The economic costs of permanent war.

"Since the 1973 Yom Kippur War, Israel has had a destructive wartime economy that weakens its society, suffocates its economy and threatens its existence as an independent state," wrote left-leaning Israeli entrepreneur Ofer Kornfeld in the June 24 issue of Haaretz. Each Israeli household spends the equivalent of tens of thousands of dollars each year "on the wartime economy."

Foreign capital outlays in Israel depend "on American guarantees and are for the most part speculative financial investments rather than real investments," he continues. "A decision to withdraw foreign capital from Israel can come suddenly." During Israel's first 25 years, its economy grew at an annual rate of about 5 percent. Since 1975, "the Israeli economy has moved to a growth of about 1 percent in per capita production," Kornfeld points out. Israel's economy is thus almost entirely dependent on U.S. foreign aid--that is, wealth transferred from U.S. taxpayers.

"The wartime economy is found everywhere, and it affects all aspects of life in the country," Kornfeld observes. "In the State of Israel, the construction of roads is decided according to military priorities. The establishment and dispersal of communities is designed to strengthen [settler] communities and [strategic] axes, rather than to meet economic employment and construction needs. The entire infrastructure management of the Israeli economy--water, energy, and the media--is subordinate to the supreme military consideration."

Kornfeld, an economic consultant to Israel's socialist Labor Party, doesn't object to socialist regimentation of Israel's economy; he would prefer that it follow a different set of priorities. And in some ways the situation he describes is a result of Israel's unique geographical and strategic challenges. Be all of that as it may, it is clear that U.S. subsidies of the Israeli government--aside from being patently unconstitutional--are doing nothing to improve that nation's economic or security prospects.

Israel's experience with an economy on a permanent war footing also offers a cautionary tale for the U.S. as our own society is retooled for an open-ended "war on terrorism." Ominously, much of the federal debt being accumulated as Washington militarizes our society is being underwritten by Communist China, which (not to put too fine a point on the matter) has a less collegial relationship with the U.S. than Washington has with Israel.