having great vulnerability and the dichotomy of military and economy.To test the new hypothesis, this thesis touches down upon Israeli economicdevelopment strategy, and divides it into four periods according to its respectivefeatures, and explores its impact on Israeli national strength. The research shows thatIsraeli development strategy is the key to its national strength, entailing the state’seconomy evolving from a planned economy to a market economy, from agovernment-run economy to a market-driven economy, from a public-dominatedeconomy to a private-dominated economy, from a big government to a strong society, from authoritarian economic system to a democratic economic system, and fromgovernmental intervention to a legal-binding economy. The expertise of Israelieconomic development strategy is of great significance for the current Chineseeconomic reform, particularly the reform on China’s currency circulation.