The panic that swept Israel this month when the bottom fell out of the Tel Aviv stock market illustrated the extent to which this vehicle of capitalism has become a pervading feature in a country still living in the image of a pioneering, socialist community.
The Tel Aviv markeT, which was the second fastest growing in the world last year, suffered a three-day break in which some stocks plunged 50 percent. By the end of the week the situation had stabilized and many stocks had recouped.
The stock market, founded in 1935, had always been regarded with scorn by Zionist idealists, many of whom had abandoned comfortable lives abroad to "build up the land," as they called it, with the sweat of their brows. These idealists became farmers, workers, and professionals and left the bourgeois fringe of society to play the market.
Idealism was inevitably eroded by daily life. By the 1960s, even nonbourgeois citizens were beginning to see nothing offensive in investing in the market. A socialist government, however, stifled the market rise which had begun to manifest itself by imposing a capital-gains tax.
It was only a decade ago that the market began to attract the broad public. The need to raise money for investment in Israel's rapidly expanding economy induced the government to drop the capital-gains tax on stock market investments altogether. The public now also had more money to invest. As inflation picked up in the past few years, the market came to be regarded as the only way to stay ahead of it.
Some 400,000 people now invest in the stock market, 20 percent of the adult population in Israel. This is more than four times as many as a decade ago.
"When I go on army reserve duty," says a Jerusalem lawyer, "the main topic of conversation in my unit now is the stock market. A few years ago no one knew what the stock market was."
There was a wide sense of surprise, if not shock, last month when a television report disclosed that some kibbutzim were investing in the market. The collective settlements are regarded as the ultimate bastion of socialist principles, including the exaltation of physical labor. A leader of the kibbutz movement, Dov Peleg, noted that some of the industrial plants established by kibbutzim had sought to overcome their economic problems by investing in the market. "It should be forbidden for kibbutzim to engage in financial manipulation," he said. Officials of local kibbutzim, however, said they saw nothing wrong in investing in the market.
The country's youth, at least, remains a reservoir of old ideals. Several hundred members of youth movements, mostly of high school age, gathered outside the Knesset (parliament) last month in an unusual demonstration calling for improvement in Israel's quality of life. One of their most prominent placards read, "Citizen, invest in the state and not in the stock exchange."
The Tel Aviv stock market last year rose 81 percent in dollar terms, second only to Hong Kong's market, which rose 83 percent. There were weeks when most stocks rose by 10 percent and days when individual stocks rose by that much.
The pace increased with the new year as the general share index advanced 20 percent in January, with the shares of one industrial, Koor, advancing 61 percent in one week. Market analysts warned that many of the stocks were far overpriced and that a downward trend could be expected. A proposal by Industry Minister Gideon Patt that a capital-gains tax be revived for short-term investments appeared to have triggered latent anxiety. In three days of record trading early this month, the stock price index fell back to where it was near the beginning of the year, with industrials taking the heaviest beating.