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CAPITAL INFLOW AND THE ECONOMIC DEVELOPMENT OF MODERN ISRAEL Item Type text; Dissertation-Reproduction (electronic) Authors Rosenberg, Henry Samuel, 1900- Publisher The University of Arizona. Rights Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. Download date 07/10/2021 05:33:31 Link to Item http://hdl.handle.net/10150/287461 70-15,425 ROSENBERG, Henry Samuel, 1900- CAFITAL INFLOW AND THE ECONOMIC DEVELOPMENT OF MODERN ISRAEL. University of Arizona, Ph.D., 19 70 Economics, finance University Microfilms, A XEROX Company, Ann Arbor, Michigan THIS DISSERTATION HAS BEEN MICROFILMED EXACTLY AS RECEIVED CAPITAL INFLOW AND THE ECONOMIC DEVELOPMENT OF MODERN ISRAEL by Henry Samuel Rosenberg A Dissertation Submitted to the Faculty of the DEPARTMENT OF ECONOMICS In Partial Fulfillment of the Requirements For the Degree of DOCTOR OF PHILOSOPHY In the Graduate College THE UNIVERSITY OF ARIZONA e> 19 7 0 THE UNIVERSITY OF ARIZONA GRADUATE COLLEGE I hereby recommend that this dissertation prepared under ray direction by Henry Samuel Rosenberg entitled CAPITAL INFLOW AND THE ECONOMIC DEVELOPMENT OF MODERN ISRAEL be accepted as fulfilling the dissertation requirement of the degree of Doctor of Philosophy V /2_ - 9--6? Dissertation Director Date After inspection of the final copy of the dissertation, the following members of the Final Examination Committee concur in its approval and recommend its acceptance:"" (f A c— /^/p'A f l-U. av e/69 /•%/ This approval and acceptance is contingent on the candidate's adequate performance and defense of this dissertation at the final oral examination. The inclusion of this sheet bound into the library copy of the dissertation is evidence of satisfactory performance at the final examination. STATEMENT BY AUTHOR This dissertation has been submitted in partial fulfillment of requirements for an advanced degree at The University of Arizona and is deposited in the University Library to be made available! to bor rowers under rules of the Library. Brief quotations from this dissertation are allowable without special permission, provided that accurate acknowledgment of source is made. Requests for permission for extended quotation from or re production of this manuscript in whole or in part may be granted by the head of the major department or the Dean of the Graduate College when in his judgment the proposed use of the material is in the in terests of scholarship. In all other instances, however, permission must be obtained from the author. SIGNE; TO NAOMI, GLORIA, ALVIN, AND LIONEL ill ACKNOWLEDGMENTS The author wishes to acknowledge the encouragement and assist ance of Dr. Philip Hudson, as well as his kindness and advice to remain at The University of Arizona. Appreciation is also recorded of the generosity and direction of Dr. William H, Fink, who influenced the writer to major in International Economics and who spent so much time with the author. A ^pecial thanks is extended to the author's wife, Esther, for her patience and understanding as well as for her help in typing and reading the manuscript. Appreciation is also recorded of the untiring assistance of Beryl (Mrs. Eric) Roberts who helped with the research and the original typing, A debt of gratitude is recorded in favor of Marjorie (Mrs. J. L.) Cude, without whose expert advice and typing of the final version this dissertation might not yet be completed. The author appreciates all that was done for him by the profes sors at The University of Arizona whose lectures he attended. Iv TABLE OF CONTENTS Page LIST OF TABLES viii ABSTRACT xi CHAPTER 1 INTRODUCTION 1 2 HISTORY AND GEOGRAPHY 5 History 5 Geography . 9 3 IMMIGRATION AND EMPLOYMENT ........ 12 Employment 16 Housing 17 4 CAPITAL INFLOW 19 5 HUMAN CAPITAL 27 Artists 34 6 AGRICULTURE 36 7 INDUSTRY AND MINING 41 Minerals 51 Chemicals ..... .. 53 Oil 53 Small Settlements - Development Areas 53 8 TRANSPORTATION AND COMMUNICATION 55 9 WATER RESOURCES 59 10 MONEY AND BANKING 66 Inflation 71 Savings 75 v vi TABLE OF CONTENTS—Continued Page 11 BALANCE OF PAYMENTS 77 Exports 80 12 GOVERNMENT AND ADMINISTRATION 83 Principles of Government . 84 Departments of Administration . 86 New Economic Objectives 88 Government Revenue 89 Monetary and Fiscal Policy ...*•• 92 13 EDUCATION 95 Primary Education ... 95 Secondary Education • . 96 Higher Education 96 Education as Investment in Human Capital 99 14 SCIENCE AND RESEARCH 103 15 CONSUMPTION AND STANDARD OF LIFE . 108 Cultural Activities Ill 16 THE HISTADRUT AND THE LABOR MOVEMENT ......... 114 17 THE KIBBUTZ, THE MOSHAV, AND THE COOPERATIVE ORGANIZATIONS 123 18 HEALTH AND MEDICINE 136 19 SOCIAL SERVICES AND WELFARE 142 20 ASSISTANCE TO OTHER NATIONS 152 21 COMPARISONS WITH OTHER COUNTRIES 157 22 MORE ABOUT ISRAEL'S ECONOMY 169 G.N.P. and Income . ....... • ••••>..* 174 23 NEGATIVE FACTORS 178 vii TABLE OF CONTENTS—Continued Page 24 THE EXPERIENCE OF ISRAEL AS A MODEL FOR INTERNATIONAL ASSISTANCE TO DEVELOPING COUNTRIES 186 SELECTED BIBLIOGRAPHY 200 LIST OF TABLES Table Page 1. Immigrants by occupations abroad, 1949-1961 13 2. Unilateral transfers and long-term capital inflow into Israel, 1949-1965 •••••••••« 24 3. Total capital inflow into Israel, 1950-1967 * . • . 24 4. Economic assistance from the United States to Israel, 1949-1965 25 5. Comparative figures in agriculture 37 6. Gross investment in agriculture and in water supply, 1950-1967 .... 40 7. Gross output of industry, 1967 . 43 8. Workers' nominal and real daily wages 45 9. Gross revenue of industry 45 10. Area of industrial buildings completed (1000 sq. meter). <..•«•..«••• 45 11. Total investment and investment in industry • , • • . 46 12. Breakdown of investment in transportation and communication, 1950-1967 .. 57 13. Export of transport services, by major categor ies, 1959-1966 57 14. Number of motor vehicles by categories (thousands) • , 58 15. Annual precipitation in Israel (in mm.) 62 16. Gross investment in fixed assets for water development, 1950-1966 63 17. Money supply, credit, and G.N.P. (gross national product) . 70 viii ix LIST OF TABLES—Continued Table Page 18. Official exchange rate of the Israel pound (1L per U.S. dollar) 77 19. Trade deficit, transfers, and capital imports of Israel, 1964-1967 ($ million) 79 20. Summary balance of payments of Israel, 1964-1967 ($ million) 80 21. Exports (net) by major commodities, 1967 *.«••.. 81 22. Imports, exports, and trade deficit In dollars per capita 82 23. Public financing of gross fixed capital formation by industry in 1960 91 24. Development of state revenue according to sources (1L thousands) . » 93 25. Expenditure in state budget by purpose (in 1L thousands) 94 26. Selected data on major institutes of higher educa tion (as of December, 1967) 98 27. Comparisons between the educational systems of 1948 and 1968 99 28. School costs, earnings foregone, and total costs of schooling per student per year in the United States and Israel 102 29. Percentage of households enjoying modem household appliances, 1967 ... 109 30. Scope and structure of Histadrut economic activity, 1964 ••••• 119 31. Annual.rate of increase in the production of field crops 159 32. Average agricultural yields, 1960 159 X LIST OF TABLES--Continued Table Page 33. Net official flows to less developed countries from DAC member countries and multilateral organizations, 19 64 • • • • • • • • • • • • • • • 160 34. Per capita product, 1961 (u.s. dollars) . 161 35. Comparison of gross investment • . 163 36. Central government employees per thousand inhabitants ••••••••••• . 165 37. Share of public consumption in resources, 1955-1964 average •••••••••••• • • • • • • 165 38. Construction industry's share in the economy . 167 39. Some economic growth between 1950 and 1964 •• • • • • 174 40. Per capita gross national product of selected countries, 1960-1965 ••••••••••••• • • • • 177 ABSTRACT Israel has achieved an unusually high average annual rate of economic growth over a period of 21 years. This dissertation analyzes the part played by the inflow of capital, which includes human as well as real capital, in overcoming natural and other obstacles, and in at taining this desirable result. It is also indicated, herein, how Is rael's achievement may be useful in helping underdeveloped countries to raise the standard of living of their people. Theories of economic development are reviewed especially in re gard to their applicability to the economic development of Modern Is rael. The geography of Palestine and Israel is outlined and its history is brought up to the formation of the modern State of Israel. New social and communal phenomena such as the kibbutz, the moshav, and the Histadrut. are explained, and the part contributed by them is ana lyzed. The Histadrut is not only a Federation of Labor, it Is also an industrial giant and one of the largest employers of labor in the coun try. Capital inflow took the form of unilateral transfers, grants, and loans coupled with the immigration of human capital of the highest order. This, together with the development of technology and a high rate of real capital formation caused economic growth. The capital came from the Jews of the world in the form of gifts and loans, and from the government of West Germany in the form of reparation payments xi xii to the government of Israel and restitution and pension payments to Israelis who were former German nationals. Aid and loans came from the United States government. Large sums of private capital were invested by foreigners. Immigrants, consisting of survivors from the Nazi death camps of Europe, many of whom had been detained for years in the concentration camps of Cyprus, and uneducated and poor refugees from Arab lands, en tered in the hundreds of thousands and tripled the population of Israel in a few years.