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PREFACE My fascination with what I learned about political economics during my stint in the public sector led me to write this book. From the end of 198 1to early 1985, I served, first as economic adviser to the minister of finance and then as deputy governor of the Bank of Israel. Many of the observations and analyses that inhabit this volume were fom1ed, at least par1ially, during those years. With them, my distrust ofgovernment meddling in the economy grew by the day. I started the systematic research of the existing material on the Israeli economy in 1986, working my way backwards in time. During my progress I became increasingly fascinated as I realized that the story of the Israeli economy was a natural extension of the story of Zionism. The story of the Israeli economy thus turned into the story of the economy of the Jewish people in Eretz Yisrael- the land of Israel. The roots of what 1 call Israel's economic culture were to be found, as I gradually discovered, as early as in the last quarter of the nineteenth century, which is when practical Zionism began. The search and research took a lot longer than l had anticipated, because nobody had ever attempted to write a comprehensive history of the Israeli economy, which meant that I had to go back to the original documents to find enough material to corroborate my emerging hypotheses. I did my best to present the material in a form that does not require the reader to be a professional economist, nor even to have attended economics courses. The little technical material contained in the book is relegated to the appendices ofchapters and may be safely skipped by the uninitiated. The story told is of why lsrael's economy grew vigorously during the first quarter-century of the state's existence and why it has virtually stagnated since. The obstacles to growth are identified and analyzed, and then their origins in Zionist history are unearthed. Wherever possible and instructive, comparisons are drawn between Israel's economy and other economies, both in the free world and in the former communist domain. Being a novice in searching through historical material, I needed guidance . This was generously extended to me by my sister, Hagit Lavsky, who is a historian specializing in the Zionist movement. My search was aided by Sara Ben-Amy and Hagit Sten, both of whom did a marvelous job in going through the thousands of documents, articles, and collections of papers. In this context I owe a debt ofgratitude to the Z ionist Archives, where I was extended courteous help and patience during many months of search. xii Preface My thinking about the problems and the development of the various hypotheses benefitted greatly from conversations with David Levhary of the Hebrew University, Steve Hanke of Johns Hopkins University, Meir Kohn of Dartmouth College, Alvin Rabushka of the Hoover Institution, and Joe D. Reid, Jr., of George Mason University. But most of all Towe a great intellectual debt to Pinhas Zusman of the Hebrew University, whose profound insights, gained partly during his tenure as director general ofJsrael's Ministry of Defense, enhanced my thinking to a considerable degree. I also benefitted tremendously from my conversations with Yoram Aridor, former minister of finance of Israel, who was the first occupier of the job with extensive training in economics. Yoram Aridor, Steve Hanke, Alvin Rabushka, and Joe Reid read earlier drafts of the manuscript and provided me with valuable comments. Daniel Elazar and Zvi R. Marom, president and director, respectively, of the Jerusalem Center for Public Affairs, were extremely helpful in every respect, making my toil that much easier. Part of the work was done while I was a visitor at the Department of Economics at Dartmouth College, whose hospitality I greatly appreciate. Mark Ami-El of the Jerusalem Center for Public Affairs performed a marvelous editing job, for which I am grateful. Andrea Arbel prepared skillfully the camera-ready figures. Russell Stone of SUNY played a key role when, on having been told by me about the project, suggested that I submit the manuscript to SUNY Press. When 1 followed his advice, I had the good fortune of dealing with Rosalie Robertson, editor of SUNY Press, whose efficiency and swiftness in handling the process that led to the book's acceptance by the publisher are admirable. Finally, I am grateful to two anonymous referees for SUNY Press for comments that helped a lot in...


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