Many of Israel's early settlers had a socialist orientation, and today's economy is a mixture of private enterprise and government control. Electricity, water, railways, and airways are all provided by government-owned monopolies, with an annual balance sheet of US $17 billion. Since 1986, the Israeli government has encouraged a program of privatization by selling off its share ownership in these companies. By 1995, it had raised over US $3 billion in this fashion, disposing of over 25% of its ownership in Bezeq Telecommunications Corporation.

Israel's labor force consists of about 2,150,000 people over the age of 15, of which 43% are women and 12% are new immigrants. The are highly educated, with approximately one-third holding post secondary-school degrees. Of the 1996 labor force, about 20% were employed in some form of industry, 15% in commerce, 2.5% in agriculture, and 26% in public service. Unemployment is low - 6.7% in 1996 - a substantial decrease from 28.6% in 1992. The Histadrut (General Federation of Labor) is the dominant labor union, which also provides medical and social services. Until recently, it was one of the largest employers in Israel and still owns some companies.

Israel has few natural resources, and these are mainly limited to bromine, potash, and salts mined from the Dead Sea region. Most of the raw materials used for industry are imported. The largest source of foreign currency is tourism, especially to religious and biblical sites. In 1996, over 2.37 million tourists visited Israel, contributing $2.2 billion to the economy. While Israel operates at a small trade deficit, exports make up 33.6% of the GDP. The main moneymakers include processed diamonds, agriculture (especially citrus fruit), and manufactured goods. In recent years, Israel has made significant advances in several high-tech fields, such as agrotechnology, bio-optics, computer peripherals and software, energy conversion, aviation, defense, communication, lasers, and general electronics.

Since 1993, Israel has formally accepted the obligations of Article VIII of the International Monetary Fund Agreement, which prohibits exchange restrictions on payments and transfers for international currency account transactions. The Israeli government is slowly discarding its complex system of exchange controls and moving toward a policy of full foreign currency convertibility, implementing economic reforms to make investment in Israel easier for foreigners. In May of 1998, the government announced a full liberalization of foreign currency exchange, with only a few exceptions that relate primarily to overseas investment by Israeli residents and corporations and do not affect most forms of foreign trade.

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