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Israel Doesn’t Have To Be A Banana Republic By: Paul Eidelberg
Freeman.org | Wednesday, May 21, 2003


Israel’s dependence on the US is the result of its own flawed political system on the one hand, and of its Bolshevik economic system on the other.

Israel receives annually $1.8 billion and $1.2 billion, respectively, in military and economic aid from the United States.  The total figure is less than 3% of Israel’s $106 billion Gross Domestic Product.   Contrast this American aid with the huge sums Israel loses as a result of the following factors.

(1) Diminished capital investment and economic growth resulting from excessive tax rates. 

(2) Prodigious tax evasion, especially by the business community, which could be significantly diminished by an honest and efficient government.

(3) 40% of Israel’s National Insurance expenditures go to Arabs who comprise 20% of the population and who pay hardly any taxes.

(4) Enormous outlays of money for pensions to non-combat military officers, who must retire at the early age 45 (say instead of 60). 

(5) The high cost of security (and of course loss of Jewish lives) resulting from the Government’s failure to destroy the PLO- Palestinian Authority, which could have been done immediately after if not before 9/11.

(6) Related to the preceding item, the building of a security fence that will cost hundreds of millions of dollars (and provide little security).

(7) The failure of the Knesset to implement the annual State Comptroller’s report—sometimes two volumes in length—which documents countless cases of corruption and inefficiency in the various cabinet ministries.

(8) The loss of productive labor resulting from Israel’s bloated bureaucracy, while the inability to dismiss government employees results in wasted public funds.

(9)  The unjustifiable power of cabinet ministers to appoint the directors of dozens of public corporations, which directors are chosen not on the basis of merit but from political considerations.

(10) The grotesque amount of public funds spent on political campaigns (which exceeds, per capita, that of any other country!).

(11) The hundreds of thousands of foreign workers whose work could be done by Israelis drawing unemployment checks.

(12) The vast sums the Government dispenses to save failing kibbutzim, corporations, banks, and the Histadrut sick fund.

(13) The exorbitant perks of Knesset members, as well as the excessive number of cabinet ministries (which exceeds that of the United States).

(14) The loss of productivity resulting from Hisdatrut strikes.

(15) Of paramount importance, Israel’s inept and corrupt political system, specifically:  (a) the 1.5% parliamentary electoral threshold, which multiplies the number of parties and renders the Knesset incapable of wise deliberation; (b) the system of multi-party cabinet government which prevents the pursuit of coherent and resolute national policies; (c) the lack of political accountability resulting from the absence of regional elections; (d) the system of fixed party lists, which enables politicians (like Shimon Peres) to remain in office despite their dismal and disastrous failures.

In short, billions of dollars are lost because of Israel’s inept system of government on the one hand, and billions of dollars could be added to the nation’s wealth if Israel had a market economy on the other.  With a well-designed system government and a free economy, Israel would not need a dime from the United States. 

Moreover, given its superb scientific-technological infrastructure, Israel could even develop its own arms industries, just as it could have developed the Lavie fighter.   Through the sale of technology alone, it could bring billions into the public treasury (whereas now it cannot do so under US restrictions).  Israel does not have to be a bargaining chip in US-Arab relations.  No longer need it sacrifice Jewish national honor and Jewish national purpose as a banana republic.    



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