The large influx of well-trained and Western-educated European and North American immigrants contributed greatly to a rapid rise in Israel’s gross national product (GNP) after 1948. Although most of them had to change occupations, a nucleus of highly skilled labour, in combination with the country’s rapid founding of universities and research institutes, facilitated economic expansion. The country obtained large amounts of capital, which included gifts from world Jewry, reparations from the Federal Republic of Germany for Nazi crimes, grants-in-aid from the U.S. government, and capital brought in by immigrants. Israel has supplemented these forms of revenue with loans, commercial credits, and foreign investment.
The goals of Israel’s economic policy are continued growth and the further integration of the country’s economy into world markets. Israel has made progress toward these goals under difficult conditions, such as a rapid population increase, a boycott by neighbouring Arab countries (except Egypt from 1979 and Jordan from 1994), heavy expenditure on defense, a scarcity of natural resources, high rates of inflation, and a small domestic market that limits the economic savings of mass production. Despite these obstacles, Israel has achieved a high standard of living for most of its residents, the growth of substantial industrial export and tourism sectors, and world-class excellence in advanced technologies and science-based industry.
However, this economic progress has not been uniform. Israeli Arabs are generally at the lower rungs of the economic ladder, and there are substantial economic divisions among Israeli Jews, mainly between the Sephardim and Ashkenazim. Large influxes of capital have passed through government channels and public organizations and enlarged that sector of the economy that engages in enterprises between the government and private concerns.
Government policy dating from the late 1970s, however, has been directed toward privatization. The private, governmental, and, to a limited extent, cooperative sectors all coexist in an economy that supports both the broad objectives of state policy and individual enterprise. Tax rates in Israel are among the highest in the world, with income, value-added, customs and excise, land, and luxury taxes being the main sources of revenue. The government has gradually raised the proportion of indirect taxes since the late 1950s.
Tax reforms in 1985 included a new corporate tax levied on previously untaxed business sectors while slightly reducing direct taxes on individuals. Taxation approaches two-fifths of the value of GNP and is about one-fourth of average household income. The General Federation of Labour in Israel (Histadrut) is the largest labour union and voluntary organization in the country. It once was also one of the largest employers in Israel and owner or joint owner of a wide range of industries, but by the mid-1990s it had sold most of its holdings to private investors. Since 1960 Arab workers have been admitted to the organization with full membership rights. The Manufacturers’ Association of Israel and the Farmers’ Union represent a large number of the country’s employers. "Israel" © Emmanuel BUCHOT, Encarta, Wikipedia
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