To start page
Israelis consider themselves a Western nation. And there is strong evidence to support that belief: Israel has a stable — albeit turbulent — political regime, an advanced economy, a reasonable infrastructure, a relatively educated population, a modern public health system, and a comprehensive social welfare system.
Etty Konor-Attias is a PhD student in the Department of Public Policy at Tel Aviv University and research coordinator at the Adva Center.
Shlomo Swirski is a sociologist and academic director of the Adva Center.
Yet in most of these areas, Israel lags behind the West. To take just one example, Israel’s social welfare system includes most of the services expected of a Western welfare state, but its level of public funding is such that most beneficiaries live below or barely above the poverty line.
The main reason behind the relatively low social welfare budget has to do with the main competitor for public money: the military budget, which enjoys highest priority. That priority, in turn, derives from the fact that with very few exceptions — the decade after the Sinai War of 1956 and the decade or so after the 1973 Yom Kippur War — Israel has been in constant conflict with varying coalitions of Arab states in 1948, 1956, 1967, and 1973, and with the Palestinians in 1948, 1987, 2000–2005, and 2023–2024. In addition, there have been numerous low-intensity confrontations like the two intifadas and the two invasions of Lebanon (1982–2000 and 2006); and presently (2023–2024), a higher intensity war by proxy (Hamas) with Iran.
The defence budget did not always enjoy top priority: up to 1967, Israel was mainly occupied with the absorption of huge waves of immigration that necessitated the provision of food, shelter, and employment. That is, a civilian agenda. It is said that soon after the war of 1948, Yigal Yadin, the then-Chief of Staff of the IDF, came to Ben Gurion to ask for a larger defence budget in anticipation of a possible “second round” against the Arab armies. Gurion refused the request, arguing that he needed the money to absorb new immigrants. Yadin resigned, and Ben Gurion proceeded with his civilian agenda.
Israel finds it hard to finance the full costs of maintaining its ‘imperial’ military status without foreign assistance.
The war of 1967 turned out to be a watershed for Israel, seizing the Sinai Desert and Gaza Strip from Egypt, the Golan Heights from Syria, and the Palestinian West Bank from Jordan. Israel’s initial decision was to hold on to them all, at least as bargaining chips, a decision that soon turned Israel into a major actor in the Middle East. With a larger standing army and a powerful US-supplied air force, Israel became a different country. If the well-known sociologist Eric Hobsbawm could quip that Zionism took the Jews from Shtetl to Statel —the Jewish state, although no more than a Statel in size, had become a regional power.
The new geopolitical status did not come free. It required a huge investment in military personnel, arms and ammunition. As Amir Oren wrote in Haaretz back in 2004,
It took a mere eight companies — paratroopers, Golani and Border Police. They secured the open, fragile borders of Israel … right up to May 1967 … That was the entire ground force the Israel Defense Forces was asked to commit to maintaining security along the confrontation lines with Jordan, Egypt, Syria, and Lebanon. There was no fenced, electronic obstacle line covered by air power…
That changed as soon as Israel opted to keep the new territories: as Amir Oren stated, the number of companies needed to defend the now longer borders then jumped to 92: “Ninety-two is more than eleven times eight — and 92 companies is the force the army needed after the Six Day War to guard the new lines and patrol the conquered”.
Biden: We Have Your Back
Half-a-century later, in 2020, the size of Israel’s regular armed forces was much larger, comprising 4.24 percent of the labour force, a figure that ranked ninth out of 161 countries. No other OECD country ranked this high.
The military budget became the single largest item in the Israel’s annual budget. Impressed by Israel's military performance in 1967, the US adopted Israel as its major proxy in the Middle East. The adoption came with a large aid package — the largest in the world before the eruption of the war in Ukraine. Most of the aid package came in the form of US dollars for the purchase of US-made armaments. But there was also a cost paid in Israeli shekels: fuelling, training, and maintenance of the gift.
Let us look at the numbers. There are two main ways of comparing military budgets: as a percentage of GDP or as a percentage of the total national budget. Israel stood high on both: in 2022, Israel’s military budget amounted to 4.51 percent of its economy — the highest percentage among OECD countries. That same year, Israel's military budget stood at 12.2 percent of its total annual budget.
From the very beginning of the present war, Israel’s prime minister and almost all IDF generals have frequently warned that the war will be long.
And that is not the whole story. Economist Yossi Zeira points out that the above GDP figure is partial, as it does not take into account the loss of GDP caused by the fact that a large number of young men are outside the civilian labour force, a fact that translates into a 5.7-percent loss of GDP per year.
Once the defence budget is determined, not much is left for other, non-military civilian budgets. In 2023, while the average civilian public expenditure in OECD countries stood at 42.2 percent of GDP (not including interest and military expenditure), in Israel it stood at 32.9 percent — a quarter less.
With all those resources, Israel finds it hard to finance the full costs of maintaining its “imperial” military status without foreign assistance. Today, foreign financial and non-financial military aid comes mainly from the US. In the past, it had more varied sources: in 1956, such aid came from France and Great Britain and from 1967 on, from the US.
According to the US Council on Foreign Relations, US aid accounts for some 15 percent of Israel’s defence budget. At the time of this writing, the US has signed a memorandum of understanding assuring Israel nearly 4 billion dollars per year through 2028. As for the actual fighting in the present war with Hamas, the US provided Israel with tank and artillery ammunition, bombs, rockets, and small arms, and was considering further supplies, including 50 F-15 fighter aircraft.
Enough to keep the fighting going.
Permanent Wars, Permanent Distantiation from the OECD
Wars in our region used to have a beginning and an end — even the Yom Kippur war, and certainly the so-called Six Day War. Now it appears that there are wars with no expiration dates.
From the very beginning of the present war, Israel’s prime minister and almost all IDF generals have frequently warned that the war will be long. The Bank of Israel seems to agree, as it recently published a figure of 250 billion shekels for the total cost of the present war with Hamas — if the war lasts until 2028. That means a permanent very large military budget, continuous large aid packages from the US, and growing pressures on the budgets for social services, demands for which increase as a result of the ongoing war and seemingly unending dislocations.
The need for a massive investment in Israel’s social services is well-known. On most socio-economic indicators, Israel is located at the bottom of the OECD scales. The situation is such that even if there are no budget cuts, services suffer from a lack of man — and mostly woman — power, as a growing number of professionals are no longer willing to work for the low salaries offered by the public sector. Which means that Israel’s chances of reaching the higher echelons of OECD social and economic scales will grow dimmer and dimmer year by year, as the hostilities continue and the military budget maintains its first-priority status.