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WEEKLY NEWSLETTER
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Israel
Index
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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