Astounding Facts Most People Don’t Know About Israel 13
Israel has one of the world’s most successful economies despite bearing the world’s heaviest military burden
It’s the economy, stupid was Bill Clinton’s winning campaign mantra in 1992. Politicians around the world have followed it religiously, often with great success. In Israel, things are a little different. “It’s security, stupid,” has as much or greater resonance with Israeli voters.
Not that Israelis are comfortable with soaring unemployment, hyperinflation or crippling taxes. Far from it – they’ve regularly had to cope with all three and complain bitterly about them. There’s a strong collective memory of the desperate, poverty-blighted years of austerity (Tzena) in the 1950s when the young country teetered on the verge of bankruptcy and depended on German reparations to pay for her army as well as her unwieldy Soviet style bureaucracy. The problems were compounded by the huge debt incurred by the war of independence, and the doubling of her population through immigration in her first three years of statehood.
Over the subsequent decades, an economic miracle occurred. In 1960, the per capita income of Israelis was just over $1,000 per year; by 2019 it was $40,000 – a growth rate comparable to the world’s highest income countries including the oil-rich Gulf states. All Kuwaitis had to do was to dig a few holes in the desert, while the wealth Israelis generated was won through their blood, sweat and tears. Israel today has a vibrant mixed economy that has raised living standards beyond recognition. She proved more resilient than most in the face of the global economic crash of 2008-9 and was rewarded with an invitation to join the club of the world’s richest nations, the OECD, in 2010 [1]. (Whether that resilience will stand up to the even greater stress-test of the coronavirus pandemic of 2020 remains to be seen).
Known as one of the most innovative countries in the world, especially in the fields of hi-tech, science and healthcare, Israel – the Start-up Nation [2] – has attracted massive inward investment. The recent boom in tourism, the discovery of vast gas reserves off her coast, the expansion of the green energy sector, notably solar power, and the increasing strategic cooperation with her Eastern Mediterranean and even some Arab neighbours, has set the country on course for further spectacular success. Israelis are understandably keen for those trends to continue.
It’s widely believed that the buoyant Israeli economy has been the secret of Binyamin Netanyahu’s prime ministerial longevity. But that’s only part of the story. When Israelis find themselves, as they frequently do, inside that voting booth, the physical safety of their family, community and country tends to trump all other considerations. That’s hardly as surprise for a nation that hasn’t experienced a moment of real peace in the more than seven decades of her existence. Crucially, Netanyahu is viewed as a safe pair of hands in confronting the country’s numerous murderous foes. In most countries, elections focus on the economic outlook; in Israel they are also about life and death.
This is no abstract anxiety. Terrorism, war and threats of annihilation are inescapable facts of Israeli life. If you’ve spent any time in the country, you’ll be aware of the extensive network of public bomb shelters as well as the protected spaces that are a required featured of all buildings. You may also have had the unpleasant experience of running to safety with the crowd on hearing the sirens warning of an impending rocket attack by Hamas or Hezbollah. Living with ever-present menace of violence exerts a corrosive effect on collective morale, on individual mental health, and economic well-being.
Protecting Israelis against those who would do them harm costs money, shedloads of the stuff. Billions of shekels have been expended on maintaining an army, shoring up civil defence, deploying Iron Dome anti-missile batteries, and all the other paraphernalia of effective security. Israel spends more per person on her armed forces than any other country [3]. Per capita military spending is now well over $2,000 per annum – double that of the UK and about the same as the US [4]. That equates to 5% of GDP – far higher than most democracies – but even that has come down from the eye-watering peaks of 30% in the 1970s (coinciding with the Yom Kippur War) and 25% three decades later (during the Second Intifada).
But let’s look at these figures through the other end of the telescope, as it were, for they conceal a truth that is tragic in its dimensions.
Putting aside the lives destroyed, the families broken, the children traumatised by this endless and avoidable conflict (and we shouldn’t, of course, do any of that), let’s ask a related question: how much more productive, prosperous and contented might Israelis have become had they not had to shoulder this colossal burden? That’s a difficult question to answer, given the irony that much of Israel’s entrepreneurial talent was nurtured in the army. What we can do is calculate roughly the extra finance that would have been available to the Israeli treasury had peace prevailed for the last seven decades.
Taking the earlier cited figure for current military spending of $2,000 per capita – a relatively low one, in real terms, in the country’s history – and applying it to the total population in 1984 of just over 4 million (the mid-point between 1948 and 2020), comes to $8 billion per year or $576 billion over 72 years. (That’s a conservative estimate as it doesn’t take account of the conflict’s indirect costs – but let’s discount them on the assumption that the savings from those would have been needed to run a “normal” army).
That impressive sum could have been spent on meeting Israel’s numerous domestic challenges – an underperforming educational system, below average GDP per capita, low worker productivity, lack of skills (especially in the Charedi and Arab sectors), poor public transport, and an inefficient government bureaucracy. All of these are being addressed but it’s a huge struggle in the context of Israel’s unrelieved military obligations, and one that could have been mitigated by the diversion of funds from the defence budget.
The frustration at being unable to unleash her full economic potential is a key reason (along with the desire to save lives) why Israel has been trying to reach a peaceful accommodation with her neighbours since 1948. Her citizens know it and so do her enemies. That’s why they target her economic wellbeing, first through the Arab League boycott (launched before Israel’s establishment) and then the BDS movement, as a first step towards her destruction. To date, they have failed but one thing is certain: they will keep trying. Having deployed conventional warfare and multiple terrorist campaigns, they may resort to even more extreme tactics, up to and including the nuclear option. In response, Israelis will do as they have always done: prepare for the worst and hope for the best. That will involve combining a high level of military expenditure with a can-do, anything’s possible mentality.
Bill Clinton’s advice has been heeded by Israeli governments of all political hues in the past and will likely do so in the future. Yet all Israelis know that their economic future is severely constrained by the conflict.
Reflecting on all this the other night, I reached a startling conclusion: if only Israel’s enemies felt the same, a peaceful Middle East could usher in an era of prosperity for all the peoples of the region.
And then I woke up.
[1] Organisation for Economic Co-operation and Development (OECD): accessed 21/7/20
[2] Senor D, Singer S. The Start-Up Nation. The Story of Israel’s Economic Miracle. Boston, Twelve, 2009
Source: Stockholm International Peace Research Institute; accessed 27/7/20.
[4] Our World in Data, University of Oxford; accessed 21/7/20 https://ourworldindata.org/grapher/military-expenditure-per-capita-constant-2015-us?country=CAN~IRL~DNK~ITA~BRA~ISR~FRA~IND~PAK~ESP~GBR~USA
