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Bulletin 2: The Settlements - Economic Cost to Israel |
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Written by Shir Hever
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Wednesday, 17 August 2005 |
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Page 3 of 5
The Calculation
Income: NIS 68.492 billion
Calculating the cost of the occupation to Israel will not be complete unless the income that Israel gained by controlling the OPT is deducted from it. Kav Laoved, an Israeli workers? rights organization, estimates that between 1984 and 1992, Israel confiscated various wage-additions from the Palestinians totaling NIS 800 million. Economists Stanley Fischer (who is currently the chairman of the Central Bank of Israel) and Thomas Shelling calculated that between 1968 and 1993, Israel confiscated NIS 1.125 billion from social security taxes collected from Palestinians, a bogus taxation as social security funds were never allocated to Palestinians. Union fees for Israel?s central labor union, the Histadrut, reached NIS 481.5 million, though the Palestinians never enjoyed the union?s protection.
In addition, income was generated by exploitation across the board of Palestinians and their natural resources, primarily land and water. Shimshon Bichler and Jonatan Nitzan calculated that the income gained by Israel from controlling the OPT amounted to 10% of Israel?s GDP (as of 2001). This amount is about NIS 46.651 billion. The sum above, and the following sums, are extrapolations for the years 1970-2005.
Agriculture: NIS 1.817 billion
The World Zionist Organization (WZO), ostensibly working for the benefit of the Jewish people, has been systematically used as a primary apparatus for investments in the settlements. Funded heavily by the Israeli government, the WZO spends money in developing Jewish-only agricultural projects in the settlements. Swirski estimates that between 2000-2002 alone, NIS 385 million was spent by the WZO on agricultural projects in the settlements.
Casualty Compensations: NIS 2.985 billion
Swirski is one of the first to realize that compensations paid by Israel?s National Security to people who were harmed by Palestinian attacks should also be calculated into the cost of the occupation. Between 1980 and 2003, compensations for those directly injured or killed in Palestinian attacks totaled NIS 2.467 billion. According to Swirski, before 1980 there were very few injured and dead on the Israeli side, so there is no point in extrapolating this sum backwards.
Education: NIS 1.323 billion
Education costs of the occupation include excessive investment in schools within the settlements, incentives for teachers to work there, high security expenses for the isolated schools, classes opened for few pupils and free transportation for pupils to schools. In 2003, the extra education costs beyond those that could be expected within the Green Line (according to Relly Saar), were NIS 100 million.
Health: NIS 2.112 billion
The settlements enjoy an extensive overinvestment in health. Isolated settlements have a clinic for every 100 residents, far beyond the ratio of clinics inside Israel.
Furthermore, medical staff receives benefits for operating in the settlements and security measures ? armored vehicles, guards, etc ? incur extra costs. Swirski quotes the Haaretz estimate of NIS 1.75 billion for health care costs in the settlements until 2003 alone.(27)
Housing: NIS 6.941 billion
These costs include government subsidies for housing in the settlements and subsidized loans and grants for settlers to buy their houses. Swirski estimates this cost to be NIS 2.875 billion during the 1990?s.(28)
Industry: NIS 0.819 billion
Industrial zones built inside the settlements for the benefit of the Jewish settlers (although Palestinian workers are sometimes hired to work in manual jobs) incurred a cost of NIS 237 million between 1997-2001, according to an estimate by Dror Tsaban. This refers only to government expenditures, not private investments.(30)
Municipal funding:
NIS 5.553 billion In 2004, while municipalities within the Green Line were unable to pay the salaries of their employees, the funding for the municipalities of the settlements increased by over 14%.30 This must be compared with the cut of over 10% in the average budget of Israeli municipalities that year.(32)
Ironically, the government funding to the settlers eventually comes to oppose the official policies of the government. The government itself indirectly funds the campaign by the settlers against the Disengagement plan, as the settlers found ways to manipulate government funding to the ?Yesha Council?, the leadership of the settlers. Millions of these funds were spent on driving people to demonstrations. In a way, the funding for the settlements created a mechanism intended to prevent their evacuation.(33)
The capitalist concept is that value is calculated as the sum of money inputs. The settlements then gain a strange form of ?value? for being a bottomless pit for government expenditures.
Swirski estimates that in the 1990?s, NIS 2.3 billion were provided as extra funding to the municipalities of the settlements. This means that settlements received more than double the equivalent per capita funding for municipalities within the Green Line.(34)
Roads: NIS 2.38 billion
A special network of bypass roads, exclusive for Jewish settlers, allows access to every isolated settlement while dividing the Palestinians into isolated and blockaded communities. Road construction in the OPT far exceeds the rate of construction inside Israel. The journalist Ze?ev Sheef estimated that between 1993 and 2002, NIS 1.25 billion were spent on road construction for the settlements, but the true costs remain hidden as the budget for bypass roads was transferred to the Ministry of Defense in order to conceal it.(35)
Security Costs: NIS 119.292 billion
Naturally, security costs are the biggest factor in the cost of the occupation. A great deal of them are already dispersed among the other costs. For example, security costs for paving roads was 19% of the budget for the roads above.36 Therefore, here we will only include security costs that were incurred by the Israeli army when guarding the settlements or for protecting the settlements themselves. The security figure is obscured by the authorities, and is therefore at risk of being underestimated. We should note, however, that special budgets for military actions in the OPT exceeded NIS 14 billion since the beginning of the second Intifada, in addition to the ordinary defense budget (part of which refers anyway to actions in the OPT).
Swirski notes that between 1988 and 2005, NIS 28.7 billion were spent on extra security needs caused by the occupation through the defense budget. Unsurprisingly, the defense budget is Israel?s largest budget.
In 1994 Israel further established the new Ministry of Public Security, the first priority of which, as defined by the Israeli government, was to ?fight terrorism?. The ministry?s budget so far accumulated at NIS 64.434 billion.(37) Funds go to buy armored vehicles, to arm and train settler militias, for surveillance gear, fences and walls and a plethora of weapons and ammunition for uses ranging from suppressing demonstrations to assassinations and house demolitions.
Tax Benefits: NIS 1.811 billion
Tax benefits to the settlers come in three forms. One is extensive discounts on municipal taxes, already calculated into the municipal benefits above. Despite paying less for municipal taxes, settlers enjoy better municipal services and have more public buildings in their vicinity. The second is various tax benefits for businesses in the settlements, designed to promote industry and commerce there. The third kind is discounts in direct taxes, mainly in income tax, that settlers receive. Swirski quotes the report by the Haaretz newspaper that NIS 1.5 billion were given as tax relief until 2003 (although the calculation of Naor Gamliel would suggest an extrapolated amount of over 3 billion).(38)
Transfers to the Palestinian Authority:NIS 29 billion
Certain sums of money were transferred by Israel to the Palestinian Authority (PA). Naturally, these funds are not part of the cost of occupation because they were originally monies belonging to the Palestinians, but they should also be considered part of the occupation cost calculation as they are deducted from the income received by Israel. This expenditure, a total of NIS 5.7 billion between 1995 and 1998, did not exist before 1995 and will only be extrapolated upwards.(39)
Water: NIS 0.886 billion
Israel invested a great deal in creating a water infrastructure for the settlers, based mostly on exploiting the mountain aquifer in the West Bank and preventing the Palestinians from using it (Palestinian water consumption per capita is a third of Israeli water consumption).(40) Swirski estimated that the expense on water infrastructure beyond the average water costs for population within the Green Line was NIS 0.5 billion in the decade until 2003 (based on the Haaretz estimate). (41)
The Wall and the Disengagement: NIS 14.5 billion
Two recent costs should be added to this tally. These are one-time projects and will therefore not be extrapolated. One is the Wall, built on Palestinian lands in violation of international law as ruled by the International Court in Hague.(42) In response to this international pressure, the route of the Wall is constantly being moved and re-planned. The cost for the Wall currently stands on NIS 6.5 billion, according to Swirski?s estimate.(43)
The planned Israeli withdrawal from the Gaza Strip, called the ?Disengagement Plan?, is a project that will receive the attention of a full socioeconomic bulletin in the future. Swirksi estimates the cost of this redeployment to be NIS 3.5 billion but since the writing of his book, the updated estimate is above NIS 8 billion, a third of which is for security costs and the rest for compensations to the settlers; this does not include the costs of building new houses for the settlers inside the Green Line. Note that this cost applies only to the Gaza settlers, less than 3% of the total settler population.(44)
Interest
Finally, interest must be added for income and expenses alike. This is important as money and resources spent on the settlements could have been invested in other areas as well (infrastructure, education, debtrelief etc). To truly assess the accumulated cost of the occupation, interest must be applied to the total cost, and applied to the time since the payments were made. For the years 1988-2005, The Bank of Israel interest rate will be used. This rate is a rough estimate for the average interest available for Israeli investments during these years. For the earlier years, the average Bank of Israel interest rate will be used for the years 1988-2005, for lack of better data. The Bank of Israel interest rate is the interest that averages the interest rates on loans and on deposits. The real interest, adjusted for inflation, is used here.(45)
The interest calculation is very important, yet Swirski overlooked the effects of interest on the accumulated costs of the occupation. By calculating the accumulated interest and adjusting the costs to the settler population in any given year, we reach the conclusion that the total cost of occupation should be multiplied by 3.54
Summing the Cost
Summing the list above to obtain the total cost of the occupation for Israel is very dangerous, as many items yet remain hidden.
Sum: NIS 119.921 billion (after subtracting the income to Israel). This is more than the original estimate made by Swirski, despite the fact that the estimate for Israel?s income was also increased here by a factor of ten. Without interest, the settlers, comprising only 3.93% of Israel?s population, received as extra funds more than 13% of Israel?s budget for 2005.(46)
Sum with interest: When the accumulated interest is added to the sum, we reach the staggering amount of NIS 425 billion. In US dollars: US$ 97 billion.47
Security Implications
Almost 66% of the total cost of the occupation for Israel was in security costs, as the graph above shows. The fact that security costs far outweigh all the other civil costs means that the occupation is costly mainly because of the Palestinian resistance. The Palestinians are the true force driving Israel out of the OPT, transforming every move made by Israel in the OPT difficult and expensive and making the occupation an increasing burden for Israel.
Comparisons of Totals
The following graph shows the various estimates for the economic cost of the occupation to Israel. The bottom part is the extrapolated cost for the period of 1970-2005. The upper portion is the interest accumulated on the estimated sum.
By adding extrapolations for years for which we have no official data and by assessing the accumulated interest costs, the sum of NIS 425 billion is much higher than other current estimates of the cost of occupation. Swirski estimates the sum at 100 billion,(48) and Naor Gamliel at 2.5 billion per year.(49)
A report done by Haaretz in 2003 estimated that until that year, the total cost of occupation was NIS 45 billion. Extrapolating until 2005 and adding interest results in a sum of ?only? NIS 192 billion. However, this sum applies to the civilian costs alone (only 88% of the estimated civilian cost here).(50) It comes as no surprise that Swirski?s estimate is higher than the previous estimates, because of the thorough manner of his data collection. However, there are even higher estimates in existence.
Arie Arnon estimated that Israel lost 1% of gross domestic product (GDP) per year of occupation since 1973, as resources were diverted to the occupation instead of to developing and improving the Israeli economy. This accumulated to 32% of the GDP in 2005, or about NIS 155 billion without interest. With interest the sum is approximately NIS 543 billion. Professor Eitan Berglas also noted a loss of GDP. Berglas reasoned that the losses should be calculated only from 1988, but at a rate of 2% per year, for a total of 56% of 2005?s GDP. With interest the sum is about NIS 583 billion.(51)
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