Israeli security industry is new roadblock to peace


The creeping security culture of Israeli society is having serious repercussions for regional peace, writes Alon Aviram 

Alongside a seemingly ever-intensifying occupation of the West Bank and Gaza and mounting regional instability, the economic liberalisation of the state of Israel over the past three decades has led to a set of specialised industries, namely the “High-Tech” and “Homeland Security” sectors to increasingly dominate its economy. Israel’s internal economic imperatives, and the geopolitical strategies it consequently pursues with its indigenous population and in the wider Middle East, are increasingly shaped by the role of these sectors.

For liberal advocates of globalisation the creation of such “niche” sectors within an international division of labour and integrated world economy should see states progressively opening up their markets without resorting to protectionist practices. But the experience in Israel – where highly sectional economic interests intersect with equally narrow sense of geopolitical interests associated with the Zionist project – illustrates the problems with these arbitrary liberal assumptions. Instead, the Israeli state has deliberately fostered segmented, highly-specialised markets that are becoming more resistant to conflict-induced economic shock. The privatised Israeli “Homeland Security sector- an informal cluster of IT, defence and biotechnology firms, is one industry in particular that is rapidly expanding the nation’s share in global markets.[1] This emerging sector was valued in 2009 at $142bn and is predicted to grow to $2.7tn globally between 2010 and 2020, with growth rates between 5% and 12% a year.[2]

The consequences of this should be obvious but are in fact rarely discussed. The existence of powerful economic actors within the state of Israel which have material interests starkly opposed to any peace settlement has hardly been registered at all in the political mainstream or the Western media. This is despite the peace process being increasingly exposed as a sham with successive Israel military adventures over the last five years in Gaza and Lebanon and no apparent end in sight to its settlement-building activity in the West Bank.

In short, as I will argue below, these economic changes diminish the internal political economic incentives for Israel, and other geopolitical actors who possess the means to acquire such technologies, to engage in peacemaking. They are instead becoming more inclined to pursue a course of increased “securitisation” – at the expense of long-term, mutually-agreed conflict resolutions. Below I outline the existence of these incentives, but my intention is not to argue that these economic forces are wholly determining Israel’s geopolitical policies. I entirely accept that politics, ideology, statecraft, war and occupation are all features of the Zionist project that cannot be reduced to a particular nexus of economic interests. But I do want to correct the one-sided assumption that is often latently present even on the anti-Zionist left, which sees Israel’s tendency to colonial activity as only expressing an ideological logic; its need to maintain by force a Jewish-majority state.

Over the past three decades Israel has undergone an extensive process of internal economic reform involving substantial liberalisation and privatisation, a process which was eagerly advocated by the growing Israeli business elite. It had been widely acknowledged that regional instability was seriously damaging the performance of the Israeli economy both domestically and internationally, and deterring foreign investment[3]. Neoliberals consequently advocated the reforms as a necessary solution to Israel’s then endemic stagflation – stagnant output and rising inflation – which had largely been induced by its burdensome state led war economy.[4] At the ideological level, the liberalisation package was also promoted as an opportunity to further integrate the economy regionally, something which was even purported to have the potential to lead to an ultimate secession of its conflicts with the Arab states and Palestinians. After three decades, it will come as little surprise to many that these apparently high-minded aims have not been realised: neoliberalism has not miraculously quashed xenophobic nationalism or brought to an end any of the elements, such colonial settlement, that are fundamental to its conflicts. The occupation of the West Bank and the de facto besieging of Gaza are ever-present realities while Israel is more-isolated than ever within the region. But as Nitzan and Bichler argue, what appears to be a theoretical contradiction (for a particular and influential set of ideologues) for liberalism between internal economic liberalisation and the continuation of a state of war in international relations is no paradox, for “perhaps economic liberalisation could coexist comfortably with internal political conflict in a quasi-war economy?”[5] By drawing on Israel’s Homeland Security sector, I will propose that this form of coexistence – between neoliberal economic transformations and Israel as a highly militarised actor in a state of near-permanent warfare – is becoming ever more entrenched in the Israeli political economy both domestically and internationally.


Israeli macroeconomic shifts and geopolitical implications

Israel’s economic, and its areas of specialisation, have rapidly adapted to its near-abroad geopolitics and the wider global economy as it has become more neoliberalised. The business community of Israel has a firm and growing footing in the international economy, predominantly in the US, and has developed what Adam Smith famously called “comparative advantage”, i.e. economic sectors that outperform rivals, first and foremost in a booming high-tech sector, and a rapidly developing Homeland Security sector. The ability of sections of Israel’s economy to capitalise on particular areas of its domestic specialisation and historical legacies, specifically its military experience as one of the world’s most “war prone” states, has arguably led to a change in internal economic imperatives regarding its relations with the rest of the Middle East. How is this so?

The process of economic deregulation and privatisation has, as in numerous other parts of the globe, led to rising levels of income inequality, and a massive concentration of wealth under a monopolised, transnational corporate structure which, crucially, is not only rooted in Israel.[6] The shift to an export led, high-tech economy has not resulted in increased regional integration as it was originally argued, but has increased Israel’s global integration with the West and specifically the United States. In short, this has not resulted in Tel Aviv becoming the ‘Silicon Wady’ of the Middle East, but only a ‘Silicon Wady’ in the Middle East. It still remains isolated from its geographic neighbours, it exports predominantly to partners outside of the region, but yet it still experiences relatively high and increasing levels of sustained growth.[7]


Segmented markets: a economic Safeguard

As capital has expanded to subsume most global markets, actors have not simultaneously been connected into one smoothly circulating, undisrupted circuit of trade. But, depending on a whole host of social/economic factors, certain circuits of capital remain wholly or partially exclusive, in turn disenfranchising political/economic communities. This can in some instances, limit the effect of the extra-economic on economies that have developed high-in-demand “specialised production”. For example, whilst Turkish-Israeli political relations have deteriorated considerably over the past few years, due to Israel’s high quality specialised military production, Ankara still purchased ten UAVs (unmanned aerial vehicles) from Israeli firms in 2010.[8]

As this case demonstrates, rather than a limited circulation of capital and participating agents being economically detrimental to these networks of trade, their exclusivity is often beneficial and/or necessary. Israel in securing its place in the world as a highly specialised flexible, predominantly high-tech economy, means that it does not need to freight cargo to Beirut or Baghdad, and thus is less susceptible to the traditional negative economic impacts of regional turmoil. As an effect of Israel’s internal liberalisation, it has increasingly shifted to an economy which specialises in High-Tech exports that do not go to “its neighbours with whom it is in tension, but to faraway markets in Asia, Europe and North America.”[9]

Specialised market economies also have the potential to somewhat safeguard themselves against the negative effects of political instability on the economic, more so than those economies that supply standardized commodities for mass markets. The former governor of the bank of Israel, Jacob Frenkel, in an interview with Thomas L. Freidman, stated: “Israel today was rapidly moving away from its old economy of oranges, diamonds and textiles toward a high-tech economy that, in some ways, made Israel less vulnerable to Arab political pressures, terrorism, boycotts, and the ups and downs of the peace process.”[10]


Israel and the “Homeland Security” sector

t would be wrong to imply that due to the state’s shift to high-tech, that Israel’s economy is now immune from political instability. The Second Intifada, which was launched by the Palestinians in 2000 as Israel reengaged on its peace process pledges, proved otherwise, with large-scale economic damage inflicted on Israel’s economy during this period.[11]

But, there is reason to believe that the global trend of growing securitisation and surveillance industries, facilitated predominantly by the privatised Homeland Security industry in Israel, is diminishing the internal political economic incentives of states and other actors who possess the means to acquire such technologies, to engage in peacemaking. They are instead becoming more inclined to pursue a course of increased “securitisation” at the expense of long-term and mutually agreed, resolutions to conflicts.

The emergence of Israel’s Homeland Security sector as a considerable economic force globally, has helped maintain the continued occupation of Palestine, and enabled more “efficient” control of its persistent tensions with the wider Middle East. This has included the construction of the vast ‘separation’ Wall that has physically divided communities apart, annexed vast swathes of Palestinian territory in the West Bank, and represented quite a technological “achievement” for the Homeland Security sector inside Israel. Indeed, this is but one example of the increasing incentives that exist not only to maintain, but to financially capitalise, on the status-quo relations. As Schwartz puts it, “If Israel can make itself secure enough to enable the economy to grow, leaders like Netanyahu argue, a peace deal with the Palestinians becomes less urgent.”[12]

Israel has a well developed and sophisticated market for Homeland Security. It is one of Israel’s fastest growing export industries, and has emerged in tandem with fiscal austerity measures to military spending, thus increasing its domestic demand. In 2007, according to D&A Visual Insights, a business information company that provides an overview of Israel’s high tech industry to the Israeli government, homeland security included “416 companies or 21 per cent of the high-tech sector and is the second largest group after telecommunications.”[13] Israel’s homeland security’s annual sales for 2010 were estimated at $5.5 billion, with export accounting for approximately $2 billion.[14]


“Experience” as a comparative advantage

“No other advanced technology country has such a large proportion of citizens with real time experience in the army, security and police forces” was written in a government brochure entitled ‘Israel Homeland Security: Opportunities for Industrial Cooperation’.[15]

One only has to access any Israeli homeland security company’s internet site to see how these firms sell their merchandize and services. Israel’s firsthand and continuous experience of “security activities”, i.e. its on-going warfare, occupations and vast domestic security apparatus, provides Israeli firms in this sector with a comparative advantage in global markets. Israeli homeland security firms increase their global sales by promoting their “expertise”, which they derive directly from the ongoing occupation, to achieve a competitive edge in the global market.

As this industry grows and Israeli firms realise the potential of this global market, “it is highly likely that some of the military experiences take place in order to satisfy economic needs and interests, but it is not always so easy to demonstrate such motivations since they are concealed.”[16] Israeli firms work in close liaison with the Israeli military, both directly and indirectly, ensuring that the equipment being developed is being tested and constantly reviewed. As this relationship is one of the core elements which define the comparative advantage of Israeli homeland security firms, this more than implies that the production and reproduction of security related “experiences” is economically desirable. The considerable reduction to Israel’s military spending, under the general fiscal austerity measures, has also increased the demand for privatised homeland security technologies and services domestically, thus further securing its place as a growing industry in the world economy.[17]



Peled argues that there have been two significant transformations to the Israeli political economy since 1985. Firstly, it has gone from being “a corporatist, relatively egalitarian society in conflict with the Palestinians to a liberal, highly inegalitarian society seeking accommodation with them”. Secondly, “to an even more harshly inegalitarian society engaged in an open war of politicide with the Palestinians.”[18] The conclusions of this should alarm anyone who cares for peace in the Middle East and need to be carefully reflected upon by those of us that support the struggle of the Palestinian people. The fact is that Israel is increasingly developing into a kind of “garrison state” in which it defends itself by maintaining and perpetuating a permanent cycle of mostly low-level conflict with its indigenous population and neighbours. A situation in which increased “securitisation” enables the state to safeguard itself from the negative impacts of social unrest on the economic, delaying any permanent settlement to the conflict.

There was a time when Israel’s state of permanent war had far more serious negative consequences for its domestic economy. The liberal ideal that there could be a two state solution and peace process underpinned by regional economic integration did not appear then to be as utopian as it does now. But today these economic incentives have massively diminished as a result of neoliberal globalisation and the arrival of the Homeland Security and high-tech military sectors of Israel’s domestic economy. Israeli firms access global markets by capitalising on the conflict, marketing their “experiences” to gain a “comparative advantage” which is the very antonym of the liberal ideal of globalisation. The culture and market of “securitisation” within Israel has emerged as a fundamental force in its own right, and has been hugely aided by the “war on terror” that has dominated global politics since 2001.

The more far-sighted no doubt anticipated that the idealisation of neoliberal reform as part of the Clinton-era project of Middle Eastern peace would one-day prove illusory. But after over a decade of almost ceaseless Israeli aggression amid rapid integration of its economy into the globalisation order, the ideological and self-serving character of these claims now lie particularly exposed. For the Palestinian movement it provides cause to reflect upon the dishonest claims that always underpinned the Clinton-era “drive for peace”.

If Israel’s economic development is not coincidental to its military aggression over the last ten years, then we have a duty to reassess the viability of the two-state solution and, furthermore, any settlement whose core architecture is designed not according to the basic needs and demands of ordinary Palestinian and Israeli people, but the imperatives of the global capitalist economy.


[1] Neve Gordon, ‘Working Paper III: The Political Economy of Israel’s Homeland Security/ Surveillance Industry’ (Ben-Gurion university, Beer-Sheva, Israel April 28, 2009)

2 Stephen Graham, ‘Olympics 2012 Security: Welcome to Lockdown London’, The Guardian, (12 March 2012)

[3] Yoav Peled, ‘Profits or glory: the twenty-eighth elul of Arik Sharon‟, New Left Review (Series 2, No. 29, 2004) p3

[4] Shimshon Bichler & Jonathan  Nitzan,‘The Global Political Economy of Israel’ (Pluto Press 2002)

5 Shimshon Bichler & Jonathan  Nitzan,‘The Global Political Economy of Israel’ (Pluto Press 2002) p1

[6] Shimshon Bichler, Jonathan  Nitzan,‘The Global Political Economy of Israel’ (Pluto Press 2002) p30

7 Globes-Israel’s Business News, ‘How Israel’s High-Tech Happened’ (January 11, 2012)


8 Adam Gonn , ‘News Analysis: Israeli arms industry a major economic engine’ (2011)


9 Thomas L. Freidman, ‘The Lexus and the Olive Tree’ (London: HarperCollins1999) p205

[10] Thomas L. Freidman, ‘The Lexus and the Olive Tree’ (London: HarperCollins 1999) p204

[11] Melnick & Mealem,‘Israel’s Economy 1986-2008’, (2009)


[12] Nelson D. Schwartz, ‘Prosperity without Peace’, CNN, (June 13, 2005) p2


[13] Neve Gordon, ‘Working Paper III: The Political Economy of Israel’s Homeland Security/ Surveillance Industry’ (Ben-Gurion university, Beer-Sheva, Israel, April 28, 2009) p10

[15] Neve Gordon, ‘Working Paper III: The Political Economy of Israel’s Homeland Security/ Surveillance Industry’ (Ben-Gurion university, Beer-Sheva, Israel, April 28, 2009) p1

[16] Neve Gordon, ‘Working Paper III: The Political Economy of Israel’s Homeland Security/ Surveillance Industry’ (Ben-Gurion university, Beer-Sheva, Israel, April 28, 2009) p49

[17] Melnick & Mealem,‘Israel’s Economy 1986-2008’, (2009) At:

[18] Yoav Peled,‘The Struggle for Sovereignty: Palestine and Israel, 1993-2005’(Stanford University Press, 2006)p52


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