ABSTRACT
This chapter reviews and weighs empirical evidence on the contemporary evolution of Israel's political economy, which is drawn mainly from published data and documentary sources. The term liberalization is typically applied to reforms of countries' trade policies and their foreign currency regimes. From a broader perspective, the principal goal of liberalizing economic reforms in Israel and elsewhere has been state contraction, a fundamental alteration of the division of labor between markets and the state by means that include privatization, expenditure and tax cuts, sectoral "deregulation," and so on. Foreign direct investment (FDI) has been the most novel and noticed element of Israel's contemporary integration into the world economy. Net FDI was insignificant until the early 1990s and only at mid-decade did it reach substantial levels. It has been widely observed in Israel that private expenditure on social services has increased in the last decade to compensate for inadequate public provision.
