With the anniversary of the Six-Day War upon us, it is easy to forget the anniversary of another event nearly as important in the history of the Jewish state. On May 14, 1977, Menachem Begin led the Likud party to its first national electoral victory, defeating Labor (then known as Mapai), which had reigned uninterrupted since 1948. Zev Chafets explains how Begin put the country on the path to becoming the economic powerhouse it is now:
Perhaps the worst accusation [his political opponents] leveled against Begin was that he was a capitalist. That was a bit ironic for a man who was born broke and stayed that way all his life. Even as prime minister, Begin bought his suits on an installment plan.
From Israel’s founding until the 1977 vote, Mapai or its affiliated Histadrut labor organization tightly controlled most of the country’s agriculture and industry, health care and social welfare, infrastructure and development, education, housing, and radio. No detail was too small for the socialists: in 1964, the government banned the Beatles on the grounds that they would subvert the morals of Israel’s pioneering youth.
Begin, who had spent an instructive year in a Siberian Soviet gulag during World War II, was skeptical of such power. He had simple instructions for his finance minister, Simḥah Ehrlich: free the economy and make life better for the common people (by which he meant Likud voters).
Ehrlich, who owned a small optics factory in Tel Aviv, was a short, sixtyish man, pink-cheeked, fastidious, and laconic nearly to the point of silence. He . . . was devoid of formal education or economic training. The Israeli media began calling him a follower of Milton Friedman, the free-market guru who had recently won the Nobel for economics. But Ehrlich, who couldn’t read or write English, didn’t know the first thing about Milton Friedman. . . .
Although Ehrlich’s reforms led to what Chafets describes as a “fiasco,” they paved the way for the more successful reforms of the mid-1980s—which saved a cratering Israeli economy—and for the even more sweeping changes of the 1990s, which allowed for the birth of today’s “start-up nation.”
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