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Situation Assessment 19 July, 2011

Israeli defense spending and the Arab revolts

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Saleh al-Naami

Al-Naami is a Palestinian refugee currently – and temporarily – residing in the al-Maghazi refugee camp in the central West Bank. He holds a Master’s degree in policy studies specializing in Israeli Studies from Jerusalem University and is currently working on his doctoral thesis. At the moment he is a lecturer in the Economics and Political Science Department at the Islamic University in Gaza. He is also a researcher and journalist specializing in Israeli affairs and its various junctions. He is also an affiliated researcher with the al-Jazeera Research Center in Doha the al-Mesbar Studies and Research Center in Dubai the Center for Middle Eastern Studies in Amman and the Researchers’ Center in Beirut. Al-Naami is the author of The Army and the Press in Israel published by Dar ash-Shuruq in Cairo in 2005 and Israel: Between Militarism Religion and Corruption published by Dar al-Kitab al-Jamii al-Ain UAE. He has also published several studies in publications including “Wajhat Nadhar” (Cairo) “al-Bayan” (Riyadh) “Dirasat Sharq Awsatiyya” (Amman) “Dirasat Falastiniyya” (Ramallah). He also works as a correspondent for the Cairo-based English-language publication al-Ahram Weekly. Since 1999 he has also been the Palestinian territories correspondent for the London-based pan-Arab daily al-Sharq al-Awsat. He has published hundreds of articles on Israel and its relations with the Arab Palestinian and international contexts. He has also translated the work of Israeli writers from Hebrew into Arabic. He has also appeared in documentary films on the Arab-Israeli conflict.

The Israeli security establishment predicts that the democratic revolts across the Arab world and their potential ramifications will impose a reformulation of the Zionist state's fundamental defense and security doctrines, as well as essential changes to the structure, preparedness and mobilization plans of the Israeli military; this will require an increase in the security budget, and a restructuring of its components so that it can respond to the anticipated threats.

This study examines arguments presented by the leaders of the Israeli security apparatus in order to justify increased security spending in light of the Arab revolts, as well as the possible facets this increase will take, including the evaluations of economic experts and decision-makers in Israel, and their expected ramifications on Israel's economic stability and its social strength. 

Official Israeli figures indicate that the signing of the peace agreements with Egypt and Jordan (Camp David with Egypt, and Wadi Araba with Jordan) represented significant turning points in the Zionist entity's achievement of substantial economic progress.

 The diminution of security threats on the southern and eastern borders allowed Israeli decision-makers to greatly decrease defense spending, and resources that had been allotted to security were diverted towards investment in civil infrastructure and advanced technologies, as well as other sectors. This led to a huge reduction in the size of the security budget relative to the national budget and GDP.

However, one of the consequences of the 1973 war was that, in order to avoid further military failures in the future, in 1974 then-Prime Minister Golda Meir's government made the unprecedented decision to almost double defense spending, so that it reached 47% of the national budget, and 37% of GDP, in order to cover the costs of restructuring the military, . [1] 

In order to emphasize the extent of change the security infrastructure has undergone since this step, it is sufficient to point out that the defense budget for 2011, which amounts to 49.4 billion shekels (approximately USD 12 billion), the largest of its kind in Israeli history in absolute terms, represents just 15.1% of the national budget, and 6% of GDP, which is 864 billion shekels (approximately USD 201 billion). This is the smallest percentage of GDP allotted to defense ever recorded in Israel's history.[2]

After the economic crisis that overtook Israel following the 1973 war, economic experts referred to the ten years that followed the conflict as the "lost decade"; the interest Israel paid on its debt during that period was greater than the size of its total spending on education, health, social security, housing and welfare.[3]

In other words, the increasing strength of Israel's military following the war came at the expense of economic growth, and the state almost declared bankruptcy. This would have occurred had it not been for a sweeping economic plan enacted by the national unity government in 1985.

Following the signing of the Camp David agreement, the decrease in defense spending enabled Israel to funnel resources to pay the interest on its loans, and divert some of the funds towards the health, education, and housing sectors. In other words, "peace" and stability helped enable Israeli decision-makers to follow a socioeconomic policy that established the foundations of a welfare state, making Israel more attractive to Jewish immigration.

 This development played a large role in improving the Israeli economy, enabling Israel to absorb waves of Jewish immigration from the former Soviet Union at the end of the 1980s and the beginning of the 1990s.

 Economic expert Shlomo Maoz argues that it was these waves of immigration that strengthened the economy, since they brought in many qualified workers and skilled technicians, particularly in the advanced technology sector, which led to a growth in exports and rapid economic development.

 During this period, the percentage of skilled scientific workers leaped from 10% to 20% of the total population. This in turn played a role in increasing export revenues; the latter grew from USD 50 billion a year prior to the immigration wave, to USD 80 billion after that.[4]

Israeli analysts suggest that the signing of the Camp David agreement paved the way for the Palestine Liberation Organization's (PLO's) signing of the Oslo Accords, and Jordan's signing of the Wadi Araba pact, which made possible further increases in the pace of economic growth.[5]

Economic experts exclude the period of the al-Aqsa intifada from this picture, since it affected the Israeli economy negatively. In the four years of the intifada, the Israeli economy lost approximately 12 billion US dollars, and the per capita GDP declined by approximately 1800 US dollars/year.[6] Undoubtedly, these figures lend credibility to the conclusion that the security situation and structure has a noticeable effect on economic activity.

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  • [1] Merav Arlozarof, "The Collapse of the Security Doctrine Usually leads to Economic Collapse", The Marker, 31/1/2011. http://www.themarker.com/markets/1.599447
  • [2] Motti Busch, "Who Reveals the True Numbers of the Security Budget", The Marker, 4/12/2011. http://www.themarker.com/news/1.624815
  • [3] Merav Arlozarof, op.cit.
  • [4] Tani Goldstein, "Had it not been for the Russians, We would have been Twenty Years Behind", Ynet, 5/12/2010. http://www.ynet.co.il/articles/0,7340,L-3842545,00.html
  • [5] For example, see, Omer Gendler, "The Security Budget will Increase, and Israel's Relations to the United States will be Strengthened", personal blog, 28/2/2011. http://omergendler.blogspot.com/2011/02/defense-budget-will-increase.html
  • [6] Samuel Iven, "Security Expenditures in "Israel": Givens and Implications", translated by the Zaytouna Center for Studies and Consulting from the Israeli National Security Research Center, 5/6/2010. http://www.alzaytouna.net/arabic/?c=201&a=114136