Israel’s militarised economy: How perpetual conflict drains GDP and deepens structural inequality

Indigenous Palestinian and Mizrahi Jewish communities have long practiced economic models rooted in communal sharing and resistance to state violence, such as the *sumud* (steadfastness) economy in the West Bank, which prioritises local agriculture and cooperative trade over dependency on militarised GDP growth. These traditions contrast sharply with Israel’s state-led militarisation, where 25% of the budget is allocated to security, crowding out social welfare programs that could address structural inequality. The erasure of these models in mainstream discourse reflects a colonial epistemology that dismisses non-Western economic paradigms as 'backward' or irrelevant.

Israel’s war economy traces back to its 1948 founding, when the state’s economic model was built on land confiscation and the displacement of 700,000 Palestinians, creating a perpetual refugee crisis that now costs $10 billion annually in humanitarian aid. The 1967 occupation of the West Bank and Gaza further entrenched a dual economy, where Palestinian GDP per capita stagnated at $3,000 while Israeli GDP per capita soared to $50,000, a disparity maintained through military control of resources and trade. Historical parallels include apartheid South Africa, where military spending (14% of GDP at its peak) led to economic collapse, and the US post-9/11, where war expenditures ($8 trillion and counting) diverted funds from domestic infrastructure.

In India, the concept of *Gandhian economics*—which rejects militarisation and prioritises rural self-sufficiency—offers a counterpoint to Israel’s war-driven GDP growth, showing how economies can thrive without perpetual conflict. Similarly, the Rojava model in Syria, built on democratic confederalism and ecological sustainability, demonstrates an alternative to state militarisation, where GDP is measured in community resilience rather than military output. These examples highlight how Western-centric economic metrics (e.g., GDP) often obscure the true costs of war by ignoring non-Western frameworks of prosperity.

Studies show that military spending has a negative multiplier effect on GDP growth, with every $1 spent on defense reducing long-term economic output by $0.80 due to crowding out of productive investments (e.g., education, healthcare). The Bank of Israel’s estimates align with IMF data, which found that countries engaged in prolonged conflicts experience a 2-3% annual GDP contraction due to lost trade, infrastructure damage, and brain drain. Meanwhile, research on post-conflict recovery (e.g., Rwanda, Bosnia) demonstrates that economies rebound faster when military expenditures are redirected toward civilian infrastructure and social programs.

Artistic movements like the *Breaking the Silence* collective in Israel use narrative and visual art to expose the spiritual and psychological toll of militarisation, framing war not as an economic necessity but as a moral failure. In Palestinian culture, poetry and embroidery (e.g., *tatreez*) serve as acts of resistance against economic erasure, preserving identity and collective memory in the face of state violence. Similarly, the Jewish tradition of *tikkun olam* (repairing the world) is often co-opted by the state to justify militarisation, but artists like Yehuda Amichai critique this contradiction, linking peace with economic justice.

Scenario modelling by the *Institute for Economics & Peace* suggests that if Israel redirects 3% of its military budget to renewable energy and education, it could achieve a 1.5% annual GDP growth boost within a decade while reducing conflict recurrence. Alternative economic models, such as the *Green New Deal for Israel*, propose phasing out the military-industrial complex in favor of green jobs, which could employ 200,000 Palestinians and Israelis within 15 years. Historical precedents, such as Costa Rica’s abolition of its military in 1948, show that reallocating defense funds to social programs can yield higher long-term prosperity and stability.

Mizrahi Jews, who make up 50% of Israel’s Jewish population, face systemic discrimination in housing, education, and employment, yet their economic struggles are rarely linked to the war economy’s priorities. Ethiopian Israelis, who comprise 2% of the population, experience poverty rates of 40%—double the national average—due to state neglect and militarised employment policies that funnel them into low-wage security roles. Palestinian citizens of Israel, who contribute 20% of the country’s GDP, are systematically excluded from economic planning, with 50% living below the poverty line. Their exclusion from policy discussions ensures that the costs of war are borne disproportionately by the most vulnerable.