The
economy of Israel was initially primarily socialist and the country dominated by social democratic parties until the 1970s. Since then the Israeli economy has gradually moved to capitalism and a free market economy, partially retaining the social welfare system.
Prehistory[edit]
Between 2.6 and 0.9 million years ago, at least four episodes of
hominine dispersal from Africa to the Levant are known, each culturally distinct. The flint tool artifacts of these early humans have been discovered on the territory of the current state of Israel, including, at
Yiron, the oldest stone tools found anywhere outside Africa. Other groups include 1.4 million years old
Acheulean industry, the Bizat Ruhama group and
Gesher Bnot Yaakov.
[2]
In the Carmel mountain range at
el-Tabun, and
Es Skhul,
[3] Neanderthal and early modern human remains were found, including the skeleton of a Neanderthal female, named Tabun I, which is regarded as one of the most important human fossils ever found.
[4] The excavation at el-Tabun produced the longest
stratigraphic record in the region, spanning 600,000 or more years of human activity,
[5] from the
Lower Paleolithic to the present day, representing roughly a million years of
human evolution.
[6]
Ancient times[edit]
Egyptian rule[edit]
During the 2nd millennium BC,
Canaan, part of which later became known as Israel, was dominated by
Egypt.
Early Israelites[edit]

The
Merneptah stele. While alternative translations exist, the majority of
biblical archeologists translate a set of hieroglyphs as "Israel", representing the first instance of the name Israel in the historical record.
The first record of the name Israel (as
ysrỉꜣr) occurs in the
Merneptah stele, erected for Egyptian Pharaoh
Merneptah c. 1209 BCE, "Israel is laid waste and his seed is not."
[7] William Dever sees this "Israel" in the central highlands as a cultural and probably political entity, more an ethnic group rather than an organized state.
[8]
Ancestors of the Israelites may have included
Semites native to
Canaan and the
Sea Peoples.
[9] McNutt says, "It is probably safe to assume that sometime during
Iron Age I a population began to identify itself as 'Israelite'", differentiating itself from the
Canaanites through such markers as the prohibition of intermarriage, an emphasis on family history and genealogy, and religion.
[10]
Villages had populations of up to 300 or 400,
[11][12] which lived by farming and herding, and were largely self-sufficient;
[13] economic interchange was prevalent.
[14] Writing was known and available for recording, even in small sites.
[15] The archaeological evidence indicates a society of village-like centres, but with more limited resources and a small population.
[16]
Israel and Judah[edit]
The
Hebrew Bible describes constant warfare between the Jews and other tribes, including the
Philistines, whose capital was
Gaza. The Bible states that
King David founded a dynasty of kings and that his son
Solomon built a
Temple. No material evidence indisputably of Solomon's reign has been found.
Yigael Yadin's excavations at
Hazor,
Megiddo,
Beit Shean and
Gezer uncovered structures that he and others have argued date from his reign,
[17] but others, such as Israel Finkelstein and Neil Silberman (who agree that Solomon was a historical king), argue that they should be dated to the
Omride period, more than a century after Solomon.
[18] This building is not mentioned in surviving extra-biblical accounts.
[19] Possible references to the "
House of David" have been found at two sites, the
Tel Dan Stele and the
Mesha Stele.
[20] Both David and Solomon are widely referenced in Jewish, Christian and Islamic texts.
Exile under Babylon (586–538 BCE)[edit]
In 586 BCE King
Nebuchadnezzar II of
Babylon conquered Judah. According to the Hebrew Bible, he destroyed
Solomon's Temple and
exiled the Jews to Babylon. The defeat was also recorded by the Babylonians
[23][24] (see the
Babylonian Chronicles). Babylonian and Biblical sources suggest that the Judean king,
Jehoiakim, switched allegiances between the Egyptians and the Babylonians and that invasion was a punishment for allying with Babylon's principle rival, Egypt. The exiled Jews may have been restricted to the elite.
Classical era (538 BCE–636 CE)[edit]
Persian and Hellenistic rule 538–160 BCE[edit]
In 538 BCE,
Cyrus the Great of
Persia conquered Babylon and took over its empire. Cyrus issued a proclamation granting subjugated nations (including the people of Judah) religious freedom (for the original text see the
Cyrus Cylinder). According to the Hebrew Bible 50,000 Judeans, led by
Zerubabel, returned to Judah and
rebuilt the temple. A second group of 5,000, led by
Ezra and
Nehemiah, returned to Judah in 456 BCE although non-Jews wrote to Cyrus to try to prevent their return.
Hasmonean dynasty 160–37 BCE[edit]
Herodian kingdom 37 BCE–6 CE[edit]
The
Jewish Temple in
Jerusalem was granted special permission not to display an effigy of the emperor, becoming the only religious structure in the
Roman Empirethat did not do so. Special dispensation was granted for Jewish citizens of the Roman Empire to pay a
tax to the temple.
Roman rule 6–390[edit]
Judea was made a Roman province in 6 CE. Following the next decades, though prosperous, the society suffered increasing tensions between Greco-Roman and Judean populations.
In 64 CE, the High Priest
Joshua ben Gamla introduced a religious requirement for Jewish boys to learn to read from the age of 6. Over the next few hundred years this requirement became steadily more ingrained in Jewish traditions.
[31]
In 66 CE, the Jews of Judea rose in
revolt against Rome, naming their new state as "Israel".
[32] The events were described by the Jewish leader/historian
Josephus, including the desperate defense of
Jotapata, the
siege of Jerusalem (69–70 CE) and the heroic last stand at
Masada under
Eleazar ben Yair (72–73 CE). Much of Jerusalem and the Temple lay in ruins. During the Jewish revolt, most
Christians, at this time a sub-sect of Judaism, removed themselves from Judea. The rabbinical/
Pharisee movement led by
Yochanan ben Zakai, who opposed the
Sadducee temple priesthood, made peace with Rome and survived. After the war
Jews continued to be taxed in the
Fiscus Judaicus, which was used to fund a temple to Jupiter.
From 115 to 117, Jews in Libya, Egypt, Cyprus, Mesopotamia and
Lod rose in
revolt against Rome. This conflict was accompanied by large-scale massacres of both Romans and Jews. Cyprus was severely depopulated and Jews banned from living there.
[33]
In 131, the Emperor
Hadrian renamed Jerusalem "
Aelia Capitolina" and constructed a Temple of Jupiter on the site of the former Jewish temple. Jews were banned from living in Jerusalem itself (a ban that persisted until the Arab conquest), and the Roman province, until then known as
Iudaea Province, was renamed
Palaestina, no other revolt led to a province being renamed.
[34] The names "Palestine" (in English) and "Filistin" (in Arabic) are derived from this. From 132 to 136, the Jewish leader
Simon Bar Kokhba led another major
revolt against the Romans, again renaming the country "Israel"
[35] (see
Bar Kochba Revolt coinage). The Bar-Kochba revolt probably caused more trouble for the Romans than the more famous (and better documented) revolt of 70.
[36] The Christians refused to participate in the revolt and from this point the Jews regarded Christianity as a separate religion.
[37] The revolt was eventually crushed by
Emperor Hadrian himself. Although uncertain, it is widely thought that during the Bar Kokhba revolt, when a
rabbinical assembly decided which
books could be regarded as part of the
Hebrew Bible, the
Jewish apocrypha were left out.
[38] A rabbi of this period,
Simeon bar Yochai, is regarded as the author of the
Zohar, the foundational text for Kabbalistic thought. However, modern scholars believe it was written in Medieval Spain.
[39]
After suppressing the Bar Kochba revolt, the Romans
exiled the Jews of Judea, but not of Galilee and permitted a hereditary Rabbinical Patriarch (from the
House of Hillel, based in Galilee) to represent the Jews in dealings with the Romans. The most famous of these was
Judah haNasi who is credited with compiling the final version of the
Mishnah (a massive body of Jewish religious texts interpreting the Bible) and with strengthening the educational demands of Judaism by requiring that illiterate Jews be treated as outcasts. As a result many illiterate Jews may have converted to Christianity.
[40]
Jewish seminaries, such as those at
Shefaram and
Bet Shearim continued to produce scholars and the best of these became members of the
Sanhedrin[41] which was located first at
Tzippori and later at
Tiberias.
[42] Before the Bar-Kochba uprising, an estimated 2/3 of the population of Gallilee and 1/3 of the coastal region were Jewish.
[43] In the Galillee, many Synagogues have been found dating from this period. However, persecution and the economic crisis that affected the Roman empire in the 3rd century led to further Jewish migration from
Syria Palaestina to the more tolerant Persian
Sassanid Empire, where a prosperous Jewish community with
extensive seminaries existed in the area of Babylon.
Early in the 4th century,
Constantinople became the capital of the
East Roman Empire and
Christianity was adopted as the official religion. The name Jerusalem was restored to Aelia Capitolina and it became a Christian city. Jews were still banned from living in Jerusalem, but were allowed to visit, and it is in this period that the surviving
Western Wall of the temple became sacred. In 351–2, another
Jewish revolt in the Galilee erupted against a corrupt Roman governor.
[44] In 362, the last
pagan Roman Emperor,
Julian the Apostate, announced plans to rebuild the
Jewish Temple. He died while fighting the Persians in 363 and the project was discontinued.
Byzantine rule 390–611[edit]
The Roman Empire split in 390 CE and the region became part of the (Christian) East Roman Empire, known as the
Byzantine Empire. Byzantines Christianity was dominated by the (Greek)
Orthodox Church. In the 5th century, the
Western Roman Empire collapsed leading to Christian migration into the Roman province of
Palaestina Prima and development of a Christian majority. Jews numbered 10–15% of the population, concentrated largely in the Galilee. Judaism was the only non-Christian religion tolerated, but there were bans on Jews building new places of worship, holding public office or owning slaves. Several
Samaritan Revolts erupted in this period,
[45] resulting in the decrease of Samaritan community from about a million to a near extinction. Sacred Jewish texts written in the Holyland at this time are the
Gemara (400), the
Jerusalem Talmud (500) and the
Passover Haggadah.
In 611,
Sassanid Persia invaded the Byzantine Empire and, after a long siege,
Khosrau II captured Jerusalem in 614, with
Jewish help, including possibly the Jewish
Himyarite Kingdom in Yemen. Jews were left to govern Jerusalem when the Persians took over, though the short-lived
Jewish commonwealth lasted only until about 617, when the Persians capitulated. The Byzantine Emperor,
Heraclius, promised to restore Jewish rights and received Jewish help in defeating the Persians, but he soon reneged on the agreement after reconquering Palaestina Prima, issuing an edict banning Judaism from the Byzantine Empire. (Egyptian)
Coptic Christians took responsibility for this broken pledge and fasted in penance.
[46] Jews fleeing Byzantium settled in the Baltic area, where the
Khazar nobility and some of the population subsequently converted to Judaism.
Middle Ages (636–1517)[edit]
Arab rule 636–1099[edit]
Between the 7th and 11th centuries, Jewish scribes, called the
Masoretes and located in Galilee and Jerusalem, established the
Masoretic Text, the final text of the
Hebrew Bible.
Crusader and Ayyubid rule 1099–1291[edit]
In 1187, the
Ayyubid Sultan
Saladin defeated the Crusaders in the
Battle of Hattin (above
Tiberias), taking Jerusalem and most of the former Kingdom of Jerusalem. Saladin's court physician was
Maimonides, whose work had an enormous influence on Judaism. Maimonides was
buried in Tiberias. A Crusader state centred round
Acre survived in weakened form for another century.
Mamluk rule 1260–1517[edit]
Egyptian Mamluk Sultan,
Baibars (1260–1277), conquered the region and the
Mamluks ruled it until 1517, regarding it as part of
Syria. In
Hebron, Baibars banned Jews from worshiping at the
Cave of the Patriarchs (the second holiest site in Judaism), the ban remained in place until its conquest by Israel 700 years later.
[49]
The collapse of the Crusades was followed by increased persecution and expulsions of Jews in Europe. Expulsions
began in England (1290) and were followed by France (1306).
[50][51] In Spain,
persecution of the highly integrated and successful Jewish community began, including massacres and forced conversions. During the
Black Death, many Jews were murdered after being accused of poisoning wells. The completion of the
Christian reconquest of Spain led to expulsion of the Jews of
Spain in 1492 and
Portugal in 1497. These were the wealthiest and most integrated Jewish communities in Europe. Many Jews converted to Christianity, however many
secretly practised Judaism and prejudice against converts (regardless of their sincerity) persisted, leading many former Jews to move to the New World (see
History of the Jews in Latin America). Most of the expelled
Spanish Jews moved to North Africa,
Poland, to the Ottoman Empire and to the region of
Bilad a-Shamwhich roughly corresponds to the ancient
Kingdom of Israel (united monarchy). In Italy, Jews living in the Papal States were required to live in
ghettos (see
Cum nimis absurdum). The last compulsory Ghetto,
in Rome, was abolished in the 1880s.
Ottoman rule (1517–1920)[edit]
Old Yishuv[edit]
From the Middle Ages on, there was small scale individual Jewish migration to the
Damascus Eyalet of
Ottoman Syria, which tended to increase when persecution was bad elsewhere. The Jewish population was concentrated in
Jerusalem,
Hebron,
Safed and
Tiberias, known in Jewish tradition as the
Four Holy Cities. In the 16th century, following a wave of Spanish immigration, Safed became a centre for study of the
Kabbalah. However economic decline and conflict between the Druze and the Ottomans, led to the community's gradual decline by the mid-17th century. In 1660, a Druze
revolt led to the destruction of the major
Old Yishuv cities of
Safed and
Tiberias.
[52][52][53] In 1663
Sabbatai Zevi settled in Jerusalem, proclaiming himself to be the Jewish Messiah. He acquired a large number of followers before going to Istanbul in 1666, where the Sultan forced him to covert to Islam. In the late 18th century a local Bedouin Sheikh
Daher el-Omar created a de facto independent Emirate in the Galilee. Ottoman attempts to subdue the Sheikh failed, but after Daher's death the Ottomans restored their rule in the area.
In 1799
Napoleon briefly
occupied the country and
planned a proclamation inviting Jews to create a state. The proclamation was shelved following his
defeat at Acre.
[54] In 1831,
Muhammad Ali of Egypt conquered Ottoman Syria and decided to revive and resettle much of its regions. His conscription policies led to a popular
Arab revolt in 1834, resulting in major casualties for the local Arab peasants, and massacres of Christian and Jewish communities by the rebels. Following the revolt, Muhammad Pasha, the son of Muhammad Ali, expelled nearly 10,000 of the local peasants to Egypt, while bringing loyal Arab peasants from Egypt and discharged soldiers to settle the coastline of Ottoman Syria. Northern
Jordan Valley was settled by his Sudanese troops.
In 1838 there was another
revolt by the Druze. In 1839
Moses Montefiore met with Muhammed Pasha in Egypt and signed an agreement to establish 100-200 Jewish villages in the
Damascus Eyalet of
Ottoman Syria,
[55] but in 1840 the Egyptians withdrew before the deal was implemented, returning the area to Ottoman governorship. In 1844, Jews constituted the largest population group in Jerusalem and by 1890 an absolute majority in the city, but as a whole the Jewish population made up far less than 10% of the country.
[56][57] In 1868, the Ottomans banished the
Bahá'u'lláh, one of the founders of the
Bahai religion, to
Acre where he is buried, and the movement subsequently established its global administrative centre in nearby
Haifa. In 1874, Ottoman reforms led to the area of Jerusalem gaining special status as the
Mutasarrifate of Jerusalem.
[58]
Birth of Zionism 1870 - 1914[edit]
During the 19th century, Jews in Western Europe were increasingly granted citizenship and
equality before the law; however, in Eastern Europe, where they were more numerous, they faced growing
persecution and legal restrictions, including widespread
pogroms. As a result millions of Jews began leaving Eastern Europe in the late 19th century, mainly for the United States, with a small percentage heading for what the Ottomans regarded as
Southern Syria. In this period,
national movements were emerging across Europe. Many such national movements rejected Jews as aliens, while some Jews were attracted by the notion that Jews were a nation. The movement began as a religious movement in Russia, evolving into a secular movement that became popular among Jews around the world. It coincided with a wave of Jewish migration to the Holy Land and
Messianism among
Yemenite Jews and
Bukharan Jews.
In 1870, an agricultural school, the
Mikveh Israel, was founded near
Jaffa by the
Alliance Israelite Universelle, a French Jewish association. In 1878, Russian Jewish emigrants established the village of
Petah Tikva, followed by
Rishon LeZionin 1882. Russian Jews established the
Bilu and
Hovevei Zion ("Love of Zion") movements to assist settlers and these created additional communities which, unlike the traditional Ashkenazi-Jewish communities, sought to be self-reliant rather than dependent on donations from abroad. Existing Ashkenazi-Jewish communities were concentrated in the
Four Holy Cities, extremely poor and lived on donations from Europe. The new migrants avoided these communities and tended to create small agricultural settlements. In Jaffa a vibrant commercial community developed in which Ashkenazi and Sephardi Jews inter-mingled. Many early migrants left due to difficulty finding work and the early settlements often remained dependant on foreign donations. Despite the difficulties, new settlements arose and the community grew.
The new migration was accompanied by a
revival of the Hebrew language and attracted Jews of all kinds; religious, secular, nationalists and
left-wing socialists. Socialists aimed to reclaim the land by becoming peasants and forming
collectives. In Zionist history, the different waves of Jewish settlement are known as "
aliyah". During the
First Aliyah, between 1882 and 1903, approximately 35,000 Jews moved to what is now Israel. By 1890, Jews were a majority in
Jerusalem, although the area was populated mainly by Muslim (settled and nomad Bedouins) and Christian Arabs.
Between 1904 and 1914, around 40,000 Jews settled in Southern Syria (the
Second Aliyah). In 1908 the Zionist Organisation set up the Palestine Bureau (also known as the "Eretz Israel Office") in Jaffa and began to adopt a systematic Jewish settlement policy. Migrants were mainly from Russia (which then included part of Poland), escaping persecution. The first
Kibbutz,
Degania, was founded by 9 Russian socialists in 1909. In 1909 residents of Jaffa established the first entirely Hebrew-speaking city,
Ahuzat Bayit (later renamed
Tel Aviv). Hebrew newspapers and books were published,
Hebrew schools, Jewish political parties and workers organizations were established.
World War I 1914 - 1917[edit]
During
World War I, most Jews supported the Germans because they were fighting the Russians who were regarded as the Jews' main enemy.
[60] In Britain, the government sought Jewish support for the war effort for a variety of reasons including an erroneous antisemitic perception of "Jewish power" over the Ottoman Empire's
Young Turksmovement,
[61] and a desire to secure American Jewish support for US intervention on Britain's behalf.
There was already sympathy for the aims of
Zionism in the British government, including the Prime Minister
Lloyd George.
[62] In late 1917, the British Army drove the Turks
out of Southern Syria,
[63] and the British foreign minister,
Lord Balfour, sent a public letter to
Lord Rothschild, a leading member of his party and leader of the Jewish community. The letter subsequently became known as the
Balfour Declaration of 1917. It stated that the British Government "view[ed] with favour the establishment in
Palestine of a national home for the Jewish people". The declaration provided the British government with a pretext for claiming and governing the country.
[64] New Middle Eastern boundaries were decided
by an agreement between British and French bureaucrats. The agreement gave Britain control over what parties would begin to call "Palestine". This appellation would remain uncontroversial until the rise of
Anti-Zionism in the 1940s.
British Mandate of Palestine (1920–1948)[edit]
First years 1920 - 1929[edit]

Balfour Declaration of 1917, which supported the establishment of a Jewish homeland in Palestine
The
British Mandate (in effect, British rule) of Palestine, including the Balfour Declaration, was confirmed by the
League of Nations in 1922 and came into effect in 1923. The boundaries of Palestine initially included modern
Jordan, which was
removed from the territory by
Churchill a few years later. Britain signed a treaty with the United States (which did not join the League of Nations) in which the United States endorsed the terms of the Mandate.
Between 1919 and 1923, another 40,000 Jews arrived in Palestine, mainly escaping the post-
revolutionary chaos of Russia (
Third Aliyah), as over 100,000 Jews were massacred in this period in Ukraine and Russia.
[65] Many of these immigrants became known as "pioneers" (
halutzim), experienced or trained in agriculture and capable of establishing self-sustaining economies. The
Jezreel Valley and the Hefer Plain marshes were drained and converted to agricultural use. Land was bought by the
Jewish National Fund, a Zionist charity which collected money abroad for that purpose. A mainly socialist underground Jewish militia,
Haganah ("Defense"), was established to defend outlying Jewish settlements.
The French
defeat of the Arab
Kingdom of Syria and the Balfour Declaration led to the emergence of
Palestinian Nationalism and Arab rioting in
1920 and
1921. In response, the British authorities imposed immigration quotas for Jews. Exceptions were made for Jews with over 1,000 pounds in cash (roughly 100,000 pounds at year 2000 rates) or Jewish professionals with over 500 pounds. The
Jewish Agency issued the British entry permits and distributed funds donated by Jews abroad.
[66] Between 1924 and 1929, 82,000 more Jews arrived (
Fourth Aliyah), fleeing antisemitism in Poland and Hungary, and because the United States
Immigration Act of 1924 now kept Jews out. The new arrivals included many middle-class families who moved into towns and established small businesses and workshops—although lack of economic opportunities meant that approximately a quarter later left. The first electricity generator was built in Tel Aviv in 1923 under the guidance of
Pinhas Rutenberg, a former
Commissar of St Petersburg in Russia's pre-Bolshevik
Kerensky Government. In 1925 the Jewish Agency established the
Hebrew University in Jerusalem and the
Technion (technological university) in Haifa.
From 1928, the democratically elected Va'ad Leumi (
Jewish National Council or JNC) became the main institution of the Palestine Jewish community ("
Yishuv") and included non-Zionist Jews. As the Yishuv grew, the JNC adopted more government-type functions, such as education, health care and security. With British permission, the Va'ad raised its own taxes
[67] and ran independent services for the Jewish population.
[68] From 1929 its leadership was elected by Jews from 26 countries.
In 1929 tensions grew over the Kotel (
Wailing Wall), a narrow alleyway where Jews were banned from using chairs or any furniture (many of the worshipers were elderly). The
Mufti claimed it was Muslim property and that the Jews were seeking control of the Temple Mount. This (and general animosity) led to the August
1929 Palestine riots. The
main victims were the ancient Jewish community at Hebron which came to an end. The riots led to right-wing Zionists establishing their own militia in 1931, the
Irgun Tzvai Leumi (National Military Organization, known in Hebrew by its acronym "Etzel").
Zionist political parties provided private education and health care: the
General Zionists, the
Mizrahi and the
Socialist Zionists, each established independent health and education services and operated sports organizations funded by local taxes, donations and fees (the British administration did not invest in public services). During the whole interwar period, the British, appealing to the terms of the Mandate, rejected the principle of majority rule or any other measure that would give the Arab population, who formed the majority of the population, control over Palestinian territory.
Increase of Jewish immigration 1930 - 1938[edit]
In 1933, the Jewish Agency and the Nazis negotiated the
Ha'avara Agreement (transfer agreement), under which 50,000 Jews would be transferred to Palestine. The Jews possessions were confiscated and in return the Nazis allowed the Ha'avara organization to purchase 14 million pounds worth of German goods for export to Palestine (which was used to compensate the immigrants). The Nazis did not normally allow Jews to leave with any money or to take more than two suitcases. The agreement was controversial and the Labour Zionist leader who negotiated the agreement,
Haim Arlosoroff, was assassinated in Tel Aviv in 1933. The assassination was a long source of anger between the Zionist left and Zionist right. Arlosoroff once dated
Magda Goebbels and may have been assassinated by the Nazis to hide the connection which only emerged recently. In Palestine, Jewish immigration (and the Ha'avara goods) helped the economy to flourish. A port and oil refineries were built at Haifa and there was a growth of industrialization in the predominantly agricultural Palestinian economy.
Between 1929 and 1938, 250,000 Jews arrived in Palestine (
Fifth Aliyah). 174,000 arrived between 1933 and 1936, after which the British increasingly restricted immigration. The influx contributed to the
1933 Palestine riots. Migration was mostly from Europe and included professionals, doctors, lawyers and professors from Germany. As a consequence German architects of the
Bauhaus school made Tel-Aviv the world's only city with purely
Bauhaus neighborhoods and Palestine had the highest per-capita percentage of doctors in the world.
As Fascist regimes emerged across Europe, persecution of Jews massiv