How Capitalism Saved Israel

George Gilder has a new piece in City Journal on how Benjamin Netanyahu’s time as Finance Minister helped create the flourishing economy where the Jewish state ranks second to the U.S. in technological innovation. This despite being constantly under attack by its neighbors.

The force driving the Israelis decisively out of their socialist slough into the modern world of finance was once again the ingenuity of Netanyahu. As finance minister, Netanyahu used the financial crisis of 2003 and 2004, precipitated by the latest campaign of Palestinian terror, as a lever to transform Israel’s economy from a largely socialized domain dependent on foreign finance into one of the world’s most open and flourishing financial systems. In the process, he created what occasional advisor Keinan today calls “the greatest opportunity in our lifetimes.”

An Israeli supply-sider, Netanyahu faced the adamant opposition of Histadrut and its allies in the Knesset. To overcome the hostility to finance capitalism that had long hobbled the Israeli economy, Netanyahu enlisted vital help from President George W. Bush and his treasury secretary, John Snow. Netanyahu sought a sovereign loan guarantee that would give Israeli bonds the full faith and credit of the United States Treasury, so that despite intifadas and other perils, Israel could issue bonds on the same terms as the world’s leading economy.

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