Back to the Wall

Israel's 1,400,000 Jews sat down to the most bountiful meal each could spread, for Passover is a joyous festival to celebrate the Hebrew deliverance from bondage and arrival in the Promised Land 3,000 years ago. Now the land was theirs, and for this they could be grateful, but it was a land of little joy.

The leftist government of David Ben-Gurion had just proclaimed a new devaluation--the second in 13 months. The government did not call it that, but, in simple fact, the Israeli pound, once pegged at $2.80 (and devalued last year to $1.40 for tourists, $1 for investors), has been devalued still further to a straight $1. (Even that figure is not realistic enough: the unsentimental Zurich money market values Israel's pound at 40-c-.)

Israel, a harassed and overcrowded Utopia-in-the-desert, is now shaking down to a grim fight to hang on, if possible, until long-term improvements begin to pay off. Israel's scant monthly food ration --four ounces of meat, two pounds of potatoes, a pound of frozen cod--makes oldtime British austerity seem almost pleasurable. Unrationed goods are priced skyhigh: $20 for cotton overalls, $8 for a pair of sandals, a month-and-a-half's wages for a radio.

Widening Gap. Instead of relieving the downward trend of Israel's inflated economy, last year's devaluation intensified it. Devaluation cut the value of the currency enough so that domestic prices rose sharply, but not enough to give Israeli products a competitive chance in foreign markets. Result: instead of the hoped-for export boom, the import-export gap widened in 1952 from a dangerous 7 to 1 to a disastrous 9 to 1.

Unable to get foreign currency to buy raw materials, factories cut production to 30% of capacity. The big Philips electric-bulb plant at Natanya was dismantled and its equipment shipped back to Holland. The government, which has already forced its citizens to lend it 10% of their currency holdings and bank deposits, last week imposed a new forced loan on property owners. Israel's first devaluation had come when pockets were full and shop windows empty. Now, at the second devaluation, pockets are empty and shopwindows are full--full of tins of canned tomatoes and figs, "frustrated exports" waiting for foreign buyers who do not come.

Narrowing Aid. Unemployment has risen to an estimated 40,000. Capital-improvements expenditures, the seed corn of Israel's future, dropped 8% last year, as the government desperately diverted foreign aid from long-term investments to stopgap purchases of wheat and fish.

Israel is simply unable to live on its own resources. The vast sums of foreign aid that kept it going ($1 billion from America alone up to 1952) are drying up. The big Israeli private-bond drive, trying to raise $500 million among its friends in the U.S. in three years, has actually realized only a fifth (some $100 million) in the first 22 months.

On the eve of its fifth year of independence, Israel still manages a brave face to the future, but its back is to the wall.

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