It was quite clear to David Ben-Gurion that a state ought to be economically independent. Economic independence, he understood, was a condition for political independence. Ben-Gurion talked about this back in the 1950s, when he barely had the means to buy a shipload of oil or wheat.
At the beginning of the 1970s, econometricians amused themselves with economic models predicting when Israel would achieve economic independence, in other words when the country's balance of payments' current account would balance. In the years following the Six-Day War, we were in a state of euphoria. Ariel Sharon described us as "a regional superpower." But in 1973, the Yom Kippur War broke out, and that brought us back to reality, resulting in the economic crisis of the "lost decade."
In 1983, Israel's external debt reached 80 percent of GDP, while the balance of payments' deficit in the current account was 9 percent of GDP. Today external debt has shrunk to 17 percent of GDP and the balance of payments' deficit has contracted to only 2 percent of GDP. So apparently, our situation in the past 30 years has improved immeasurably in terms of economic independence. Or has it?
In the past two-and-a-half years, the economy has suffered a grave crisis. The government's share of the economy has increased, the tax burden has grown, domestic and external debt has swelled, growth has flipped to negative, factories have closed and unemployment has reared its ugly head. In tandem, the gap between rich and poor, and between strong and weak has widened.
The edge of the abyss was reached in June 2002, when the Accountant General of the Finance Ministry Nir Gilad could hardly manage to sell a government bond to finance domestic debt and the dollar threatened to break the NIS 5 barrier.
Today on the eve of Israel's 55th Independence Day, we are still in danger. The state cannot raise funds overseas (except on terms for the bankrupt) to finance its expenses in foreign currency and to roll over its overseas debts. The sad situation brought us to ask for urgent assistance from the U.S., which recently agreed to extend us $9 billion in guarantees and military aid of $1 billion to cover the war of attrition with the Palestinians. In other words, even today, we are far from being economically independent, and therefore politically independent.
But, despite all the difficulties, Israel has managed to increase its population eight-fold since the state began. Some 6.7 million people live in Israel today, compared to only 806,000 when the state was born. Some 3 million immigrants (olim) have arrived on these shores since the country's founding, thereby fulfilling its historic duty of being a safe haven. Its second strong point is its economic ability. The drop of 1 percent in GDP in the past two years was the very least one could expect from a war-torn terror-plagued country. This is the achievement of the private business sector, which has succeeded despite - not thanks to - the government. So if it were up to me, then this evening I would choose the small private businessmen and women to be torch-lighters on Mt. Herzl - for the glory of the State of Israel.
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