The OECD Takes up Arms: Israel’s Defence Spending and the OECD

This is the third in a series of articles on the possible upcoming acceptance of Israel into the Organisation for Economic Co-operation and Development (OECD). In May, the final vote of the OECD Ministerial Committee will take place on whether to invite Israel to join as a full member. The first article[1] reviewed how including Israel in this prestigeous international organization would be a boost to Israel”s legitimacy whilst deliberately ignoring the multiple crimes committed by Israel against the Palestinians and its ongoing violations of international law and human rights. It was further noted that accepting Israel would devalue the meaning of the word “democracy” and undermine the international standing of OECD members.

The second article[2] outlined the serious flaws in the OECD”s own logic regarding recognition of Israel”s borders. The OECD relies on data provided by Israel which includes details about the illegal colonies and their Israeli residents in the occupied Palestinian territories, but which includes absolutely no information concerning the Palestinian population subject to Israel”s control. By accepting this data, the OECD would also be adopting Israel”s apartheid perspective and policies according to which Israel may do as it wills in the occupied Palestinian territories, in contravention of international law, while ignoring the very existence of the Palestinians in these areas.

Now, however, the discussion turns to the characteristics of the Israeli economy itself, and specifically how its military aspects are uniquely different from any military expenditures in OECD countries. While many OECD members are belligerent states that maintain large standing armies and engage in warfare (chief among them the United States), Israel”s military is such a defining feature of its economy that this sets it apart from all other OECD countries.

Israel is all about defence

The Israeli army is officially entitled the “Israeli Defence Forces (IDF)”, and the OECD accepts Israel”s definition of its military expenditure as spending on “defence,” conveniently forgetting that Israel is an aggressive country. In the 62 years of its existence, Israel has launched an invasion of Syria, three invasions of Jordan, three invasions of Egypt and five invasions of Lebanon (it has also been attacked twice by neighboring countries). It has engaged in multiple terrorist attacks, assassinations, skirmishes and bombings against other countries (including Dubai, Egypt, Jordan, Iraq, Lebanon, Sudan, Tunisia and Syria). Last but not least, it has engaged in a military occupation of the Palestinian and Syrian populations and has launched countless attacks against the Palestinian population – both inside Israel and in the Gaza Strip and the West Bank. Israel is also one of the biggest exporters of weapons in the world (Sipri, 2010).

All of this is done in the name of “defence.”

Clearly, Israel”s constant engagement in conflict is not a result of some accident, or some inexplicable hatred of Arabs towards Jews. It is because of the role that Israel plays in the Middle East, as a branch of U.S and European imperialism, promoting ethnic policies and engaging in military expansionism. As such, the term “defence” expenditure in no way reflects reality.

According to the OECD and Israeli official data, Israel spends 8% of its GDP on defence, more than any OECD country (OECD, 2010b: 18). About one fifth of that is military aid from the U.S. By comparison, the majority of OECD members spend only 1-2% of their GDP on defence (OECD, 2010a: 29).

The OECD notes that such a massive expenditure on defence is not only a tremendous loss of resources, but also a qualitative difference from other OECD countries. Israel”s workforce is defined by the millions of workdays lost to military service (and reserve duty), and the public space in Israel is studded with security guards, who perform invasive security checks at commercial venues, transportation networks and public offices, creating countless delays and making everyday activities slower and more cumbersome (Ibid.).

Table 1, above, illustrates the comparison in defence spending between Israel and the OECD. Every Israeli citizen spends on average US$ 1,774.5 on defence every year (not including the aid from the U.S). Conversely, it is possible to note there were 7.5 million Israeli citizens in the first quarter of 2010, but only 2.8 million were employed. Accordingly, an average Israeli worker spends US$ 4,693 every year on defence, just by paying taxes (ICBS, 2010).

As Table 2 above shows, a direct result of Israel”s focus on military spending is that there are fewer resources available for other things. The Israeli government spends less on social policies than the OECD average, including on pensions, health, housing, the labor market and education. The notable exception is expenditures on long-term care for people with disabilities and for gariatric nursing, which is comparable with the OECD average.

As a result of decades of under-investment in social policies, Israel has failed to live up to its potential. Table 3, above, demonstrates that Israel has accumulated a high public debt, and had a slower per-capita growth rate than the OECD average (OECD publications focus on the past 4 years in which Israel had a comparatively high growth rate, “skipping” over the years of the second Intifada which were devastating to the Israeli economy).

Israel is thus among the most unequal of all OECD countries, comparable to the U.S and Poland (although this is based on 2005 data, and since then Israeli inequality has further increased). Israel also has the highest poverty rate compared to all OECD countries (OECD, 2010b: 15).

Official unemployment in Israel is surprisingly lower than the OECD average, mostly because people suffering from under-employment, people who have given up looking for jobs and people who have usedup their rights for unemployment benefits are not registered in the official unemployment figures (Ben-Shakhar et. al., 2006).

It should be mentioned, as a side-note, that the Israeli government also spends the least amount of money on development aid abroad compared to any OECD country (OECD, 2010b: 229).

The real expenditure on defence

A recent study by Tal Wolfson, an economics student building upon 1989 research by economist Eitan Berglas, shows that the official statistics for defence expenditures published by Israel and used by the OECD do not include several crucial items:

* The value of the lost time conscripts spend in the army (as opposed to being gainfully employed).
* The value of the land used by the military, which in Israel reaches nearly 50% of all its territory, and which is not used for economic purposes.
* The loss of productivity as a result of deaths and injuries of military personnel and civilians, as a result of military conflict.
* The cost of “civil defence” projects such as shelters, which are a legally-required component in apartments built in Israel, and emergency programs for protecting civilians in case of attack.
* The cost of security services provided by hundreds of private security companies, which employ tens of thousands of security guards.
* The budgets for the secret security services in Israel – the GSS (General Security Services, or “Shabak”) and the Mossad, which are not included in the official figures for the defence budgets, but are rather hidden in the government”s budget reserves.
* The cost of maintaining government-managed emergency supplies of food and petroleum, to be used in case of war.
* Security agencies not included in the cost of defence: the Discharged Soldiers Department, the Atomic Energy Committee and the Coordinating Office for Government Activities in the Territories (COGAT).

Wolfson calculated that if the items above would be considered, the real expenditure on defence in Israel would not be 8% of the GDP, but NIS 88.9 billion, which amounts to 12.3% of the GDP (for 2008). This is 53% higher than the official figures, and even Wolfson”s study could not take into account numerous expenses that are not reported properly and for which there is insufficient data (Wolfson, 2009).

To amend the calculation above, it would mean that every Israeli worker actually spends US$ 7,798 on defense (not including aid from the U.S).

It should be noted that the expenses above are not completely absent from the OECD reports on Israel. In fact, the OECD counts much of them as “civilian” expenses. Therefore, the distortion in the data is double – the expenses are not only absent from the military expenditures of Israel, but are misleadingly inflating the figures on Israel”s civilian expenditures.

What Does it Mean

The meaning of this data is that Israel can be understood, to borrow Naomi Klein”s term, as a “fortress state,” more military base than country (Klein, 2007).

If Israel would be accepted as a member to the OECD, it would significantly alter the statistics of the OECD, making it possible for OECD countries to boost military expenditure and still be well below the OECD average.

The name of the OECD is the Organization for Economic Cooperation and Development. The inclusion of Israel, a state whose economy is devoted so intensely to conflict and destruction, would raise serious questions concerning the meaning of “cooperation” and of “development.”


* Ben-Shakhar, Arik, Schuldineger, Zvi, Toker-Maimon, Oshrat, 2006, Unemployment Report 2006 [Dokh Avtala 2006], Commitment to Peace and Social Justice.
* ICBS (Israeli Central Bureau of Statistics), 2010, Statistical Yearbook 2009, Jerusalem.
* Klein, Naomi, 2007, “Laboratory for a Fortress World,” The Nation, July 2nd, 2007.
* OECD, 2009, Government at a Glance 2009, Directorate of Public Governance and Territorial Development, October 2009.
* OECD, 2010a, OECD Economic Surveys: Israel, Volume 2009/21-January 2010, Supplement No. 3, OECD Publishing.
* OECD, 2010b, OECD Reviews of Labour Market and Social Policies, OECD Publishing, January 2010.
* SIPRI, 2010, “SIPRI Arms Transfer Database,”, accessed April 18th, 2010.
* Wolfson, Tal, 2009, “The Security Burden and the Israeli Economy; A Second Look at the Official Statistics, 2009,” Paper, unpublished, December 2009.



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