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Israel’s Permanent ‘War Economy’

It is a good summary and a well-researched article. I think it needs more elaboration on Israel’s shift to ‘a neoliberal economy’.  The Israeli’s economy is not just a ‘war economy’. It is 1. a capitalist political economy with its internal dynamics and 2. a global political economy.


Class is absent in the analysis as if Israel is a unique case where ‘nationalism’ (and religion or both) decide rather than a ruling class or a coalition that represents different classes. Falling rate of profit or as Nitzan and Bichler put it in a seminal work that serves as a background and a starting point of Israel economy today “the profit margins of dominant capital started to feel the pinch.” This is a major factor in the form of capitalism Israel shifted to in order to maintain or increase the regime of capital accumulation. 


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After the economic crisis that hit a few countries in the 1990s then the 11 of September attacks on the US, the crisis reached Western countries. “The impact on Israel was immediate and brutal,” wrote Nitzan and Bichler.“Escalating guerrilla warfare with the Palestinians, attacks in the United States, and the global ‘war on terrorism’ beginning with Afghanistan, delivered the rude awakening. Clearly, expectations for a ‘New Middle East’ and vast ‘peace dividends’ were a bit premature. Tourism into Israel has fallen sharply, green-field investment has come to a halt, and capital inflow has turned into a trickle. Most seriously, the global ‘high-tech’ meltdown buried many Israeli companies under mountains of losses. Some of the largest players, such as Koor, IDB, Fishman and the Dankers, were forced to write-off expensive acquisitions. And given that many of their acquisitions, along with green-field R&D investments, were heavily leveraged, the large banking groups were also feeling the pressure.


Israeli capitalism is clearly at a crossroads, and its future, perhaps more than ever, is bound up with global developments. Until recently, transnationalisa- tion lent strong support to reconciliation with Arab neighbours, and to ‘peace’, if only paternal, with the Palestinians. The recent stalling of global breadth, however, has thrown a monkey wrench into the process. If the reprieve proves temporary, there may still be a remote chance of resolving the regional conflict. Breadth requires political stability, and dominant capital, both in Israel and globally, would seek a settlement to calm things down. But with religion winning the hearts and minds of the underlying population, time is running out. And if instead of renewed breadth, global capital settles in for an extended period of depth, the conflict and violence associated with such a regime could prove devastating for Israel and for the region.” (The Global Political Economy of Israel, Nitzan and Bichler, 2002)

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