Abstract
Israel is not estranged to social economy. Indeed, the political economy of the state during the pre-establishment era and continuing for about three decades into statehood could be described as socialist-nationalist, or at least quasi-socialist. This was the case until the 1980s, when—following a major economic crisis—the Israeli economy took a turn towards neoliberalism which has subsequently deepened socio-economic inequality. More recently, however, a new form of social economy has emerged and is gathering momentum. The new social economy is characterised by three features which distinguish it from the social economy of Israel’s early days. First, it is based on individual entrepreneurship rather than on collective entrepreneurship. Second, in line with Israel’s development as a ‘start-up nation’ with a flourishing high-tech industry, the new social economy often takes the form of social-tech entrepreneurship. Third, it is focused on solving concrete social or environmental problems and is not linked to any overarching ideology.
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- 1.
Note that our discussion of the Kibbutz relates to the communal Kibbutz, that is, the traditional Kibbutz before the wave of privatisation that has occurred in the Kibbutz movement since the late 1990s, resulting in a new model called ‘renewing Kibbutz’.
- 2.
Prior to the establishment of the State of Israel in 1948, during the Ottoman rule and the British Mandate, the land of Israel was known as Palestine. After WWI it included the geographical area that today covers the State of Israel, the West Bank and the Gaza Strip.
- 3.
First, the World Zionist Organization (HaHistadrut HaTzionit Ha’Olamit in Hebrew) is a non-governmental organisation that promotes Zionism. It was established in 1897 at the First Zionist Congress in Basel, Switzerland (https://www.wzo.org.il/). Second, the Jewish Agency for Israel (HaSochnut HaYehudit in Hebrew) is a non-profit organisation that was established in 1929 to look after the interests of the Jewish people. It played a key role in the development of the State of Israel and the absorption of Jewish diaspora into Israel (see https://www.jewishagency.org/aliyah/). Third, the Jewish National Fund (Keren Kayemeth LeIsrael in Hebrew) was established at the fifth Zionist Congress in 1901, as a non-profit organisation, wholly owned by the World Zionist Organization. Its original aim was to purchase land for the Jewish people (https://www.kkl-jnf.org/). Lastly, United Israel Appeal (Keren Hayesod in Hebrew) was established in London in 1920, to serve as the fundraising arm of the Jewish people and the Zionist movement. It is recognised today as a national institution (public benefit company), operating under a special law that was passed by the Israeli Parliament in 1956 and which grants it fundraising status (https://www.kh-uia.org.il/about-us/).
- 4.
According to Kislev (2015) 700,000 Jewish immigrants entered Israel within the first 4 years following independence, doubling the number of Jews in the country. Others followed thereafter, tripling the number within 15 years.
- 5.
All governments until 1977 were led by the Labour Party, generally considered socialist. However, Strenhell (1998) notes that the founders of the Labour Party were not committed to the socialist ethos. Certainly, the economy could not be described as pure socialism.
- 6.
Large and well-established cooperatives include Tnuva, for dairy and food production; Koor, in the business of heavy industry; and Egged for transportation.
- 7.
The United Jewish Appeal was set up in 1939 as the United Jewish Appeal for Refugees and Overseas Needs and is now known as the Jewish Federations of North America. It is a Jewish philanthropic umbrella organisation that represents over 100 Jewish non-profit organisations across North America (https://jewishfederations.org/).
- 8.
Excluding two periods of crisis when redemption rates dropped below 30%. These two periods include the years 1951–1957, immediately following independence, and the years 1967–1973, covering the 6-Day War, the War of Attrition and the Yom Kippur War (see Fleisch, 2014).
- 9.
The Reparations Agreement (Heskem HaShillumim in Hebrew) specified that West Germany would pay Israel for the costs associated with resettling Jewish survivors as well as compensate individuals for losses resulting from Nazi persecution (see Honig, 1954, and Auerbach, 1991).
- 10.
Two clarifications are in order. First it is important to note that some of the Reparations Agreement was paid to individual survivors and to families of victims. Second, it is relevant to our discussion to explain that the Histadrut, the national labour union, was created in 1920 as the General Organization of Workers in Israel, to represent Jewish workers. It became a very powerful organization, the owner of key businesses and the employer of many people.
- 11.
Lebel et al. (2018) describe the results of the 1977 general elections in Israel as ‘political upheaval’ and ‘one of the most dramatic moments in Israeli political history’ (pg. 939). It is noted that the Labour Party was leading Israel not only since independence in 1948, but actually since 1933, in its pre-state status as the Zionist movement.
- 12.
As part of the 1985 economic stabilisation plan, the Israeli Shekel was replaced by the New Israeli Shekel, and a fixed exchange rate regime was imposed. But in 1989 the currency market was liberalised by introducing a fluctuation band policy with the New Israeli Shekel allowing to fluctuate within predetermined upper and lower borders. The fluctuation band was expanded over the years until it was cancelled in 2005, moving the New Israeli Shekel into a floating exchange rate regime (Israel Central Bureau of Statistics, 2008).
- 13.
Peretz (2018) describes the transformation of Israel from a socialist to a capitalist economy in 1985 as no less than the biggest event in its economic history. While this may overstate the situation, the Israeli Government certainly reduced its intervention following the events of the 1970s and 1980s. For example, government expenditure on education was reduced from 86% of total expenditure in 1980 to 74% in 1987, while its expenditure on health was reduced from 51% of total expenditure in 1985 to 45% in 1990 (Shapira, 2010). Similarly, welfare services were privatised, forcing those providers to adopt business strategies and become more efficient, thereby establishing the moral legitimacy and positive public perception of the association between business and society (Dart, 2004).
- 14.
The Encouragement of Industrial Research and Development Law 5744–1984 was amended a number of times and is also referred to as the ‘R&D Law’. The Office of the Chief Scientist was replaced in 2016 by the National Authority for Technological Innovation, also known as the Israel Innovation Authority, IIA. The Ministry of Economy changed its name several times to reflect changes in its responsibilities. It has been known as the Ministry of Economy since 2013, but until 1978 it was called the Ministry of Commerce and Industry.
- 15.
For example, according to Israel Ministry of Foreign Affairs, as of 2018, the high-tech sector accounts for less than 9% of employees (https://mfa.gov.il/mfa/aboutisrael/economy/pages/economy-%20sectors%20of%20the%20economy.aspx).
- 16.
This excludes an economic downturn in the early 2000s, brought about by the global dot-com bubble and the Palestinian uprising against Israel (the Second Intifada) which broke out in 2000 (de Boer & Missaglia, 2007).
- 17.
- 18.
- 19.
https://callyachol.co.il/en/home-2/
- 20.
- 21.
- 22.
- 23.
- 24.
- 25.
The Israeli protest over economic inequality and against the financial sector preceded Occupy Wall Street, a similar protest which took place on September 17, 2011, at the financial district, New York City. It soon spread around the world and marked the initiation of the Occupy Movement.
- 26.
The Trajtenberg Committee was appointed by the Israeli Prime Minister on August 8, 2011, to examine Israel’s socio-economic problems.
- 27.
The Zaken Committee was set up in December 2011 named after its chairperson. It estimated the additional costs relating to lack of competition in the banking sector at about 2.3 billion dollars (see https://www.boi.org.il/en/NewsAndPublications/PressReleases/Pages/19032012e.aspx).
- 28.
The Global Impact Investing Network (GIIN) defines impact investments as investments made into companies, organisations and funds with the intention to generate social and environmental impact alongside a financial return (see https://thegiin.org/).
- 29.
Moreover, traditional third sector organisations, such as charitable foundations, have also been changing and adapting their strategies in line with new thinking about charity and charitable giving. For example, while in the past donors used to provide funds and let the charitable organisation decide to what use those funds would be put, today they are much more involved. In particular, not only do the younger generation of contributors want to know exactly where their funds are going, but they also want to track the impact of their philanthropic giving (see Impact Investing Meets Social Welfare by Alex Traiman, August 28, 2019, Jewish News Syndicate at https://www.jns.org/impact-investing-meets-social-welfare-how-a-99-year-old-israeli-institution-stays-relevant/).
- 30.
- 31.
IVN was established in 2001 and today it manages three key social funds, among them Yozma. The other two include Tandem and Seed. Tandem was launched in 2013 to provide loans, working capital, mentoring and relevant networks to businesses that seek solutions to social challenges in the areas of economic development, employment and education. Seed was established in 2014 in collaboration with Bank Mizrahi-Tefahot to support young, socially minded entrepreneurs by providing funding in the form of grants as well as mentoring (see http://ivn.org.il/the-program).
- 32.
More specifically, by the Capital Market, Insurance and Savings Authority which is part of the Ministry of Finance.
- 33.
We mentioned the IIA in section “Neoliberalism and the Rise of the Start-Up Nation” above (see also https://innovationisrael.org.il/en/contentpage/israel-innovation-authority). The authority has six divisions, among them the Societal Challenges Division which focuses on inspiring technological innovation to improve social welfare. There are several incentive programmes under the Societal Challenges Division, each focusing on a different aspect of impact. The Grand Challenges Israel Incentive Program which we discussed above is one example. Other examples include the Assistive Technology for the Disabled Incentive Program and the Incentive Programs for Ultra-Orthodox and Minorities. The latter target entrepreneurs from sectors of the Israeli society that are under-represented in the local innovation ecosystem (e.g. Israeli Arabs, the ultra-orthodox and women).
- 34.
- 35.
8200 is the elite intelligence and cybersecurity unit of the Israeli Defense Forces. The Internet site of the 8200 Social Program is https://www.8200impact.com/
- 36.
- 37.
Maala is the non-profit Corporate Social Responsibility (CSR) standard-setting organisation in Israel. The TA-Maala SRI Index was launched in 2005 and was initially limited to 20 shares. It was later expanded to all shares that meet the index criteria.
- 38.
SFI was established in 2013 and its story can be found at http://www.social-finance.org.il/category/Our-Story
- 39.
The report by the OECD (Organization for Economic Cooperation and Development) is entitled September 2020 Economic Survey of Israel and is available at http://www.oecd.org/economy/israel-economic-snapshot/. Note also that the unemployment figures exclude workers on unpaid leave.
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Manos, R., Gidron, B. (2021). The New Social Economy in Israel: From the Kibbutz Ideal to Social-Tech Entrepreneurship. In: Gidron, B., Domaradzka, A. (eds) The New Social and Impact Economy. Nonprofit and Civil Society Studies. Springer, Cham. https://doi.org/10.1007/978-3-030-68295-8_5
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