Sources of state discipline: lessons from Israel’s developmental state, 1948–1973

Abstract

Both the classic literature on the developmental state and more recent accounts of rapid-innovation-based (RIB) development highlight the importance of the state's capacity to discipline underperforming firms. Although long acknowledged, the sources of this capacity remain relatively understudied, and existing knowledge draws almost exclusively on the East Asian experience. To address this lacuna, I examine the successful industrialization experience of Israel in the two and a half decades following its independence (1948–1973). Drawing on archival materials and other original sources, I identify a novel path to state discipline. Whereas East Asian developmental states became disciplinarian through their engagement with export competition, in Israel, state elites generated discipline by leveraging their embedded relations with collectively owned enterprises to foster a competitive domestic market. In the conclusion, I explore the relevance of this model for more contemporary cases of RIB development in both developed and late-developing economies.

Taking back control: comprador bankers and managerial developmentalism in Poland

“…In such states, bureaucrats have devised industrial policies through intense dialogue with corporate elites. Yet their meritocratic recruitment, long employment tenures and esprit de corps have given them enough 'autonomy' not to get captured by special interests and to be able to discipline business by using a carrot-and-stick approach where firms have had to meet specific performance targets in order to receive state subsidies (see also Maggor, 2018).…”

The metropolitanization of Israel's settlement policy: The colonization of the West Bank as a strategy of spatial restructuring

“…Israel's political economy has followed a similar trajectory. During its first decades of existence, from its establishment in 1948 until the late-1970s, the Israeli state exerted a great deal of centralist control over matters of infrastructure and industrial development, foreign trade, economic investment, and the structuring and management of the labor market (Grinberg, 1991;Levi-Faur, 1998;Maggor, 2021). Israel's welfare state in this period was relatively robust, yet assured differential levels of decommodification to different social groups defined by ethnicity, nationality, and citizenship.…”

“…The same logic guided the era's industrial policies, which provided generous state subsidies to manufactures that were willing to operate in peripheral regions. These policies had a significant effect on the national pattern of capital investment, infrastructure, housing, and public services (Shachar (1998), p. 213; see also Gradus, Razin, & Krakover, 1993;Levi-Faur, 1998;Maggor, 2021). This approach was also initially applied after 1967 in the conquered territories.…”

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“…From this point of view, the fragmented nature of economic and social processes is becoming more obvious. Joint (collective) development planning overcomes the limitations of the technical dimension of the economy in relation to the social dimension [1][2][3].…”