Building A Jihadi Economy in the IEA-partII

Building A Jihadi Economy in the IEA Part II The Israel War Economy The history of imperialism shows that all major imperialist countries developed their military sector as an integral part of their economy. This is the case with respect to the United States, Britain, France, Russia and China today and was true in the case of Germany, Japan and the USSR during the first half of the twentieth century. During the period of the Second World War (1939-1945) the war sector dominated the US economy and its relative weight in the US economy is still quite high but it is not significantly dominant there currently. As against this the war economy has remained dominant in Israel and North Korea throughout their history (roughly 1950 to today). DAIMG advocates that the jihadi sector be developed as the permanently dominant segment of the national economy of the Islamic Emirate Afghanistan. In this paper we will inshaAllah explain how the war economy has been organized in Israel to ensure its permanent dominance at the systemic level. We hope that this analysis will provide some food for thought for the policymakers of the Islamic government. Israeli War Strategy Israel was founded as a war state expelling millions of Muslims during the Nakba (1948-49) and defeating Arab armies. The growth of its war economy has been central to its national, political, social and economic development throughout its history. Organizing for war economy has remained the top policy priority until comparatively recently most Arab states have been recognized as permanent enemies and policy makers have routinely emphasized the disproportionality in the population and physical resource base of Israel and its permanent enemies. Maximum resource mobilization for arms has been a permanent feature for economic policymakers in Israel. Nevertheless there has always been a recognition that the civilian economy and its growth provide the necessary base for the war effort. This has led to careful consideration of the economic constraints on war infrastructure and a shift in emphasis from quantitative to qualitative expansion of the war economy. It has also been recognized that sustaining the war effort recognizes not only military power but also social and economic support so spending on the military has also been constrained by the need to provide for a high and rising standard of living for after all Israel is a typical capitalist settler state. Israel national security doctrine is grounded in the idea that defeat in war is not affordable under any circumstances. There is realization that if Israel loses a war it shall cease to exist. Moreover there is a conviction that war with Muslims can never end. The duration between wars may be short or long but the threat of war is permanent. This commitment to permanent war reflects a commitment to national self-reliance – despite the receipt of massive military and civilian aid from the imperialists since the mid-1960s. this has led to the development of a large and highly sophisticated national war industrial complex. Commitment to self-reliance war effort has been balanced by military and economic integration with the global imperialist order, assisted by world Jewry and its extraordinary pressure on US imperialist partners.

The Israeli war sector continually serves as a first line buffer formation for the American war machine. Economic consideration has led Israel to have a relatively small standing military and it relies heavily on reserve and conscript forces. Israel is a resource poor economy and to maintain regional strategic preparedness is difficult. Israel’s security doctrine is therefore founded on a preference for relatively short wars leading to short term decisive victories while maintaining deterrence capabilities over longer periods. Success is seen as ability to carry the war into enemy territory. The war doctrine thus combines elements of an offensive and defensive strategy. The offensive strategy involving presumptive strikes is seen as cheaper especially because it quickly relocates the war to enemy territory minimizing costs to Israel’s civilian economy. Despite this a territorial defense system based on border settlements has been created in the West Bank. As the settlements grow a defensive war strategy becomes more feasible. Enhancing defense capabilities were constrained by domestic reserves availabilities while offensive capabilities depended crucially upon American military support which has grown very rapidly since 1967. Increasing the efficiency of the war sector has been a major policy concern. This led to a preference of quality over quantity in war sector development. Preference has been given to the quality of war sector inputs and to the development of efficient production technologies. Organizational changes in the war system have been initiated to reduce the cost of resource recruitment to the civilian economy. War technologies have been consistently improved and training programs have been upgraded. Factor productivity in the war sector has been continuously enhanced. Maintaining technological capability over presumed enemy states has been a key policy concern. Procurement of advanced warfare systems increased dramatically in war budgets. Indigenous research in the development of weapon system especially guided missiles has been increasingly utilized. The Israeli research community especially those invented in electronics, computer data and sensors industries play a key role in enhancing factor productivity growth in the war sector. II. The Israeli War Effort and the Economy The war sector has never been seen as a constraint on economic growth or economic stability. In 1989 aggregate war related expenditure was equal to 27.8 percent of Israeli GNP. Over the years while war expenditure has continued to increase in relative terms it’s share in national output has standardized. The military capital to gross capital formation ratio has continued to rise however it has been apparent that war expenditure generates employment industrial and technological upgrade and export growth. Growth in war expenditure was seen to be largely at the expense of domestic consumption and not civilian sector investment outlays. An increase in war expenditure impacted on consumption be reducing welfare services provided  by the state.

Financing war expenditure through taxation rather than loans was seen as preferable because loans increase public debts and cannot be progressive – i.e. they generate negative distributional effects. The income distribution effect of war expenditure in Israel has been relatively moderate – although this has not been thoroughly investigated. The positive growth effort of war expenditure has been not only through employment expansion but primarily through the development of a military industrial complex which has enhanced technological advancement, reduced imports and contributed significantly to export growth. The association between growth in war expenditure and aggregate investment has been modest but not negative. There is no evidence that resources relieved from war sector spending would find their way to civilian sector investment. It has been shown that reducing war related expenditure was not a recipe for stimulating growth in the Israeli economy. The growth of defense expenditure has contributed to the buildup of inflationary pressure especially during the 1980s.Thus the main positive growth impact of war expenditure is through its technology enhancement and employment.  In Israel war expenditure growth has contributed significantly to prevention of unemployment especially absorbing the massive inflow of Jews from the ex-Soviet Union who migrated to Israel in the 1990s, and in technological upgrade. War equipment exports have opened up new markets for the sale of civilian sector Israeli production also. War expenditure growth in Israel was influenced by growth in war expenditure of neighboring front line states, domestic elections campaigns, and profit growth of the military supplier corporations. The long term elasticity of war expenditure and GNP is positive and greater than unity. The elasticity of Israel’s war expenditure to that of neighboring state was positive but lower than unity. It has also been shown that American military aid does not influence overall Israeli war expenditure – it effects its composition mainly. Management of the war effort is undertaken by the Ministry of Finance and the Defense establishment (consisting of the Ministry of Defense and the Israeli Defense Forces). The Ministry of Finance takes a comprehensive view of the war expenditure and tries to include in the defense budget as many defense related expenditure categories as possible. Expenditure planning is on a multi-year basis. The Finance Ministry overseas the general framework of the budget and its division between local and foreign sources of finance. It also exercises some authority determining the impact of war expenditure on other segments of the public sector. The Ministry of Defense and the Israeli Defense Forces determine the particulars of the war budget and are not primarily concerned with its macroeconomic impact. Nevertheless the Ministry of Defense strongly advocates domestic acquisition of war sector inputs. The Israeli Defense Forces are often reluctant to substitute domestic products for imports. Since the 1970s the control of the Ministry of Defense over intra service budget allocations have been reduced and the influence of operational services (army, navy, Air Force, intelligence) has expanded.

The greater autonomy of the Service has led to a growth of the preferences of foreign procurement over internal production and reliance on US aid and imports has increased. This somewhat diluted the concern of the policymakers on the impact of the growth of the war sector on the civilian sector. Reliance on outsourcing has however led to the growth of corruption within the defense establishment (the Dolan scandals) and initiatives have been taken to prevent/obstruct direct contact between military personnel and Supplier Corporation. Military equipment procurement system has been gradually marketized. For major weapon systems life cycle costing techniques have been developed and alternates have been made to take into consideration for discontinued further costs of operation, training and maintenance. Procurement rules do not discriminate between public and private sector supplier companies. In the earlier years (up to about 1967) the military itself established manufacturing and service corporations. But since then outsourcing has become the norm in most instances. This shift to outsourcing has led to cost reduction and to enhanced specialization in both the military and the civilian sectors of the national economy. Reliance on outsourcing has however reduced the technological capability of military sector manpower.