Richard Kahn and Israeli Economic Policy, 1957 and 1962

This paper documents Richard Kahn’s role as an unofficial advisor to the Israeli Government, using archival and published sources. In 1957, Kahn predicted that the European Economic Community (EEC) customs union would harm Israel’s trade and that the EEC would reject Israel’s application for Associate Membership. He proposed a major reform of the Cost of Living Allowance (COLA) that would significantly reduce real wage protection and move Israel closer to the Swedish wage system. In 1962, he took a neutral position regarding the sustainability of Israel’s international imbalances. He also criticized Israeli policymakers for overestimating the potential benefits of an Israel-EEC commercial agreement, and argued that the EEC would make reducing Israel’s trade deficit more difficult, even if the United Kingdom did not join. Ultimately, Israeli policymakers ignored Kahn’s advice: they continued to push for EEC Associate Membership and failed to adopt his proposal for COLA reform. In that sense, Kahn was unsuccessful as an advisor, but he was probably successful in the more limited sense of helping government officials attain greater clarity on economic issues.