period through a thriving entrepreneurial private sector that was initially catalyzed by government action.
The roots of the first period of economic growth can be traced to well before the country’s founding—all the way back to the late nineteenth century. For example, in the 1880s, a group of Jewish settlers tried to build a farming community in a new town they had founded— Petach Tikva—a few miles from what is now Tel Aviv. After first living in tents, the pioneers hired local Arab villagers to build mud cabins for them. But when it rained the cabins leaked even more than the tents, and when the river swelled beyond its banks, the structures melted away. Some of the settlers were struck by malaria and dysentery. After just a few winters, the farmers’ savings had been exhausted, their access to roads washed out, and their families reduced to near starvation.
In 1883, though, things began to look up. The French-Jewish banker and philanthropist Edmond de Rothschild provided desperately needed financial support. An agricultural expert advised the settlers to plant eucalyptus trees where the river’s overflow created swamps; the roots of these trees quickly drained the swamps dry. The incidence of malaria dropped dramatically, and more families came to live in the growing community.2
Beginning in the 1920s and continuing through the decade, labor productivity in the Yishuv—the Jewish community of pre-state Palestine—increased by 80 percent, producing a fourfold increase in national product as the Jewish population doubled in size. Strikingly, as a global depression raged from 1931 to 1935, the average annual economic growth for Jews and Arabs in Palestine was 28 and 14 percent, respectively.3
The small communities established by settlers, like those of Petach Tikva, would never have been able to achieve such explosive growth on their own. They were joined by waves of new immigrants who contributed not only their numbers but a pioneering ethos that overturned the charity-based economy.
One of those immigrants was a twenty-year-old lawyer named David Gruen, who traveled from Poland in 1906. Upon arrival, he Hebraized his name to Ben-Gurion—naming himself after a Jewish general from the Roman period of 70
Ben-Gurion was also Israel’s first national entrepreneur. Theodore Herzl may have conceptualized a vision for Jewish sovereignty and begun to galvanize Diaspora Jews around a romantic notion of a sovereign state, but it was Ben-Gurion who organized this vision from an idea into a functioning nation-state. After World War II, Winston Churchill described the United States Army general George Marshall as the Allied Powers’ “organizer of victory.” To paraphrase Churchill, Ben-Gurion was the “organizer of Zionism.” Or in business terms, Ben-Gurion was the “operations guy” who actually
The challenge facing Ben-Gurion in operational management and logistics planning was extremely complex. Consider just one issue: how to absorb waves of immigrants. From the 1930s through the end of the Holocaust, as millions of European Jews were being deported to concentration camps, some managed to flee to Palestine. Others who escaped, however, were denied asylum by different countries and forced to remain in hiding, often in horrendous conditions. After 1939 the British government, which was the colonial power in charge of Palestine, imposed draconian restrictions on immigration, a policy known as the “White Paper.” British authorities turned away most of those trying to seek refuge in Palestine.
In response, Ben-Gurion launched two seemingly contradictory campaigns. First he inspired and organized some eighteen thousand Jews living in Palestine to return to Europe to join the British army in “Jewish battalions” fighting the Nazis. At the same time, he created an underground agency to secretly transport Jewish refugees from Europe to Palestine, in defiance of the United Kingdom’s immigration policy. Ben-Gurion was at once fighting alongside the British in Europe and against the British in Palestine.
Most histories of this era focus on the political and military struggles that led to the founding of Israel in 1948. Along the way, a myth surrounding the economic dimension of this story has arisen: that Ben-Gurion was a socialist and that Israel was born as a thoroughly socialist state.
The sources of this myth are understandable. Ben-Gurion was steeped in the socialist milieu of his era and was heavily influenced by the rise of Marxism and the Russian Revolution of 1917. Many of the Jews arriving from the Soviet Union and Eastern Europe in pre-state Palestine were socialist, and they were highly influential.
But Ben-Gurion was singularly focused on building the state, by whatever means. He had no patience for experimenting with policies that he believed were simply designed to validate Marxist ideology. In his view, every policy— economic, political, military, or social—should serve the objective of nation building. Ben-Gurion was the classic bitzu’ist, a Hebrew word that loosely translates to “pragmatist,” but with a much more activist quality. A bitzu’ist is someone who just gets things done.
