A freed Israeli military economy, the single biggest factor in Israel’s phenomenal economic growth, would only propel its economy to new heights.
By Lawrence Solomon
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 not only tends to be expensive, it 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. Next week, we’ll assess how the Rand Paul Doctrine would have fared instead.
NEXT: How the Middle East would have evolved under the Rand Paul Doctrine.
For Lawrence Solomon’s first column in this series, Israel’s growth industry, click here.
View Lawrence Solomon’s original Financial Post publication at: http://opinion.financialpost.com/2013/01/11/israel-can-live-without-u-s-aid/