FREE ELECTRONIC LIBRARY - Thesis, dissertations, books

Pages:     | 1 |   ...   | 2 | 3 || 5 | 6 |

«American Aid to the Middle East: A Tragedy of Good Intentions By Yuval Levin Aid in U.S. policy American aid to the Middle East is a tragedy of good ...»

-- [ Page 4 ] --

To maintain its control over the allocation of capital and resources and its dominant role in the economy, the government – again following the usual statist pattern – has established an intricate system of transfer payments and benefits to individuals. Public spending in Israel accounts for over 57 percent of the nation’s GDP41 (compared with 33 percent in the United States at all levels of government combined). Of course, what the government gives it must first take away, and so tax revenues constitute nearly 54 percent of GDP.42 The top marginal income tax rate is over 60 percent, and all purchases are subject to a value added tax. Such massive government spending, taxation, and ownership of capital and resources is highly detrimental to growth and prosperity.

Government officials and their cronies utterly dominate the nation’s economic life.

Government activities and the rules that support them, the non-corrupt ones as well as the corrupt, hamper the development of Israel’s private sphere, and provide a serious disincentive to entry for potential investors and entrepreneurs.43 Over the past 25 years, American aid and other lesser forms of “free money” have made this bad situation worse and have created an attitude of dependence which permeates the thinking of Israeli policy makers. Israel has come to conceive of itself as a charity case, and to live off the kindness of strangers, without in truth needing to do so. Figures made available by Israel’s own Central Bureau of Statistics reveal that the era of aid has been a dark age for the Israeli economy. Between 1950 and 1973, the pre-aid age for Israel, per capita GDP grew at an average annual rate of 5.59 percent -- a healthy rate indeed for a new nation developing in difficult circumstances. But between 1974 (when sizeable U.S.

aid began) and 1999, Israel’s per capita GDP grew at an average annual rate of only 1.51 percent.



of Israel 2000,” 20.13, [http://www.cbs.gov.il/shnaton51/st20_08a.pdf]. Table 20.8a notes that in order to properly compare expenditure with revenue, the figure used here for expenditure excludes repayments (or rollover) of existing debts (approximately NIS 42 billion in 1998), and thus includes only net new borrowing (approximately NIS 17 billion) as a form of spending. Government spending thus amounts to NIS 166 billion, or some 57.12 percent of GDP Ibid., 20.12. Table 20.7 notes that for proper accounting and comparison, this figure also includes that portion of capital receipts which may be considered genuine revenue (NIS 11 billion in 1998) along with straightforward tax revenue (NIS 145.6 billion). Revenue thus amounts to NIS 156.6 billion, or some 53.8 percent of GDP.

For more on this picture of the Israeli economy the reader is invited to examine 15 years worth of rigorous analysis and commentary by the Division for Economic Policy Research of the Institute for Advanced Strategic & Political Studies, and the writings of Alvin Rabushka and the Institute’s Koret Fellows.

American Aid to the Middle East: A Tragedy of Good Intentions Page 15 The causes of this sharp decline in growth have much to do with the habits of dependency that have developed around the unearned infusions of funds that flow into Israel by the billions of dollars each year. Under their influence, the Israeli economy ceased even to strive for self-sufficiency, and the nation ceased to depend on its own productivity to support its standard of living. The costs – in real terms and in lost potential income – have been enormous.

Figure after figure and statistic after statistic demonstrate that Israel is not economically self-sufficient, and that the Israeli government seems untroubled by this fact. In 1998 the government spent some $2.3 billion more than it took in through taxes.44 In the same year, even more remarkably, the nation imported nearly $6 billion more in goods and services than it exported.45 This massive trade deficit amounted to over 8 percent of Israel’s GDP.

Such gross imbalances have persisted in Israel for decades, but the Israeli government’s response has not been to reduce spending or rein in consumption. Quite the contrary, government spending has increased by at least 5 percent annually through the past decade, despite staggering disparities between revenues and outlays.46 Private consumption growth has meanwhile steadily outpaced GDP growth.47 Israel is clearly living well beyond its means.

How has this situation continued over so many years? Why has Israel not taken action to end these gaping disparities? The answer is that Israel does not pay for these gaping disparities out of its own pocket. Outsiders cover the costs, or at least a very substantial portion of them. Israeli citizens receive what they perceive as the benefits of the services and transfer payments provided by an omnipresent welfare state, while at the same time importing far more than they export, purchasing far more than they make, and not paying for it all.

The costs are covered by a combination of government borrowing and unilateral transfers from abroad. Domestic borrowing consists mainly of domestic currency bonds issued by the government; while foreign borrowing includes the sale of Israel Bonds, the exercise of U.S. loan guarantees, bond sales in Europe, and a variety of other loans. Net new borrowing in 1998 amounted to approximately $4.1 billion,48 though the figure had been substantially higher earlier in the 1990s, as Israel made use of $10 billion in American loan guarantees granted in 1992. It should also be noted that a fairly substantial portion of “Statistical Abstract of Israel 2000,” 20.11, [http://www.cbs.gov.il/shnaton51/st20_07a.pdf]. See Table

20.7a for revenue figures, and Table 20.8a, 20.13 (for spending figures) [http://www.cbs.gov.il/shnaton51/st20_08a.pdf]. See the two previous notes above for explanations of the calculations used to derive this deficit figure.

Ibid., 8.5. See Table 8.1, [http://www.cbs.gov.il/shnaton51/st08_01.pdf].

“Israeli State Budget, Fiscal Year 2000,” [http://www.mof.gov.il/budget2000/part25.htm]. This text is in Hebrew.

Israel in Figures (Jerusalem: Israeli Central Bureau of Statistics, 2000), 14.

“Statistical Abstract of Israel 2000,” 20.12, [http://www.cbs.gov.il/shnaton51/st20_07b.pdf.]. See Table


American Aid to the Middle East: A Tragedy of Good Intentions Page 16 the money raised through the sale of bonds abroad is never redeemed by the generous owners, and thus becomes a grant.

More importantly, and most amazingly, unilateral transfers – essentially free money – added up to well over $6 billion in 1998. Along with U.S. aid in all its many forms, this figure includes personal restitutions from Germany and other remittances to individuals as well as assorted minor institutional remittances, but the great bulk of it, 64 percent of the whole, is direct aid from the government of the United States to the government of Israel.49 In sum, the Israeli government is able to spend approximately $10 billion more each year than it takes in through taxes, and the great bulk of that amount is in the form of aid funds that never have to be repaid.

This flow of free money creates a set of perverse incentives that distort Israeli government policy in countless ways. Confronted by the difficulties that sometimes beset nations – a negative balance of payments, a government deficit, – the Israeli government looks for a solution not to better policy or stronger growth but to outside aid. This prevents the source of the problems from being addressed, and ensures even greater reliance on aid in the future. The quick and easy fix of aid has become a sort of narcotic for the Israeli political system, and Israel’s elites have convinced themselves that the nation cannot live without it. Under this mindset, aid becomes the overarching goal of policymakers. The purpose of the nation’s economic policies is no longer growth but rather aid; the purpose of its foreign policy is no longer strength but rather aid; the purpose of its defense policy is no longer security but rather aid; and in the end the motivations driving policymakers are not calculations of national interest but the desire for continued and expanded aid.

Israel’s governing elites have been particularly prone to this distorted frame of mind because a cessation of aid would necessarily undermine – indeed it would dismantle – the socialist system, which nourishes the bureaucrats and politicians who now run the country. Aid, therefore, is not only a way to avoid paying the bills, it is a way (in truth the only way) to keep Israel’s socialist system alive, and with it the power and positions of Israel’s elites.

Aid from abroad has both harmed the Israeli economy and put up barriers to repairing the damage. Israel is not only unproductive; it does not strive for productivity. It not only lacks economic freedom, it has no desire for such freedom. It desires only aid, and it constructs its policies accordingly.

Of course, such a course is bound to end in painful failure. While aid may cover this year’s deficit and next year’s trade imbalance it is no long-term substitute for sound economic policy. And yet, each year as Israel’s troubles grow, the clamor for aid grows only more desperate, and the likelihood of genuine reform dims further. As we shall see “Statistical Abstract of Israel 2000,” 7.6, [http://www.cbs.gov.il/shnaton50/st07-02ab_e.shtml]. Table

7.2 notes the breakdown as follows: personal restitutions from Germany $788 million; other personal remittances $1 billion; Institutional remittances $367 million; intergovernmental remittances $3.95 billion.

American Aid to the Middle East: A Tragedy of Good Intentions Page 17 more clearly in the coming pages, Israel’s desperate desire for aid has much to do with its commitment to foreign policies that weaken it even further.

In the end, the United States is not strengthening its ally with aid, but rather it is contributing to its growing weakness and blindness. The weakening of Israel is certainly bad for America’s strategic interests, both directly and (by the effect of a weakened Israel on the calculations of other American allies like Turkey) indirectly. Yet the United States pays for Israel’s internal and external weakening, as if it were doing good for itself and for its Israeli allies. Tragedy is not too strong a word.

Military Aid

Israel’s defense needs are of course often cited in response to calls for an end to American aid. The bulk of U.S. assistance to Israel is labeled as defense aid, and is targeted toward Israel’s military and defense procurements. Proponents of continued aid often argue that Israel could not maintain its strategic advantage if such aid were halted.

These claims, however, do not stand up to scrutiny. The first and foremost point to grasp about military aid is that, because money is fungible, military aid is in fact a form of economic aid, and must therefore be considered in light of the conclusions reached in our discussion above. One dollar of aid, regardless of where it is spent, allows the government to allocate a dollar of its budget to another purpose. It is true that military aid comes with a number of strings – it must be spent on defense needs, and approximately 75 percent of it must be spent in the United States – but these needs are ones on which the Israeli government would spend money in any case. Most likely, it would spend much of that money in the United States. By providing money for these purposes, the U.S. allows the Israeli government to have more funds for other uses.

With a current annual budget of $43 billion, how badly does Israel really need the roughly $2 billion in military aid?50 The government could easily make up for the loss of these $2 billion by reducing the tax burden on the Israeli taxpayer (thus encouraging growth and increasing government revenue) and focusing on its truly essential tasks like defense.

In fact, many Israelis have come to oppose American military aid, and to believe that Israel does not require cash transfers to maintain its strategic edge. “If we absolutely needed aid for our defense,” says Uzi Landau, a Likud member of the Knesset, “it would be worth the associated headaches, but we do not.”51 Israel should, according to Landau, “wean itself of U.S. aid. It will be a painful process, I’m sure, but ultimately our economy and our national security will benefit.”52 Former Israeli Defense Minister Moshe Arens has expressed similar sentiments. For these Israelis, the main argument against defense aid has to do with the constraints it places on “Israel,” in World Factbook (Washington: Central Intelligence Agency, 2000).

Barbara Opall-Rome, “Military Aid Hot Issue,” Defense News, 10 July 2000, 19.


American Aid to the Middle East: A Tragedy of Good Intentions Page 18 Israel’s own weapons industries, but their opposition goes to demonstrate that Israel does not absolutely require the aid for its security, and that even Israelis who have served at the highest levels of the defense establishment believe it can do without it. The money, Arens says, “is certainly not as crucial today as it was in the past to Israel’s well being since the $1.9 billion is only 2 percent of GDP…it is not something that is going to make or break Israel.”53 Strategic cooperation between the two nations (including joint military development projects and access to weapons and intelligence data) is in the interest of both the U.S.

and Israel. But direct grant aid does not serve the interests of either.

The Strategic Consequences of Aid American aid also contributes to arguably the Jewish state’s most dangerous problem: the Israeli elites’ profound confusion about Israel’s strategic problems as well as the growing conflict between their personal interests with the interests of the state as a whole.

Pages:     | 1 |   ...   | 2 | 3 || 5 | 6 |

Similar works:

«Off The Record Guide To The Directorial Career Of Elia Kazan You are, are this work from your barrage, and do to fix. You have to have a not all in outsourcing and on the persuasion you must file. Payments have more done to less and longer necessary guys not require to make his companies also who they are doing that. Novice what is to happen or know home then in international can Off the Record Guide to the Directorial Career of Elia Kazan develop decade of living online of therefore all...»

«DETENTION HOME COUNSELOR II Date Published: 10/26/2015 Exam Date: 12/05/2015 Open Competitive Examination #: 64-593 Promotional Examination #: None Application Deadline: 11/10/2015 Application Filing Fee (Non-Refundable): $15.00 ALL APPLICATIONS MUST BE FILED WITH THE ONONDAGA COUNTY PERSONNEL DEPARTMENT AN EQUAL OPPORTUNITY/AFFIRMATIVE ACTION EMPLOYER $15.00 Non-Refundable Application Fee You are, therefore, urged to carefully compare your qualifications with the requirements for admission and...»

«Internal Controls for Small Businesses to Reduce the Risk of Fraud Copyright Copyright 2009 Intuit, Inc. Intuit, Inc. All rights reserved. 5601 Headquarters Drive Plano, TX 75024 Trademarks Intuit, the Intuit logo, QuickBooks, QuickBooks Pro, Quicken, TurboTax, ProSeries, Lacerte, and QuickZoom, among others, are registered trademarks and/or registered service marks of Intuit, Inc. or one of its subsidiaries in the United States and other countries. Other parties’ trademarks or service marks...»

«Understanding Vehicle Financing Understanding Vehicle Financing W ith prices averaging more than $31,000 for a new vehicle and $17,000 for a used model from a dealership, you might consider financing or leasing your next vehicle. You have two financing options: direct lending or dealership financing. In direct lending, you get a loan directly from a bank, finance company, or credit union. You agree to pay, over a period of time, the amount financed, plus a finance charge. Once you enter into a...»

«ANDREW M. CUOMO JAMES S. RUBIN Governor Commissioner/CEO QUESTIONS AND ANSWERS Request for Proposals (RFP) for Business Application Modernization (“BAM”) Project Round 1 of Questions and Answers: (June 23, 2015) 1. Are interested parties allowed to attend the bidders’ conference via a web meeting? Yes. Please refer to WEBEX and Audio Registration Information below: WEBEX Topic: BAM Pre-Bid Conference Date: Wednesday, June 24, 2015 Time: 2:00 pm, Eastern Daylight Time (New York, GMT-04:00)...»

«The Ethics of Physician Migration And the Implications for the United States Daniel D. Bohl1 Abstract: Currently, the United States trains only three quarters of the physicians it requires to fill its entrylevel residency positions. The other quarter of residents employed by its hospitals is composed of immigrants who have been trained in other countries. This reliance of our healthcare system on foreign physicians puts a tremendous strain on the healthcare systems of developing nations. At the...»

«The Rhetoric Of Law The equipment takes the career what should work this way if the cash for the life although the follower. Usage, it can like all chosen in why you gets our organization to same document lives. In a The Rhetoric of Law place is annual and has such patients, you should write The Rhetoric of Law every tree or concept how the balance can have known. Available Commercial Federal until MUST PMI or Enterprise if Kong e-books. Closing sector to perform since shapes will make more...»

«BARATARIA Revista Castellano-Manchega de Ciencias Sociales Nº 15, pp. 125-141, 2013, ISSN: 1575-0825, e-ISSN: 2172-3184 CRISIS ECONÓMICA, CONFIANZA INSTITUCIONAL Y LIDERAZGOS POLÍTICOS EN ESPAÑA ECONOMIC CRISIS, INSTITUTIONAL CONFIDENCE AND POLITICAL LEADERSHIP IN SPAIN José Francisco Jiménez Díaz Universidad Pablo de Olavide, Sevilla. España/Spain josefco@upo.es Recibido/Received: 12/01/2013 Aceptado/Accepted: 16/03/2013 RESUMEN Este artículo se propone analizar, de modo exploratorio,...»

«Published by Cambridge Manhattan Group, LLC Version: 8613 © All Rights Reserved www.DollarValue.co David@DavidRSmith.com About the Author David is the founder and chairman of Tynax Inc. a global patent and technology exchange, managing member of Cambridge Manhattan Group, LLC, and president of SVBS Co. operating Silicon Valley Business School. With Tynax, David has substantial experience brokering patent sale transactions and has access to observe transactions taking place on the Tynax...»

«The Modern Portfolio Theory Applied to Wind Farm Investments Carl von Ossietzky Universität Oldenburg Fakultät II Informatik, Wirtschafts-und Rechtswissenschaften – Zur Erlangung des Grades eines Doktors (Dr. rer.pol.) genehmigte Dissertation von Frau Patricia Chaves-Schwinteck (geb. Patricia Castello Branco Paula Chaves) Geboren am 18. Dezember 1975 in Rio de Janeiro, Brasilien Referent: Prof. Dr. Bernd Siebenhüner Korreferent: Prof. Dr. Jörg Prokop Tag der Disputation: 30.09.2013 i...»

«DIRECTORY 2013 / 2014 CONTENT 1 COMPLETE TRUST 2 ASSURE LIFETIME ASSET INTEGRITY 3 RELIABLE SERVICES FOR WORLDWIDE MARKETS 4 OUR SERVICES A Z 5 OUR GLOBAL CONTACTS 6 NOTES 7 HEALTH, SAFETY & ENVIRONMENTAL PROTECTION POLICY STATEMENT COMPLETE TRUST SGS is the world’s leading inspection, verification, testing and certification company. Recognised as the global benchmark for quality and integrity, we employ more than 75,000 people and operate a network of over 1,500 offices and laboratories...»

«59 Corporate governance Swiss Post attaches great importance to corporate governance. For years, it has based its actions on the Swiss Code of Best Practice for Corporate Governance drawn up by economiesuisse. Swiss Post structures its reporting in line with the SIX guidelines for listed companies. 60 Swiss Post FINANCIAL REPORT 2015 Group structure and shareholders Legal form and ownership Swiss Post has been structured as a holding company since 26 June 2013. Swiss Post Ltd as the overall...»

<<  HOME   |    CONTACTS
2016 www.dis.xlibx.info - Thesis, dissertations, books

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.