After 40 Years of Decline, Israel Defense Burden Still High

But major study says that even big reductions in military spending would do little to solve Israel’s economic problems.

Moti Bassok
Moti Bassok
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IDF soldiers atop a tank outside the central Gaza Strip. July 31, 2014.
IDF soldiers atop a tank outside the central Gaza Strip. July 31, 2014. Credit: Reuters
Moti Bassok
Moti Bassok

Even after four decades of a declining defense burden, Israel spends more on arms relative to the size of its economy and population than any of 11 major world economies. But cutting defense spending would do little to ameliorate Israel’s socioeconomic problems.

That’s the conclusion of a major study by a team led by Shmuel Even, a senior researcher at the Institute for National Security Studies who wrote the report ahead of a major security conference next week. The study marks a relatively rare case of academic research into Israeli defense spending.

“From the middle of the 1970s until 2010, there was a sharp drop in all the parameters, but in 2011-2013 the rate slowed and in 2014 there was a small increase because of the cost for Operation Protective Edge,” said the study, referring to the 50-day war Israel fought with Hamas in the Gaza Strip last summer.

“All told, the multiyear decline in the ratio between Israeli defense spending and gross domestic product was the greatest of all the countries surveyed. Yet in spite of that, the ratios in Israel were still the highest,” concluded Even, an economist who served in the army’s intelligence corps.

The $16 billion Israel spent on defense in 2013 amounted to 5.6% of GDP, or $2,037 per person. Only the United States approached those figures, spending 3.8% of GDP on its military, or $20,023 per capita.

France spent 2.2% and $961, Turkey 2.3% and $250 and Japan 1% and $382.

The study noted that countries that face few strategic threats spend more in absolute terms than Israel, but far less than Israel relative to the size of their economies and populations.

An additional reason for Israel’s high spending, besides the great security threats it faces, is the fact that it does not belong to the North Atlantic Treaty Organization. The members of the Western military alliance share defense resources, reducing the burden on each state. Italy, for instance, spent $32.7 billion on defense in 2013, just 1.6% of GDP.

Rejects benchmarking

For that reason, Even said, Israeli policymakers would be making an mistake to benchmark Israel’s relative defense spending against Western European countries. Israel could, however, look to developments in defense spending over time to benchmark itself.

The research is due to be presented at a conference of the INSS next week, where President Reuven Rivlin as well as the defense, foreign and economy ministers and Israel Defense Forces top brass will be in attendance. In addition, Zionist Camp leaders Isaac Herzog and Tzipi Livni and other opposition political leaders will be attending. U.S. President Barack Obama’s Middle East adviser Philip Gordon as well as Dennis Ross and Martin Indyk are also expected.

Israel’s steep defense costs are the subject of annual wrangling between the Finance Ministry and the defense establishment, a phenomenon unknown in other countries. Even sharply criticized the way these talks are conducted asserting that there was “no in-depth, expert discussion about the defense budget” or the basic assumption that go into building the budget. Nevertheless, Even said, “there is a wide agreement in Israel concerning [strategic] threats and the matter has received high priority by every government since the establishment of the state. Only in rare cases can you find difference between one government and the next on the matter.”

The one key instance of a major change in Israeli defense-spending policy has been the response to Iran’s nuclear ambitions. The government of Prime Minister Benjamin Netanyahu, when it replaced the coalition led by Ehud Olmert in 2009, allocated 11 billion shekels ($2.8 billion) to develop the capability of striking Iranian nuclear sites if necessary.

“Countries that see themselves entitled to operate [militarily] far from their borders like the United States, Britain, France and Russia have considerably higher defense costs than countries who don’t see themselves that way,” wrote Even. “Israel has no such pretensions but it has invested in a long arm that will enable it, among other things, to stage an independent attack on nuclear installations in Iran if needed.”

Even concluded that Israel’s high defense spending is not a principal source of the country’s socioeconomic problems, which he said stemmed mainly from income inequality. At close to 5%, Israeli defense spending, excluding U.S. aid, is only a small fraction of civilian investment and spending and is lower today than ever, the study said.

“In other words, increasing civilian spending and investment by just 1% would require cutting 20% of the defense budget in local currency terms. This addition to the civilian sector wouldn’t bring an appreciable change in the standard of living or in investment. By comparison, the negative impact on the defense sector would likely be enormous,” the study said.

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