The process of nation- and state-building in Israel could be viewed as unique because of its pace and intensive character. This is evident in much that is related to immigration, forging cultural coherence, the establishment of institutions, and the like. However, the extreme characteristics of its development also make Israel a valuable case study for a theoretical or comparative discussion because those conditions allow for a clear view of various social, cultural, and political aspects of nation-building. Therefore, using Israel as a case study can corroborate, refute, or challenge assumptions, patterns of analysis, or conceptions and terminologies in theories and models used in the humanities or the social sciences for understanding processes of nation-building.

Two key aspects of Israeli nation-building can illustrate its value for understanding the general characteristics of nation-building processes. The first is the unique process of creation of the Israeli democratic state, which may help explain the fact that Israel is one of the most long-lasting and stable new democracies established after World War II. The second aspect is the speed and intensity of the radical changes that took place in Israeli society and the economy following the process of privatization and the neoliberal turning point in the mid-1980s.

The heterogeneous waves of immigration that twice doubled the population from the 1930s to the 1950s and continued to flow into the country for decades from countries devoid of a well-developed democratic tradition, plus conditions of war and active national conflict during those years, as well as the ongoing Occupation and the problematic Arab minority status—all these and more were unfavorable conditions, to say the least, for the cultivation of a democratic regime. It was reasonable to expect that they would cause the new state to collapse, if they did not thwart it in the first place. But despite its diverse origins, Israeli democracy is a solid regime that has withstood tests such as the assassination of a prime minister and continued instability over the past two years. The Jewish-Arab conflict does indeed cast long shadows on Israeli democracy in several respects, but it is precisely for this reason that the perseverance of the Israeli democracy, despite the tensions that characterize it and despite ethnic and national conflicts, calls for explanation.

The perseverance and effectiveness of a democratic regime are usually explained by the characteristics of the civil society out of which it grew, for example, the education level of the public, mechanisms developed for public participation, or socio-economic development that can facilitate the creation of an elite or political class that would be the bearer and leader of the democratic regime. A well-developed civil society is at the root of the explanation for the existence of a public and a leadership committed to cultivating a democratic regime. This commonly used model of explanation therefore presupposes such a direction of development, that is, a sustainable democratic regime that develops over a relatively long period of time from a particular pattern of civil society that encourages its development.

But in the Israeli case, the direction was the opposite during pre-independence. A quasi-democratic (pre-state) political system of parties within the Zionist movement maintained democratic procedures starting at the end of the nineteenth century, and then created and shaped a civil society (the Yishuv) from the 1920s onward. A few decades later, the democratic autonomy or polity that had been thus created declared its sovereignty.

Thus, in the Israeli case, it was not democratic politics that developed from a civil society, such as the society of the British colonies in America, but a political system that created a civil society in a different place, that is, not where that political system itself had been created. It strove to create this civil society through migration and settlement and to impart to it a pattern of self-government, that is, to politicize it. The Zionist movement was a quasi-democratic political system, centered on an elected congress, which did not seek to rule the societies in those countries where Jews were ruled by non-Jews. Rather, it sought to establish a new civil society of Jews in another continent, or at least in another country, and succeeded in doing so.

It is very difficult to point to a similar pattern of nation-building anywhere in the world. In many different cases of nation-building processes led by national liberation movements, the typical pattern is this: a territorial civil society, living under some foreign rule, develops national politics and aspires to self-rule. The direction is from civil society to national politics, that is, the politicization of some pre-existing civil society. The Zionist-Israeli nation-building process, however, has moved in the opposite direction.

The democratic character of the Zionist movement is a functional derivative of the nature of the historical task it has undertaken. In other words, the Zionist project was impossible to fulfill except in a democratic framework that would recruit serving elites, seen as ‘pioneers’, and then masses of immigrants from the early 1920s. The special circumstances of the Zionist-Israeli nation-building project required, first, the democratic construction of the constitutive political system, that is, the Zionist movement, and second, the establishment of an immigrant civil society (the autonomous Yishuv) under a political system formed before the creation of that civil society.

The ‘opposite direction’ that characterized the Zionist-Israeli nation-building is crucial in explaining Israel's democratic stability. The political movement that established the regime in Israel had to be democratic to succeed with the immigration, settlement, and political institutionalization it sought to bring about.

But the reverse direction of development that sets Israel apart also opens a window for us to understand the role of democratic political entrepreneurship in shaping civil society in general, not just in Israel. The ‘Israeli case’ demonstrates this role to an extreme extent. Thus, it may serve to illustrate the fact that, even in cases that are less pronounced or extreme in their circumstances, a constitutive political movement can shape the civil society in which it operates and not just be shaped by it.

Nation-building processes are ongoing beyond the founding period of a political society. Frequently, important historical processes in the lives of nations are in fact processes of reconstruction, and it seems that the neoliberal privatization and redesign of Israeli society and economy that began in the mid-1980s can be considered such a reconstruction. Here, too, the uniqueness of the Israeli case can open a window for understanding general processes in post-industrial countries.

The privatization revolution in Israel was characterized by a sharp and extreme transition from a relatively large degree of socio-economic equality to a large degree of inequality from the 1980s and 1990s onward. The increase in inequality was the result of a sharp decline in the state's involvement in the economy and a complete retreat from the former egalitarian ideology and its realization in welfare policy. In 2002, a Knesset inquiry committee found that since the 1980s, disparities in income, consumption, property and capital, wages, access to social services, and education and higher education had all increased significantly. The committee found that Israel “is currently ranked second in the Western world in the size of income disparities and the incidence of poverty.”¹ This puzzled the committee as, according to its findings, the process was a sharp and extreme abandonment of a relatively egalitarian model that had been anchored in the government's relatively high involvement in the economy. It therefore pointed out the uniqueness of the process, not only quantitatively but also qualitatively, in terms of the compactness of time and the very rapid change of the political and ideological environment. This uniqueness makes it possible to point to the extreme character of the Israeli case that—in the context of the privatization revolution, as in the context of the construction of Israeli democracy—can serve us when we come to understand international processes.

In a considerable part of the research literature, an approach that separates the privatization revolution and the policy of inequality from their political foundations has stood out. These outcomes have been presented as necessary derivatives of ‘economic laws’ and, regarding our purposes here, as the local expression of the declining trend of the welfare state in Western societies impacted by the globalization of markets and other structural developments of the global economy from the 1980s onward. The prevailing interpretation of the development of inequality in Israel therefore relies on three problematic complementary methods of analysis: (1) the discontinuous historicization of socio-economic questions; (2) the depoliticization of the discussion of these questions; and (3) the elimination of the uniqueness of the Israeli case—characterized by a rapid and intensive expansion of inequality—and its merging with general, so-called objective global trends.

However, these interpretive channels not only explain the sources of inequality, but also reaffirm them. Discontinuous historicization is reflected in the minimization of the weight of the policies adopted in the late 1970s and 1980s as a factor in the widening of economic disparities during these two decades—a minimization that helps to create the impression that certain processes in the 1950s are the main source of inequality in contemporary Israel. The depoliticization of the privatization revolution presents it as a consequence of a purely functional or professional consideration and obscures its role as a deliberate political policy whose purpose was to change the balance of power in Israeli society. And the uniqueness of the Israeli case is eliminated by emphasizing the similarity between the changes that took place in Israel and those that took place in Western Europe during Thatcherism and the ‘Third Way’ of Tony Blair in Britain and Gerhard Schröder in Germany. From the similarity between them, the conclusion seems to be that the changes in Israel are nothing but an expression of the normalization of the Israeli economy. However, the international comparison alongside the explanation of the ‘Israeli case’ sharpens the latter's uniqueness.

The speed and intensity of the development of inequality are unique to Israel. They require separate research and discussion in order to decipher the social, political, and ideological processes that led to them—research that would present the Israeli case as one that sheds light on structural processes in world economies and illustrates that they are the result of class decisions rather than objective processes. The discussion of the development of social and economic inequality in Israel, therefore, requires an interpretation that combines continuous historicization, politicization, and international comparison.

Such a combined interpretation shows that the processes that took place in the 1950s are essential for explaining how a high degree of social equality was achieved in Israel in the 1970s, combined with accelerated growth that began at the inception of the state. But this socio-economic structure did not persist after the recession of the mid-1960s. Developments such as the pre-war recession, the unequal prosperity after the Six-Day War of 1967, and the expansion of the Israeli welfare state in the early 1970s led Israel, between the late 1970s and the second half of the 1980s, to a crossroads of socio-economic choice. At this junction, the state leadership preferred a policy of economic stagnation, with the resultant deepening and acceleration of inequality, rather than adhering to the Keynesian model that characterized the previous decades.

The deepening of economic and social inequality and its acceleration progressed at the same time as the adoption of a neoliberal ideology that called for a reduction in government and public involvement in the economy. This ideological change was not unique to Israel, but an examination of the historical, ideological, and political context reveals that this change was also particularly extreme compared to the change in other societies. The precepts of the Zionist project, despite the erosion that has taken place in it, constitute the framework that gives meaning to the public space in the eyes of most of the Jewish public in Israel. Based on the principles of ‘social engineering’, that is, public entrepreneurship and deep political involvement in the economy, the ‘Zionist enterprise’ was seen as a way of establishing a new society that challenges the capitalist order and the underlying market and competition principles. Social engineering was an essential feature since its foundation, and especially from the time it was led by the Zionist labor movement.

Therefore, in Israel, more than in other Western countries, the drastic reduction of state involvement in society and the economy was a fundamental change and was perceived as subversive, as far as subversion can be attributed to the actions of an elected government. The extreme change in Israel makes it clear that it is the result of a political elite's decision, and in this way it clearly—and more radically—demonstrates characteristics of these processes of change in other post-industrial countries as well. Their changes are also the result of decisions by the political class.