ABSTRACT
Israel's economy has undergone substantial change since independence, and the economic well-being of its people has improved significantly, belying the preindependence prophecies that its troubled economy could not long endure. Since 1948, Israel has relied heavily on foreign capital inflows for the capital formation to finance the growing economy and expenditures. During the Labor party's domination of Israel's political life from independence until 1977, socialist and economic policies, pursued in a mixed economy, were adapted to the special circumstances of Israel. The 1984 Knesset election campaign focused substantial attention on Israel's economic situation, and the economy became an early priority for the national unity government installed in September 1984. The stabilization program began to have its effects, but the economy was soon buffeted by unanticipated political developments in the form of the Palestinian intifada and the immigration of Soviet Jews and later by the crisis resulting from the Iraqi invasion of Kuwait.
