Israel’s Capitalist Triumph

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The Democratic Socialists of America (DSA) has made opposition to Israel a defining feature of its politics. The organization brands the Jewish state “apartheid” and “settler-colonial,” champions the Boycott, Divestment, and Sanctions (BDS) movement, calls for an end to U.S. military aid, and endorses a “right of return” for “Palestinians” that would end Israel’s existence as a country, let alone a Jewish-majority state. The DSA frames all of this around occupation, human rights, and anti-imperialism—and those are the terms on which the debate is usually fought.

But there is another, quieter tension in the DSA’s position that gets far less attention than it deserves: Israel is the clearest postwar example of a country built on explicitly socialist foundations that then abandoned them, embraced market reforms, and became dramatically more prosperous as a result. That awkward data point directly undercuts an organization that has as its founding premise the claim that capitalism produces exploitation and crisis while collective ownership delivers justice and shared prosperity.

Israel’s founding generation built the state on Labor Zionist principles: kibbutzim, a powerful Histadrut labor federation, nationalized industries, and heavy state planning. For the first few decades, this produced real nation-building achievements—rapid absorption of immigrants, a functioning welfare state, and near-full employment. But by the early 1980s, it had produced economic collapse. Inflation hit roughly 445 percent in 1984, the budget deficit approached crisis levels, and the country stood on the edge of hyperinflation.

The 1985 Economic Stabilization Plan, implemented under a national unity government led in part by Shimon Peres, began the reversal through sharp budget cuts, price controls, and initial trade liberalization. But the deeper structural shift came later, and it is inseparable from Benjamin Netanyahu’s tenure as Finance Minister from 2003 to 2005. (Needless to say, the DSA hates him, too.)

Facing a recession exacerbated by the Second Intifada, Netanyahu cut the top individual tax rate from 64 to 44 percent, reduced the corporate rate significantly, privatized major state assets (including banks, El Al, and Zim Shipping), capped deficits, and advanced welfare-to-work reforms. These moves were fiercely controversial, but the macro results are undeniable: growth resumed, unemployment fell sharply, and Israel entered a sustained expansion.

What followed is now legendary.

As economist Joseph Zeira details in The Israeli Economy, and as Dan Senor and Saul Singer popularized in Start-Up Nation, Israel transformed into a global innovation powerhouse. It boasts the highest R&D intensity in the Organisation for Economic Co-Operation and Development, extraordinary per-capita venture capital, and a technology sector that propelled GDP per capita ahead of several established European economies.

None of this happened by demographic luck alone. It happened because a state that began with genuinely socialist institutions deliberately dismantled central planning in favor of markets—and the results were not ambiguous.

For the DSA, this success is intolerable. The organization’s platform insists that capitalism is structurally exploitative and that only expansive public ownership and decommodification can produce durable prosperity and justice.

Israel is not a distant hypothetical—it is a state built by socialists, on socialist infrastructure, that empirically outgrew that model once it left it behind. That fact is far harder to dismiss than “Israel is a wealthy Western-aligned state” because it shows socialism tried at scale, for decades, visibly failed relative to what replaced it.

This helps explain why the DSA’s opposition is so comprehensive—aimed not merely at alleged specific policies but at Zionism and Israel’s legitimacy itself, often in language labeling it a “racist, imperialist, settler-colonial project.” An ideological movement confronted with a living counterexample to its central economic claim has every incentive to reject that counterexample wholesale rather than engage it honestly.

Arguably, all their arguments are distractions:

There is no apartheid in Israel. Israel is a multi-ethnic democracy in which Arab citizens (about 21% of the population) have full legal equality, vote in elections, serve in the Knesset, sit on the Supreme Court, and enjoy the same civil rights as Jewish citizens, unlike the legal separation and denial of political rights that defined South African apartheid.

The Jews are not the colonialists. Jews are the indigenous people of the Land of Israel with a continuous presence for over 3,000 years, predating the Arab conquest in the 7th century, the influx of Muslim refugees from the Ottoman Empire beginning in the early 19th century, and the emergence of a contrived “Palestinian” Arab national identity in the 20th century. In fact, the first formal use of the term “Palestinian people” in the UN to describe Arabs occurred at the end of 1974. (Official UN Document: UN General Assembly, 29th Session, Plenary Meeting, A/PV.2281 (13 November 1974))

Israeli society is not racist. Israeli society, while facing real challenges with discrimination like many diverse democracies, grants full legal equality and political participation to its Arab minority, integrates immigrants from dozens of countries and ethnic backgrounds (including Mizrahi Jews from Arab lands, Ethiopian Jews, and others), and lacks the institutionalized racial supremacy or legal segregation that characterizes racist regimes.

What remains after these mendacious and diversionary claims are debunked is Israel’s economic success that puts the lie to the central claim of the DSA, i.e., Communism/Socialism succeeds and capitalism fails.

Socialism’s broader record—from the Soviet collapse to Venezuela’s catastrophe—already forces the DSA into perpetual damage control. Israel adds the most uncomfortable variant yet: not just failure abroad, but a socialist project’s own deliberate choice to abandon socialism, followed by the broad-based prosperity that the DSA claims markets cannot deliver. Netanyahu’s reforms were pivotal in locking in that turnaround, proving the superiority of market incentives over collectivist planning even under continuous existential security pressures.

Israel’s story is one of courage, adaptation, and triumph. From socialist experiment to capitalist powerhouse, it delivered results the DSA can only promise, but never deliver. The group’s hatred is about a truth they cannot accept: socialism did not work for Israel, but freedom and enterprise did. This undeniable fact exposes the lie at the core of their ideology—and they will never forgive the Jewish state for proving it.

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Endnotes

1. DSA National Political Committee statements, including “Until Palestinian Liberation” and “On the Ceasefire in Gaza” (2025), available on dsausa.org.

2. Joseph Zeira, The Israeli Economy: A Story of Success and Costs (Princeton University Press, 2021).

3. Dan Senor and Saul Singer, Start-Up Nation: The Story of Israel’s Economic Miracle (Twelve, 2009).

4. Bank of Israel reports and Israel Central Bureau of Statistics data on the 1985 stabilization and Netanyahu-era reforms (2003–2005).

5. Analyses of DSA’s ideological evolution in Moment Magazine, Haaretz, ADL, and AJC reports.