Between Private Property Rights and National Preferences: The Early Years of the Bank of Israel

Forthcoming, Israel Affairs

36 Pages Posted: 25 Mar 2013

See all articles by Arie Krampf

Arie Krampf

Free University of Berlin (FUB) - Otto Suhr Institute for Political Science

Date Written: March 22, 2013

Abstract

The history of the Bank of Israel is often told as a story that leads from servitude to independence. According to this conception, the bank was as a weak and marginal institution during the developmental period of the state, and it turned into an independent actor in the neoliberal period. In this paper I argue that the portrayal of the bank as marginal during the developing period fail to recognize the essential role the bank play in contributing to the capacity of the state to allocate credit more effectively. I argue that Bank of Israel provided the state with market compatible instruments in order to govern the banking system and depoliticized the allocation of credit. The establishment of the bank had two effects on the political economy of Israel. First, it enables the government to weaken its dependence on the Histadrut as an agent of development and it enabled it to nurture linkages with the private sector. The paper is based on original research based on primary sources.

Keywords: central banking, developing countries, Israel, preferential credit policy, bureaucracy, infrastructural power, private property rights, Israel

Suggested Citation

Krampf, Arie, Between Private Property Rights and National Preferences: The Early Years of the Bank of Israel (March 22, 2013). Forthcoming, Israel Affairs. Available at SSRN: https://ssrn.com/abstract=2238059

Arie Krampf (Contact Author)

Free University of Berlin (FUB) - Otto Suhr Institute for Political Science ( email )

14195 Berlin
Germany

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