The Arab revolutions of 2011 turned violent conflicts have renewed scholarly interest in exploring the role political economy may have played in their causes, dynamics, and consequences. Of great significance within those broad lines of inquiry is the phenomenon of “war economy,” and its multiple manifestations, as a dominant system within ongoing wars, as well as possibly shaping the context of post-conflict reconstruction. There is less attention, however, to the idea that a “war economy” may be a central and ongoing part of states’ economies, rather than an abnormal event that occurs during periods of violent conflict. Israel is a case in point for the latter. Throughout the past century, Israel’s very existence has been, and continues to be, primarily dependent on a permanent war economy system.
The establishment of the state of Israel in 1948 inaugurated an era of persistent instability, wars, and conflicts in the region. Understanding the Israeli state as a settler-colonial regime guided by ambitions of expansionism and regional hegemony, helps explain why it has been a key actor in much of the region’s major wars and conflicts throughout the past century. The ideological underpinning of the Zionist state inherently embraced military prowess and supremacy, fostered by a culture of militarism and a highly profitable militarized business sector. Much of Israel’s economic prosperity is due to its military industrial complex being a key node in regional and international conflicts. In turn, the global promotion of Israel’s war economy lies primarily through transforming the occupied West Bank and Gaza into a testing ground for military hardware, surveillance technologies, and unconventional weapons.
Israel’s military industry preceded the establishment of the state. In the 1920s, Zionist settlers in Palestine founded a clandestine network of military workshops to produce weapons and ammunition for Zionist paramilitary groups. Zionist military industry was further boosted by the establishment of TAAS in 1930s, currently known as Israel Military Industries (IMI Systems ltd), which specialized in the production of assault rifles, light guns, mortars, grenades, and ammunition. Imports of weaponry from Europe, facilitated by the British colonial mandate, also heavily armed Zionist groups. This effectively ensured military supremacy over the Palestinian resistance and systemically fueled the ethnic cleansing operations against the population in 1948, leading to the violent birth of the Israeli state. Throughout the 1950s and 1960s, Israel’s military industry became a significant pillar of the economy, and, following the Arab-Israeli war in 1967, Israel embarked on large-scale modernization and advancement of its military industries. In the 1980s, Israel formally achieved a level of military self-sufficiency, and was already exporting billions of dollars in arms per year. Today, Israel stands as one of the world`s leading traders of arms and military services.
Along with Saudi Arabia, Israel has the largest military budget as a percentage of its GDP in the world. In recent years, Israel has spent around 5.2 percent of its GDP on its military, thus surpassing USmilitary expenditure (3.5 percent of its GDP), and Russian and Chinese military spending (4.5 percent and 2.1 percent of GDP respectively). In addition, such massive military spending is accompanied by high employment in military industry. In fact, around twenty-five percent of the Israel’s labor force is absorbed in military and related industries, while about half of the labor force is involved indirectly in various private and public military-related projects.
Israel built a global reputation as being one of the world’s largest exporter of arms with annual sales of approximately 6.5 billion dollars. As much as eighty percent of its military production is directed for export to more than one hundred countries, specifically to developing countries. Yet it is a bloodstained reputation. While Israel does not publicly list all importing countries, evidence indicates that a significant proportion of its arms go to dictatorships and regimes accused of excessive violations of human rights, war crimes, and genocides. As noted by Beit-Hallashmi (1987, p.xii) “mention any trouble spot in the Third World over the past ten years, and, inevitably, you will find smiling Israeli officers and shiny Israeli weapons on the news pages.” To name just a few, Israel was involved in arm supply to Pinochet’s regime, apartheid South Africa, Azerbaijan, and Israeli-made weapons were used in the Rwandan genocide, El Salvador’s civil war, and Ethiopian’s civil war. Furthermore, Israeli arms trade penetrated Chinese, Brazilian, and Indian markets all of whom ranked among the top importers of Israeli military and security products.
Israel is also a large importer of arms. Yet, its arms imports are heavily subsidized by US and other Western taxpayers. As a strategic pillar of the American global military order, the Israeli military operates as a research and development functionary for US military industries and receives more than half of all American foreign military financing. Cumulatively, it has received around 121 billion dollars in military aid from the United States since 1949. In 2016, the Obama administration signed a record agreement granting Israel 38 billion dollars of military aid over ten years; an agreement that was described by the State Department as the “single largest pledge of bilateral military assistance in US history.” As for European states, Israel is a major military partner of most EU member states, trading most notably with Germany, France, Italy, Spain, and Finland. In the context of security research, Israel enjoyed the status of the main non-EU participant in the European Security Research Program (2007-2013), which supported projects worth 393.6 million euros to develop Israeli drone technology. Recently, the European Union approved 162 projects with Israeli participation within the Horizon 2020 research cycle, to a total value of 452.3 million euros which aim to provide a means of funding Israeli military and security companies.
Military and security companies are central to Israel’s economy. Firms operating within the military-industrial sphere can be classified according to size and form of ownership: 1) State controlled military companies are the largest and include companies such as Israel Aerospace Industries, the Military Industry, Israel Aircraft Industries, and the Armaments Development Authority (RAFAEL). 2) Around 1500 medium-sized firms are privately owned and focus on surveillance and a range of military and security instruments. 3) Private-public ventures and non-governmental industrial agencies closely linked with the state military sector, which focus on a wide range of military and security productions.
The so called “start-up nation” that relies on hi-tech innovation is in fact deeply propelled by Israel’s military spending on research and development. Former high-ranking army officers and officials commonly utilize their previous military service for private profit in these industries. Some of the well-known Israeli security companies established by former army officials are, Audiocodes and MetaLink, Elbeit, Comverse, Checkpoint, and Nice Systems. Gordon calls this phenomenon an “experience economy,” which involves the packing and selling of Israel’s military experience to foreign customers. Besides developing advanced military technologies, many of these private companies are concentrated on “homeland security,” specialized in integrating military-civilian security control by developing surveillance equipment; an industry that boomed after the 9/11 attacks and the subsequent global “war on terror.”
For several years, almost all military index reports have ranked Israel as the most militarized nation in the world. Israel’s nation-building has been rooted in the “nation-in-arms” doctrine, whereby the army plays a central role in every aspect of society and culture. This serves to make the Israeli population in a perpetual status of mobilization for war. Studies surveying Israeli perceptions toward the military regularly suggest a broad consensus in support of the army. Various public institutions are deeply involved in diffusing cultural militarism and assisting the military sector. Israeli academia, for example, is systemically deployed to serve military industrial needs through research and technological modernization, training students to work in the field of military, and conducting courses on international marketing of military technology.
Since the Israeli state occupied the West Bank and Gaza in 1967, it violently turned people, lands, and resources into a laboratory to test its unconventional weaponry and military technologies. Israeli military testing intensified since the Second Intifada in 2000 and the subsequent military aggressions such as the Second Lebanon war in 2006, and Gaza in 2008-2009, 2012, 2014. Reports suggest that after every military aggression by Israel, military sale overseas soar. According to Haaretz “in 2002, such exports were worth two billion dollars, grew to 3.4 billion dollars in 2006, and were six billion dollars in 2012. In 2013, the three largest defense contractors all showed increases in sales: Elbit had annual revenues of three billion dollars; IAI 2.65 billion dollars; and Rafael two billion dollars. At fifteen percent, Rafael’s sales showed the highest growth rate.”
Israel’s devastating wars on the besieged Gaza Strip caused thousands of deaths among Palestinian civilians and the wide spread destruction of houses and infrastructures. Yet, for Israel, these wars represent a transnational marketing event for its “battle-tested” new military products. According to an investigation by human rights groups following “Operation Protective Edge,” thirty-seven percent of those killed died in drone attacks. Strikingly, Elbit which produces eighty-five percent of Israeli drones, saw a 6.1 percent increase in value, “bringing the company close to an all-time high set in 2010.” As affirmed by the military correspondent, Amir Rapaport, “from a business point of view, the operation was an outstanding thing for the defense industries.”
 N. Gordon, “The political economy of Israel`s homeland security/surveillance industry,” WP III, The New Transparency: Surveillance and Social Sorting, (2009), 20.
 Edo Konrad, “The story behind Israel`s shady military exports,” 972 Mag (2015). See also Jimmy Johnson, “Israeli Arms Sales to Rwandan Genocidaires Should Not Be Surprising” Jadaliyya (2012).
 “US approves record $38bn Israel military aid deal,” BBC, (2016).
 Shuki Sadeh, “For Israeli Arms Makers, Gaza War Is a Cash Cow,” Haaretz, (2014).
 Corporatewatch, Gaza: Life beneath the drones,” Corporatewatch (2015).
 B. Makuch, “The Gaza Conflict Is Fuelling Israeli Weapons Sales,” (2014).
 Shuki Sadeh, “For Israeli Arms Makers, Gaza War Is a Cash Cow,”Haaretz (2014).
[This article is one of five contributions to the Jadaliyya roundtable on war economies. Click here to read the introduction or read other contributions by Toby Jones, Pete Moore, and Mandy Turner.]