Government Economics and Business in Term Paper

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Poverty rose after the Islamic Revolution, and so did unemployment, leaving Iran largely uncompetitive in the global marketplace. Their largest export is the sale of oil and gas, and Iran holds what is estimated to be 10% of the world's oil reserves, so their economy is growing again, and they are successfully paying off old debt that was restructured in the 1980s (Editors).

While Iran was sinking into a depression, Israel, on the other hand, was gaining ground in many areas of their economy. While they still have to import oil, and that continued during the 1975-1985 time period, their economy has modernized and gained much more ground and diversity than Iran's, at least today. However, from 1975 to 1985, the economy was a very different story. While Iran was undergoing a boom because of oil prices, Israel enjoyed no such luxury. In fact, their resources were depleted after the 1973 Yom Kippur War, and their economy was on a severe downslide. An economist notes, "Not only was Israel's economic growth rate much lower after 1972, it was also far less stable. The reasons most often cited for this slowdown include a sharp increase in defense spending, the 1982-83 energy crisis, and increased expenditures on social welfare" (Coutsoukis). Because their defense expenditures were so high during this time, Israel's growth stagnated, and they had to take foreign aid from other countries, (specifically the United States), and they had difficulty exporting enough items to create a healthy economy. The defense investments of Iran during this time helped ease some of the burden on Israel's population, and the oil agreement and pipeline investments helped ensure Israel would survive internally. However, during the period between 1975 and 1985, defense spending accounted for 25% of Israel's Gross National Product (GNP), an enormous amount no matter what the situation surrounding them was like (Coutsoukis). This was made up largely of military imports, because Israel has to import most all of its defense machinery and weaponry, and the U.S. helped out with about one-third of those defense costs during that time (Coutsoukis). By the end of 1985, the defense spending had been reduced to about 10% of the GNP, a more manageable number. In addition, the value of exports increased by the same time, which meant a reduced GNP, which meant Israel's economy was coming back on track and was ready to grow, just when Iran was reaching one of its lowest points. Social services also increased in Israel during this time, which added yet another burden to their economy, and social services had to increase in Iran during this same period, because there was more unemployment and cries out for economic reform. Many Iranian leaders and the highly educated left during this time, and immigrated to Israel and other countries like the United States to escape the Islamic Revolution regime and the toppling economy.

Another aspect of Israel's economy during 1975 through 1985 was the increase in oil prices, which harmed their economy, as well. Israel has no oil resources of its own, and has to import all its oil from other countries, and so, the price increases in the 1970s really added a burden to their economy. Iran, on the other hand, holds massive oil reserves, and is one of the premier members of the Organization of the Petroleum Exporting Countries (OPEC), and so their economy was helped by these rising oil prices, both before and after the Islamic Revolution in 1979. Therefore, while Iran was on the decline, Israel was on the rise, and today, Israel has a healthy economy, and Iran is basking in the spoils of the oil price increases of this year.

In conclusion, today, Iran and Israel are two of the most powerful countries in the Middle East, which clearly keeps them at odds. Understanding their history, however, adds context to the current situation in the Middle East. Iran and Israel have always "set themselves apart" from their Arab neighbors, both believing that they are above the Arabs of the region in many ways. In this, they share a common bond, and for many years, that bond stayed together despite outside influences. From 1975 to 1985, the area changed drastically, including modernization and stimulated economies. Israel continued to boom, while Iran essentially went bust for many years.

References

Coutsoukis, Photius. "Israel's Economy." Photius.com. 2004. 3 July 2008. http://www.photius.com/countries/israel/economy/israel_economy_economic_growth_and_~13.html

Editors. "Iran's Economy." Iran Trade Association. 2008. 3 July 2008. http://www.iraniantrade.org/doinbiz/econ.asp

Kirshner, Sheldon. "Israel's Ties With Iran Have Been Mercurial." CanadianJewishNews.com. 21 February 2008. 3 July 2008. http://www.cjnews.com/index.php?option=com_content&task=view&id=14065&Itemid=86

Melman, Yossi. "How Israel Lost to the Iranians." Iran Press Service. 2006. 3 July 2008. http://www.iran-press-service.com/ips/articles-2006/december2006/iran_israel_oil_071206.shtml

Inside Intel/the Story of Iranian Oil and Israeli Pipes." Haaretz.com. 2007. 3 July 2008. http://www.haaretz.com/hasen/spages/911655.html

Parsi, Trita. Treacherous Alliance: The Secret Dealings of Israel, Iran, and the U.S. New Haven: Yale University Press, 2007.

Weiss, Stanley a. "Israel and Iran: The bonds that tie…[continue]

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