The Triumph of Nationalist Socialism:
“From Class to Nation”
At the beginning of the Third Aliyah, the labor movement still had two options: either to set itself up as an alternative society, first developing its own collective institutions and egalitarian forms of life and then seeking to transform society as a whole, or to accept the existing order. The second option was easier, as the economy being created in Palestine was capitalist. The role of private capital in the development of the country was decisive, and the national wealth that served as the basis of the Histadrut economy, although generally not private capital, could ultimately be traced to the World Zionist Organization.
In the period between the two world wars, private capital represented 75 percent of the funds imported into Palestine, and even in 1940–47 it represented 50 percent. The typical immigrant did not arrive, as is commonly assumed, in total poverty. As Michael Beenstock, Jacob Metzer, and Sanny Ziv have demonstrated recently, the immigrants from Europe came to mandatory Palestine with a great deal of property, and imported capital, private and public combined, was relatively plentiful. In the 1920s the annual inflow of Jewish capital was on average 41.5 percent larger than the Jewish net domestic product (NDP). Although the share of imported capital in the fastgrowing economy declined over time, its ratio to the NDP did not fall below 33 percent in any of the pre-World War Two years and was kept at about 15 percent in all but one year since 1941. Owing to this imported capital and the wave of mass immigration, the Yishuv enjoyed an impressive demographic growth of 8.5 percent a year and an economic growth unequaled in the first half of the twentieth century in any other country in the world. Between 1922 and 1947 the NDP grew by an average of 13.2 percent a year, and product per capita at a yearly rate of 4.9 percent. From the beginning of the Third Aliyah to the end of the Fifth (1932–39), the national wealth out of which the Histadrut economy was created accounted for only a quarter of the imported capital. 1
Another record broken in the days of the British mandate was in the rate of immigration. In those years the Yishuv absorbed a stream of immigrants which relative to the size of the population was unparalleled anywhere else.