JERUSALEM, ISRAEL — February 6, 2019 — After President Donald Trump in his State of the Union address vowed that the USA “will never be a socialist country”, the looks of dismay were palpable on the faces of Senator Bernie Sanders, House Speaker Nancy Pelosi, and especially the young socialist firebrand Rep. Alexandria Ocasio-Cortez. Having written extensively about Israeli history, I must warn my many American friends to learn some critical lessons from Israel’s socialist past.
Historical revisionists aside, the fact remains that the modern State of Israel was founded as a sovereign nation in 1948, mainly by communist-inspired Jews who had escaped the Soviet Union but had been heavily influenced by the seeming idealism of the Bolshevik ideology in the new confederation.
Despite the known Jewish prowess in the free market world of business, these “new Jews” established a socialist-based economy for the nascent Jewish state, with the understandable, yet incredibly near-sighted goal of absorbing millions of Jewish refugees, while quickly creating financial security for every Israeli citizen. Within a few decades, the budget deficit was enormous, and the economy was dominated by the powerful Histadrut, the national labor union. The result of this mismanagement was a skyrocketing 400% inflation rate. Israel became known facetiously as “a very poor country with rich people”, meaning that it spent money way beyond its means. The sad reality was that salaries were less than half those in the United States, while expenses were much higher.
In the 1980’s, under heavy pressure from its ally the United States, Israel began to slash subsidies, especially food subsidies. In the succeeding decades, under the leadership of Benjamin Netanyahu, alternating as Finance Minister and Prime Minister, Israel focused on privatizing and breaking up the government-run monopolies, lowering oppressive tax rates, and creating competition in the marketplace, while providing tax-reductions for start-up businesses, particularly in the high-tech field.
In recent years, despite the unfortunate continuing need for huge military defense expenditures for a tiny country the size of New Jersey, Israel’s inflation rate has remained consistently low, now at less than 4%, with an unemployment rate of under 2%. In perhaps the most poignant expression of its now healthy economy, Israel has the largest number of start-up businesses per capita in the world. The transformed modern-day Israel has clearly succeeded in its transition from a socialist economy to a capitalist system.
For the Jewish state, going back to socialism is not an option. The United States, meanwhile, seems to be under heavy pressure now from the current millennial passion for socialism, but it would be instructive to examine just how far Israel has come, in its escape from a socialist economy that once shackled economic growth. It may be comforting to think that Uncle Sam, or in Israel’s case, Uncle Moshe, can give endless handouts, but that’s not the way a healthy, sustainable economy works.
As I’ve explained in my book “Trump and the Jews”, the Jews who immigrated to the United States in the early 1900’s knew the value of hard work, as opposed to handouts, which enabled them to rapidly emerge from their initial poverty, eventually becoming among the most successful economic groups in America. They thrived in an America that allowed the free market to flourish, thereby encouraging creativity and private initiative.
After Israel’s socialist bubble burst, its vibrant growth economy has become the envy of the free world. Despite the charisma of the young Ocasio-Cortez and the admirable passion of a Bernie Sanders, it would be a fatal error to follow down that path. Free markets breed creativity, private initiative, and economic growth, from which everyone benefits. Israel’s escape from its socialism past and its embrace of free enterprise has proven that.
David Rubin, former Mayor of Shiloh Israel, is the author of the new book, “Trump and the Jews”. Rubin is the founder and president of Shiloh Israel Children’s Fund, established after he and his then three-year-old son were wounded in a terror attack that left his then three-year-old son wounded in a terror attack.