This article examines the development of the Israeli capitalist class and the role played by the state apparatus in that development. In contrast to analyses claiming that Israel was a "socialist-type" economy prior to the mid-1980s, it argues that the Labor Zionist movement fostered the emergence of an indigenous capitalist class by encouraging the growth of private capital through key conglomerates initially tied to the state. Following the 1985 Economic Stabilization Plan, these conglomerates were placed in private hands linked with large foreign capital. Israel's recent incorporation into the global economy has undermined the traditional sustaining elements of the Zionist project, producing a crisis of legitimacy in the state. It also has important ramifications for the future of Israeli-Palestinian relations.
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July 2003
