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Israel Table of Contents


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