Control and Regulation of Capital Flows Between Poland and Palestine in the Interwar Period

Abstract

Palestine was a major destination for migrating Jews in the interwar period, with around 40 per cent of all newcomers coming from Poland. Palestine’s fast economic growth was the result of a large import of capital brought by these immigrants. Throughout the period the main goal of the Polish gov- ernment was to minimise capital transfers to Palestine while trying to sustain Jewish migration. In 1925 an attempt was made to limit the transfers, but political pressure forced the government to reconsider its position. Between 1927 and 1936 capital moved freely between the two countries, but in order to influence its flow, Polish authorities set up two banks in Palestine, and the extent of capital transfers was monitored by a number of governmen- tal agencies. When exchange control was re-established in Poland in 1936, the Jewish Agency in Palestine and the Polish government signed a transfer agreement, which proved inefficient. Poland terminated the agreement in 1938 and set up a new unilateral transfer system in which the Polish side controlled all aspects of capital flows.