The New Economic Policy of 1962

How Israeli Economists Almost Changed the Israeli Economy

in Israel Studies Review
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In February 1962, the Israeli government put in place a farreaching economic liberalization reform. Had it been implemented as designed by the economists at the Bank of Israel and the Ministry of Finance, the plan could have dramatically changed Israel’s politicaleconomic structure. Yet the plan’s actual implementation was limited and partial, with the result that economic liberalization was postponed for two further decades. This article examines the political dynamics through which Israeli economists tried to persuade political decision-makers to adopt the New Economic Policy and assesses the political obstructions that organized workers, employers, and the Ministry of Trade and Industry utilized in order to prevent its implementation. This analysis reveals the real yet limited political power that Israeli professional economists possessed in the 1960s, as well as the limits binding the power of the state with regard to organized economic interests.