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Israel
Provision of Defense Services
Throughout its existence, Israel has been obliged to devote a
considerable part of its resources to national defense. Since
1973, Israel's annual defense expenditure has equaled that of
the Netherlands and exceeded that of Sweden. In per capita terms,
Israel's expenditure has been two to three times as large as theirs.
Defense expenditures in the Netherlands and Sweden each amounted
to 3 to 4 percent of GNP in FY 1976; in Israel, they amounted
to more than 25 percent of GNP. The persistence of a high defense
expenditure over a very long period makes Israel's situation unique.
The simplest definition of the defense burden is the total budgeted
resources diverted to defense and thus precluded from other uses
by citizens. Other resource costs include the opportunity cost
of labor working for the defense sector and therefore unavailable
to other sectors, thus reducing civilian output. Finally, foreign
currency spent on military imports is unavailable for civilian
imports.
Although estimates of the defense burden suffer from inadequate
data, the Central Bureau of Statistics publishes data on the noncivilian
component of public consumption, which is used as a proxy for
defense expenditures. Apart from the war years of 1967 and 1973,
the annual fluctuations have been dominated by long-term changes
in defense costs (commonly referred to as "ratchets" or step functions).
By 1986 defense expenditure had declined to a range from 10 to
16 percent of GNP, depending on the measure used.
These official data do not include information on forfeited earnings
of conscripted soldiers, forfeited earnings of persons on reserve
duty, and costs of casualties, stockpiling, civil defense, land
devoted for army training, and many other government and civilian
expenditures ascribed to defense. Although it is impossible to
assign a rough order of magnitude to the items mentioned, some
economists have speculated that they are not insignificant components
of the civilian public sector. This becomes clear when one considers
that the length of time devoted to conscription, reserve duty,
and regular army duty has been lengthened (see Conscription; Reserve
Duty , ch. 5). Government defense functions involved in operations
in the West Bank and the Gaza Strip add a further cost to the
defense burden.
The cost of defense also includes direct defense imports and
military aid from the United States. In FY 1986, Israel received
United States military aid in the range of US$3 billion. A large
share of these funds has regularly been spent in the United States
(see table 7, Appendix A).
On the other side of the defense-burden equation are the beneficial
by-products associated with military activity. The most important
benefits are education, absorption of immigrants, agricultural
settlement, and the development and manufacture of weapons and
equipment. An example of these beneficial by-products was the
development of the Kfir interceptor, which created jobs for technicians
and laborers (see Defense Industries , ch. 5). In short, when
estimating Israel's defense burden it is important to consider
the cost reductions implicit from these beneficial by-products.
Data as of December 1988
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