Lawrence Solomon, Financial Post
A freed Israeli military economy would only propel its economy to new heights
To the delight of Israel’s enemies and the dismay of its supporters, libertarian Senator Rand Paul, a potential Republican contender for the United States presidency, argued while in Israel this week that the U.S. should phase out the $3-billion per year in aid that it provides Israel’s military. Ending this aid along with U.S. aid to all foreign countries — call it the Rand Paul Doctrine — would actually leave Israel better off, he claimed to raised eyebrows.
Criticism was quick, especially from Israel’s supporters in the U.S. Said Senator Bill Nelson: “Israel needs the full assistance of the U.S. It’s the only way Israel can remain secure.” Said the National Jewish Democratic Council: “Senator Paul’s misguided views on aid to Israel are plain wrong.”
In fact, the Rand Paul Doctrine is eminently sensible and should be seen as such, including to Israel’s supporters. Paul’s assessment that U.S. “aid hampers Israel’s ability to make its own decisions as it sees fit” is indisputable, as is his assessment that the U.S. gift of military hardware represents lost contracts for Israel’s defence industries. Fresh eyes on Israel’s need for U.S. help would be salutary.
For starters, let’s dispense with the myth that, but for the grace of the U.S. government, Israel could never have survived against its much more populous and better-armed enemies. In the first decades following Israel’s creation in 1948, the U.S was less friend than foe, generally siding with Israel’s Arab neighbours, whom the U.S courted for their oil wealth and to keep them out of the Soviet sphere. The U.S. not only gave Israel little economic and no military aid in the early years — the first military grant wouldn’t come until 1974, a quarter century after Israel’s founding — it refused to even sell arms to help the fledgling state defend itself. Meanwhile, the U.S. not only sold arms to Israel’s enemies, it also lavished them with economic and military aid through a Marshall-type plan for the Middle East.
Worse, the U.S. used the full force of its diplomacy to undermine Israel’s ability to defend itself. In 1956, after Egypt blockaded shipping into Israel and seized the Suez Canal, an international waterway owned by the U.K. and France, the three countries jointly invaded Egypt to restore their rights. Although U.S. president Eisenhower acknowledged that Egypt’s “grave and repeated provocations” had led to the invasion, he decided to curry friendship with the Arab world by forcing the invaders to withdraw. To bring to heel a resistant U.K., which was still destitute after its losses during World War II, Eisenhower threatened to financially cripple it, by selling U.K. bonds to devalue the pound and blocking a $1-billion IMF loan that the U.K. desperately needed. To get Israel to withdraw from territories captured in the war, which it refused to do without guarantees that Egypt would cease attacking its civilians and its ships, Eisenhower threatened Israel with expulsion from the UN, adding gravitas to his demands by making them in a radio and television address to the American people from the White House.
The U.S. attitude toward Israel changed, and the military aid began, only after the U.S. realized that Israel had built a potent military that it could enlist in thwarting Soviet ambitions in the Middle East. Even then, from Israel’s perspective the U.S. aid often amounted to compensation, to persuade Israel to act in what would otherwise have been against its own interests.
For example, after Israel won the Sinai peninsula from Egypt in the 1967 Six Day War, the Sinai became a valuable asset of Israel’s, partly because it served as a buffer to thwart future Egyptian attacks, partly because Israel discovered oil there, a commodity needed by both its military and economy. When Egypt failed to get the Sinai back in its 1973 Yom Kippur War against Israel, it decided to cut a deal with the U.S. — it would switch sides in the Cold War, abandoning the U.S.S.R. for the U.S., if the U.S. could persuade Israel to abandon the Sinai, along with the oil and military bases it had built there. The U.S. agreed to the deal, and obtained Israel’s agreement by providing it with partial compensation. Subsequent large military grants were also tied to Israel’s agreement to serve some U.S. geopolitical interest.
In recent decades the U.S. has been more friend than foe, the two countries having developed a strong alliance, and U.S. military aid to Israel has grown to its current $3-billion per year level (Israel now receives no economic aid). But the common view by Israel’s supporters and haters alike that Israel needs a $3-billion handout for its survival is nonsense. Israel has a powerhouse economy — the best performing in the developed world — that could easily absorb a $3-billion hit, which amounts to about 1% of its GDP. When Israel was poor, its military absorbed a whopping one-third of its GDP. As Israel became affluent and its military more efficient over the decades, the cost steadily dropped to 25% of GDP, then 20%, then 10%, then 7.5% and now approximately 6.5% of GDP. If Israel needed to assume the full cost of its military, the cost would merely revert to 7.5% temporarily before resuming its downward trajectory.
That downward trajectory would likely speed up under a Rand Paul doctrine, which would also deny aid to Israel’s neighbours. With Egypt and the Palestinians shorn of U.S. arms, Israel would be able to shrug off much of its defence burden, which today remains more than three times the Western world’s average. Israel’s defence spending would also drop because it wouldn’t be as reliant on expensive U.S. arms — under terms of its military aid agreement with the U.S., about $2.25-billion of the $3-billion must be spent on U.S. arms suppliers, whose merchandise often needs to be retrofitted to meet Israeli needs.
Paul’s other arguments — that Israel’s military industries would benefit once the Israeli government wasn’t tied to buying American and that “our money sometimes clouds the sovereignty of Israel” — are, if anything, understatements. Although Israel’s arms industry is one of the world’s largest, it has been thwarted on numerous occasions by the U.S., which blocked Israeli arms sales to China and Russia, and stopped Israel from building military jets that could compete with America’s. A freed Israeli military economy, the single biggest factor in Israel’s phenomenal economic growth, would only propel its economy to new heights.
Rand Paul’s motivation in ending all foreign aid, of course, has little to do with Israel’s welfare: He is chiefly concerned with balancing the U.S. budget and establishing a non-interventionist approach to foreign relations. Paul is today viewed as impractical, unrealistic and out of touch with diplomatic realities, but past U.S. presidents, in hindsight, including Eisenhower, often regretted their forays into what is sometimes called chequebook diplomacy. In a future column, I’ll assess how the Rand Paul Doctrine would have fared instead.
Financial Post
LawrenceSolomon@nextcity.com
NEXT: How the Middle East would have evolved under the Rand Paul Doctrine. Clickhere.
For Lawrence Solomon’s first column in this series, about Israel’s dynamo arms industry, click here.
yamit82 Said:
Cause the military like its playtoys!!!!!!!
Egypt, Russia Seal $2B Arms Deal
Saudi Arabia and UAE foot the bill for sale of advanced defense systems, helicopters, aircraft and anti-tank missiles.
Question: Why would a country that is bankrupt, can’t feed or provide employment for almost 50% of it’s population need to have military parity with Israel?
Egypt has no apparent existential enemy requiring such a large and modern army.
IT HAS LONG BEEN MY POSITION THAT EGYPT IS ISRAEL’S MOST DANGEROUS EXISTENTIAL ENEMY. ALLOWING THE EGYPTIAN MILITARY BACK INTO SINAI WILL COST US IN THE FUTURE. IT WILL BE SHOWN TO HAVE BEEN A MAJOR STRATEGIC MISTAKE. (4 wars with Egypt since 1948)
THERE IS NOTHING LEFT OF THE CAMP DAVID AGREEMENTS CONCERNING EGYPT EXCEPT AN ISRAELI FLAG ON OUR EMBASSY IN CAIRO.
NOW IT SEEMS THE RUSSIANS ARE BACK ON TWO OF OUR BORDERS.
In some ways the US treats IL the way China treats Africa. China takes the minerals from Africa for almost nothing and sell their cheap products back at inflated cost. The US takes the row material from IL (brain drain/inventions) and makes mega-box while forcing IL to buy overpriced products. This also gives more power/influence to American Jews who for the majority are on the left.
yamit82 Said:
Over use of split-infinitives???????? Darlin
honeybee Said:
Think of it as a dangling participle… 😉 ??????
@ honeybee:
Mediterranean Prayer.
@ yamit82:
You post me!!!! Then ignore me and go to sleep!!!!!!!! Rude!!!!!!!!
@ yamit82:
Is that satire,or satyr?????????
honeybee Said:
I was never accused of being discriminating… That’s dweller.
bernard ross Said:
Thought yawl cowboys were more discriminating?????????
@ yamit82:
Smarty pants, cain’t show you nothing!!!!!!!!!!!
@ bernard ross:
Head of Danish Parliament to Visit PA, Skip Israel
Israel angered as Mogens Lykketoft, Speaker of the Danish parliament, plans to visit Ramallah and Gaza but not Israel.
yamit82 Said:
these are the kind of “releases” that Israel needs to facilitate. the best defense is a good offense. If the obama admin became mired in scandal and constant release of damaging info then their time would be consumed with self preservation. The time is now. Putin treats the US admin like a bunch of kids, which they are. this one release will cuase the US a lot of problems in that arena. Every day the US loses more credibility. The only other forerunner leader in the race to lose credibility is Erdogan who manages to find new allies and enemies to alienate on a daily basis. A cabal of clowns and buffoons, give them the rope, and a little encouragement,and they will hang themselves. Obama has retreated home and left the flack to his dummy stooges. Hillary is hoping her debacles are forgotten by 2016. The smart move she made was getting out.
Putin’s Revenge:
“F**k The EU” – US State Department Blasts Europe; Revealed As Alleged Mastermind Behind Ukraine Unrest
@ honeybee:
Thanks: saw that 2-3 years ago.
One-State Solution: Give the Middle East to the Jews
@ Bear Klein:
@ Yidvocate:
The amount of US aid, about $3 billion, has remained steady in nominal dollars since 1979, while the CPI has increased by more than three times during that period. The cost of weapons increases much faster than the CPI, and the amount which was substantial in 1979 is now negligible. The aid comprises 0.02 percent of the US GDP and 0.5 percent of its military budget. For Israel the figures are, respectively, 1.5 percent and 17 percent. Though even the 17 percent can be realistically offset by streamlining the Israeli army, the situation is actually much simpler: Israel spends 77 percent of the American aid for American weapons. R&D is a major part of advance weapons costing, and Israeli purchases help amortizing it. In effect, Israel receives the US subsidies in order to pass them to the US military contractors. In terms of purchasing-power parity with Russia, US military aid to Israel amounts to about half a billion dollars annually and close to 3 percent of Israel’s military budget. Some of the weapons Israel procures in America are virtually useless, untested, hyper-expensive military toys, superfluous in real combat.
Addicted to US weapons, the Israeli army came to resemble its American counterpart in terms of inefficiency, skyrocketing costs, and the lack of training and daring spirit.
Large-scale procurement of American weapons has made Israel dependent on America for any military operations and highly susceptible to threats of an American embargo on arms deliveries. Israel currently places tens of thousands of small (less than $100,000) orders with US defense contractors, which suggests across-the-board dependence on American suppliers for spare parts and minor items. That creates immense political dependence on the US.
Besides Egypt around ($2 Billion yearly), America also aids PA and the PLO though the money nominally bypasses the PLO, it pays the salaries of PLO functionaries and employees. Now America directly funds Fatah, which even pays Al Aqsa Martyrs’ Brigades and Hamas employees in Gaza with that money. In-funding the Palis, America directly finances anti-Israeli terrorist infrastructures.
@ yamit82:
Texas cowboy: http://www.youtube.com/watch?v=4YBgUCX9gEs&feature=share
yamit82 Said:
Strange bed-fellows Darlin,with that you should be familiar!!!!
yamit82 Said:
honeybee Said:
So we have the option of being fired or quitting. Either way is fine with me.
Here is where our national interests coincide with antisemites although from different motivations.
After we are done with U.S. “aid” there will still remain one large leverage the U.S. has over Israel and that is it’s veto power at the U.N.
To cut all the strings, Israel must resign from the U.N. which is a demonstrated enemy of the Jewish state and something Israel should have done long ago.
The US military aid to israel compells Israel to buy US military gear only from US companies at exhorbitant prices. On Government to Goverment sales (so called “foreign Military Support”) the US military branches take a percentage of the deal for “management”. Israel is compelled to ask US for permissions to sell its military gear outside of Israel out of the so called “national security interests of the USA”.
The Foreign Military Funding (FMF) aid money from the US has led to the establishment in Israel of a lobby and special interest groups who feed on these funds, and extensive goverment bureaucracy to manage these funds. It’s become addictive. Just look at the IMOD mission in New-York – the epitomy of bureaucratic arterio-sclerosis…
Israel is a 300 Bn dollar economy with a per-capita GDP of over 30 thousand dollars, and could easily afford forfeiting the US aid. Such step would also significantly reduce the US political leverage on Israel. It would also be good PR for Israel as a country that forfeits US aid in the face of US domestic economic problems.
The Senator’s motive may be different, but from the pure Israeli antional inetrest he is absolutely right!
@ Eric R.:
I drink Kentucky burbon, Where are the States goin?????????????
honeybee Said:
No, I am not drinking tequila at all (I prefer rum, actually), but at the rate America is going, I’ll need to drink SOMETHING soon enough.
yamit82 Said:
Whoever pays the piper calls the tune. Or as my brother-in-law once said [in his deep Texas drawl} the BOSS signs the checks!!
Bear Klein Said:
THE GREAT TEXAS PRAYER
Eric R. Said:
Your drinking to muches tequilla, Dulcito!!!!!!!!!!!!
yamit82 Said:
I have my money on you,Darlin!!!!!!
Bear Klein Said:
Or the garbage can by the bear. Or the horse by the tail. Or the child by the ear. Or the buck by the antlers.
“May G-d make us dependent not on the alms or loans of others, but rather on G-d’s full, open and generous hand, so that we may never be humiliated or put to shame” Birkat ha-mazon.
American aid to Israel is easy to trace. The embargo on arms shipments to Israel during her War of Independence gave way to the first grant of $135 million after the 1948 war to pull Israel away from the USSR. Israel first bought arms from America in 1962, and the purchased amounts were trivial, about $270 million total from 1949 until 1970 on credit, and some cash purchases. From 1971–73, Israeli purchases increased, and included military loans of about $1 billion, which Israel fully repaid. Significant aid started only from 1974, after the last major war. The increase in military cooperation was no charity, as America lured Israel away from France, thus making a nice geopolitical acquisition. The American military-industrial complex got a well-paying customer. American taxpayers were initially unconcerned: Israel received no grants until 1985, but paid for her purchases. Israel spends almost all aid on US imports. More significantly, America balances military aid to Israel with aid to Arabs, and Israel derives no relative benefit from the aid. American arms sales to Israel provoked the Soviets to offer free supplies to Arabs, who often received aid from both sides. Arabs received about three times more aid than Israel; that further tilted the balance of aid away from Israel. Soviet weapons shipments to Arabs were much greater than meager American deliveries to Israel; in the late 1980s, Arab and African regimes owed the USSR more than $100 billion. Demographically strained Egypt, despite its modest oil reserves, would not have been able to buy weapons if not for the American aid. America has aided Jordan and Egypt since at least 1957, and also supports the Palestinians, and so essentially finances anti-Israeli terrorism. If aid to Israel makes no sense to American taxpayers, how is it that aid to Egypt, Jordan, and Palestine does?
A totally irrelevant war in Iraq cost America hundreds of hundreds of billions of dollars, and indirect costs are estimated to bring it to well over a trillion dollars. Compared to that, a mere $3 billion annually buys America the allegiance of the Middle East’s strongest military power.
We deprecate Esau for having sold his birthright for a handful of lentils, yet Israel sells her birthright, her independence, her right and power to decide, for a meager $3 billion a year in aid. Aid to Israel is a great bargain for America, a lousy one for Israel.
Must Read: for a correct analysis and perspective on the true nature of American aid on the Israeli economy and military.
Economic and Strategic Ramifications of American Assistance to Israel
Yarden Gazit
“The debate surrounding the moratorium on building in the settlements of Judea and Samaria exposed the problematic nature of America’s aid to Israel and its impact on the public agenda. Whether one’s opinion is that a settlement freeze would be contrary to Israel’s best interest or not, major policy decisions of this kind should not be based on a sense of reciprocity, such as compensation Israel might seek from the United States in return for freezing construction. Yet a great many people do not appreciate the real costs of America’s assistance to Israel. This paper presents the ramifications of this aid on Israel’s economy, followed by an examination from a strategic perspective.” READ MORE HERE
Israel (not US) leads global drone export market
Israel’s Killer Robots
Israeli UAV Drones Video
@ yamit82:
Agreed! Israel should take the bull by the horns and budget a phase out of US aid. Revenues that come in from the Gas fields should offset this budget difference.
The Psychological independence will help Israel make independent decisions. This way it will be easier to buy blue and white in lieu of US products when superior or more cost effective.
Israel Does Not Benefit from US Foreign Aid In Real Terms
Israel can live without U.S. aid Lawrence Solomon, Financial Post
A freed Israeli military economy would only propel its economy to new heights
I agree 100% with both the author and Rand Paul. Yamit82
Lawrence Solomon: Israel’s growth industry
Israel converted its economy from largely agriculture to largely military
As America becomes increasingly Hispanic and adopts Euro-style leftist economics and thinking, and becomes eventually a one-party leftists State (See California for the future), this is sound advice.
Israel will have to turn more toward Asia as America becomes more like Latin America.