David Harris
June 10, 2010 - 12:00am

Israel's ongoing occupation of the Palestinian territories is damaging the economy of the Jewish state, said a report published on Tuesday by the Adva Center for Information on Equality and Social Justice in Israel.

The document, entitled the Cost of the Conflict, is the latest in a series of reports, which is published once every two years.

Perhaps the main conclusion of its author, Adva's academic manager Shlomo Swirski, is that Israel's three-week military operation in and around the Gaza Strip 18 months ago cost the country dear.

The overall conclusion is that "the prolonged conflict with the Palestinians undermines sustainable economic growth, burdens the budget, limits social development, absorbs most of the energies of the political leadership, calls into question the legitimacy of the actions of the Israeli Defense Forces (IDF) and isolates Israel internationally," the paper summarizes.

Speaking with Xinhua on Wednesday, Swirski openly agreed that his organization has a vested interest in the report because the organization firstly seeks greater economic equality for all citizens and the freeing up of funds currently used by the military could help that aim. Secondly, he said, Adva focuses on social justice.

The decision to examine the role of the military was based on looking at the possible causes of inequality in Israel today. Adva also investigates the effects of the free-market economic policies of the government in separate reports.

"Between 1989 and 2010, the Ministry of Defense received budget increments earmarked for the Palestinian conflict in the amount of some 12 billion U.S. dollars, a sum that exceeds the 2009 budgetary outlay for schools and institutes of higher learning," the report contends.

Both Israel's mission in Gaza and last week's Gaza flotilla episode cost the country considerable sums, and caused international pressure on Israel and as has always been the case " turn the Palestinian conflict into the main preoccupation of the political leadership," said Swirski.

During the three-year period of violence from 2001, known as the second Intifada, or uprising, when bus bombs were regular occurrences on Israel's streets, the country's economy grew at just 0.3 percent annually. That compares to the days after the peace agreement with the Palestinians in the early to mid 1990s when economic growth hit the 6 percent mark.

Opponents of Adva's position say much of the growth in the decade was the result of a huge wave of immigration from the former Soviet bloc rather than a peace dividend.

To prove its point, Adva documents the comments of the Bank of Israel concerning Israel's actions in Gaza, which Israelis have dubbed Operation Cast Lead. The central bank warned that there would be a large price tag attached to the operation itself, some 1.2 billion U.S. dollars. Additionally, the impact on tourism would be substantial.

In 2007 the governmental Brodet report looked into army expenditure and recommended a large increase. One of its arguments was that more money was needed to deal with the Palestinian areas, said Swirski.

Where it backs or negates Adva's case, it is worth noting the Brodet report was published two years after Israel withdrew all its troops from the Gaza Strip.

The news release informing journalists of the publication of the Adva report summed up its findings in one simple sentence "the prolonged conflict forces Israel to choose again and again between guns and butter."

Professor Stuart Cohen, an expert on the Israeli military with the Begin-Sadat Center for Strategic Studies located just outside Tel Aviv, is the first to admit that should there suddenly be peace in the region there would be an obvious boost to the Israeli economy.

However, in present circumstances he offers an alternative vision to that of the people at Adva.

"To the best of my knowledge the defense spending as a proportion of the national budget has declined drastically over the past 30 years or so," Cohen said on Wednesday.

In the aftermath of the 1973 War the military accounted for between a quarter and a third of the entire state budget, now it is in the realm of a single digit, Cohen explained.

"It has declined while the economy has grown enormously, so it's declined as a proportion and in real terms. On the other hand, spending on education and social welfare has grown," he said.

There has been an increase in sensitivity towards social needs in recent years and the changes made to the army have freed up funds for other sectors of the economy, added Cohen.

Not only does Cohen maintain that the IDF is not burdening the economy, but also believes it may even be contributing to it. Investment in military needs raises employment, the technologies developed often have civilian as well as military purposes and the IDF has proved itself to be a breeding ground for Israel's all- conquering high-tech industries.

That having been said, Cohen accepts there is where to cut from the military's fat. Indeed he goes much further that Yair Lapid, a media star who appears to be ready to enter the political arena at the next general election. Lapid called on Tuesday night for the axe to fall on the ever-popular Army Radio.

"That's just small money, peanuts, compared to some of the things. We could talks about the pensions that are paid to military personnel... far too many reserve days are wasted on just sitting around," said Cohen, who added the possible sale of high- value land close to Tel Aviv currently owned by the military.

At the same time though, he said there must also be room to cut from the education budget without damaging children's education.

"There's nothing that can't be cut if you put your mind to it but this doesn't mean that the situation at the moment is so catastrophic," Cohen said.

Over and above actual spending though, Adva warns that if Israel continues with its current military policies, the economy will be affected in other ways. For example, "Israelis are proud of their country's credit rating, but the figures show that Israel is ranked no higher than 40 among the nations. Most of the developed countries have a rating of AAA, while Israel's rating is A," Adva noted in presenting its report.


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