Israel’s ‘Moral Hazard’ in Gaza

For generations now, the Israeli government has brutalized the Palestinian people, including this summer’s slaughter of more than 2,000 in devastated Gaza, but the Israelis also pass on the bill for repairing the damage to the international community, a lesson in moral hazard, says ex-CIA analyst Paul R. Pillar.

By Paul R. Pillar

The passage in the British House of Commons of a resolution favoring recognition of a Palestinian state, coming on the heels of the Swedish government’s announcement of its intention to extend such recognition, is the latest indicator of European disgust with Israeli policies.

Recognizing a Palestinian state is, of course, an empty gesture as long as no such state exists on the ground, and the ground that would constitute such a state is under another state’s occupation. But recognition is a peaceful and respectable way to express dismay.

Israeli Prime Minister Benjamin Netanyahu shows off photos that he claims justified the bombardment of Gaza. (Israeli government photo)

Israeli Prime Minister Benjamin Netanyahu shows off photos that he claims justified the bombardment of Gaza. (Israeli government photo)

The Conservative MP who chairs the House of Commons foreign affairs committee probably was speaking for many both inside and outside Parliament when he said that he had “stood by Israel through thick and thin” but that “over the past 20 years … Israel has been slowly drifting away from world public opinion,” and that “such is my anger over Israel’s behavior in recent months that I will not oppose the motion. I have to say to the government of Israel that if they are losing people like me, they will be losing a lot of people.”

As the comments of the MP suggest, the behavior that is the object of the dismay and anger has both long-term and short-term components. The long-term part is the continued Israel occupation of conquered territory, with the accompanying subjugation of Palestinians and denial to them of political rights.

In the shorter term is the destruction that the Israeli military wreaked on the Gaza Strip earlier this year, in an operation that began when the Netanyahu government attempted to use force to disrupt a unity pact between the main Palestinian political factions. This week United Nations Secretary General Ban Ki-moon toured the devastation in Gaza, remarking that “no amount of Security Council sessions, reports, or briefings could have prepared me for what I witnessed today.”

Another, even more recent, component of the Israeli-inflicted destruction in Gaza may also have influenced the mood of the Swedes, the MPs at Westminster, and indeed taxpayers in any Western country. At an international conference in Cairo participating countries pledging a total of $5.4 billion in aid, half for reconstruction in the Gaza Strip and the other half as budget support for the Palestinian Authority.

Besides the sheer irksomeness of any of the rest of us in the world community having to pay to repair that damage, think about what this situation implies for Israeli incentives. The Israelis mow the lawn in Gaza as often as they like, and they don’t even have to pay for the clean-up. They may even profit from it because any building supplies that Israel allows to enter the Strip generally come from Israeli sources. (Investment tip: it’s time to be bullish on cement manufacturers in Israel.)

This is an example of what economists call moral hazard: of someone having no incentive to curtail risky (or in this case, outright destructive) behavior because someone else is covering the losses. This in turn is one reason to be pessimistic that the whole tragic cycle of periodic Israeli lawn-mowing will end any time soon. The Israelis’ economic flank is covered by donor conferences, just as their political flank is covered by U.S. vetoes at the Security Council.

Those on the American political Right, who tend to be most sympathetic to those on the Israeli Right who are running that country, ought to think carefully about this situation and how it relates to the principles of economic policy in which they profess to believe.

Governments, including the U.S. government, are stepping in with subsidies that are keeping people from being held accountable for their behavior and its consequences. This isn’t just about makers and takers; it’s makers and takers with the takers also being destroyers.

The situation also ought to be thought of in terms of U.S. fiscal priorities. Any program for the benefit of the United States and U.S. citizens that gets brutalized in the Paul Ryan budget should be stacked up against U.S. subsidization of behavior by countries in the Middle East, and hard questions asked about what U.S. priorities ought to be.

Here’s an approach to reconstruction from the most recent Gaza war that admittedly has no political chance of enactment but would be fair and principled: hold each side responsible for the destruction that it inflicted. Hamas would be responsible for paying for the damage it caused, including from rockets fired into Israel, and Israel would be responsible for the damage its forces inflicted.

Hamas by all reports is in tough financial shape; that’s one of the incentives it had for making the unity agreement with Fatah. But the damage it caused in this summer’s war was so small that Hamas’s friends in Qatar and Turkey could cover the bill with loose change that has fallen between the cushions of their divans. Heck, one could probably even add to the bill the cost of the Iron Dome missiles that Israel fired at rockets that never caused any damage, and it would be a pretty painless check for the Qataris to write.

The damage that Israeli forces inflicted is many orders of magnitude greater. But Israel is also far wealthier. In terms of GDP per capita it ranks right between New Zealand and Spain, according to the International Monetary Fund. It certainly can pay the bill.

And if it balks at doing so, there are established methods that can peacefully and legitimately be used to collect from deadbeats. The half of the pledges from the Cairo conference devoted to reconstruction in Gaza totals less than the more than $3 billion in annual aid the United States bestows on Israel. Apply a garnishment to less than a year’s worth of the subsidy, and that bill is paid. Hold the taker/destroyer accountable.

Paul R. Pillar, in his 28 years at the Central Intelligence Agency, rose to be one of the agency’s top analysts. He is now a visiting professor at Georgetown University for security studies. (This article first appeared as a blog post at The National Interest’s Web site. Reprinted with author’s permission.)

6 comments for “Israel’s ‘Moral Hazard’ in Gaza

  1. Abe
    October 18, 2014 at 19:20

    The Israeli siege of the Gaza Strip has brought with it a depressingly familiar ritual: The Israeli military destroys large swaths of the ghettoized coastal enclave, leaving tens of thousands homeless, a trail of carnage and piles of rubble. Then, Western and Arab diplomats rush to some Middle Eastern capitol to play janitor to the Jewish state, pledging billions in aid to clean up Israel’s mess. And like clockwork, Israel destroys everything all over again just a year or two later, bombarding Gaza with unprecedented ferocity.

    When Israel’s international janitorial crew gathered this week in Cairo with a pledge to raise $5 billion to help rebuild the $8 billion in damage Israel caused to Gaza’s civilian population, it was assured by Israeli Minister of Transportation Yisrael Katz that its efforts were utterly futile. “The Gazans must decide what they want to be Singapore or Darfur,” Katz remarked, leveling the threat of genocide against the fantasy of economic prosperity. …

    The diplomats gathered in Cairo knew the donor conference was a farce that would do little to relieve the suffering of Gaza’s besieged population. Yet none appeared willing to stray from the status quo.

    They addressed the destruction of Gaza as though it was the result of a random natural disaster and not the malevolent wrath of an anachronistic settler-colony armed to the teeth by the world’s lone superpower. Indeed, Israeli violence against Gaza’s civilian population was scarcely mentioned at all, nor were any diplomatic measures against it proposed. And with Hamas barred from participation in the conference, the government of Gaza was unable to raise the issue.

    International Community Promises to Rebuild Gaza… with Sweat Shops to Exploit Palestinian Workers
    By Max Blumenthal

  2. JWalters
    October 17, 2014 at 20:43

    “the principles of economic policy in which they profess to believe”

    They don’t believe in those principles any more than any swindler believes in any principles.

  3. Abe
    October 17, 2014 at 12:39

    From its very inception, Israel has never, despite the myriad forms the resistance has taken, tried to live in peace with its neighbors. On the contrary, it has fought multiple wars precisely because they refuse to live in peace with neighbors, knowing that they must only conquer territory and construct a “Greater Israel” in order to achieve “peace.” I’m reminded of the famous words of Calagus as recorded by the Roman historian Tacitus regarding the Romans – “They make a desert and call it peace.”

    Indeed, in the Israeli mind, truly the collective mind of a settler-colonial state, the only peace that can exist is one in which every Palestinian has been driven from the land, their history forgotten, culture extinct or absorbed into other Arab states. Does anyone truly doubt this? If they do, they should perhaps examine the true state of Israeli politics, the extreme right fascist Zionists such as the Kahanists (extreme fascist followers of Meir Kahane) and other groups who regularly chant “Death to Arabs” among other cheerful slogans.

    To be sure, there is a great deal of hate on the Palestinian side. This is a hate engendered by multiple generations of dispossession, oppression, and war. It gives rise to a dangerous tendency to conflate all Jews as the enemy. But is the presence of such a tendency the product of innate Muslim hate? Or is it the product of political, economic, and social conditions imposed upon them? I would certainly argue the latter.

    Why I Criticize Israel: A Response to Sam Harris
    By Eric Draitser

    • Gregory Kruse
      October 17, 2014 at 18:13

      There may be some people who doubt it, but not me.

  4. Zachary Smith
    October 17, 2014 at 12:36

    Apply a garnishment to less than a year’s worth of the subsidy, and that bill is paid. Hold the taker/destroyer accountable.

    Well, it IS a nice thought. But in the real world, both houses of the US Congress are totally in Israel’s pocket. Does Mr. Pillar really believe that a Senate which voted 100-0 to support Israel – no matter what – is going to do the right thing?

    ‘Moral Hazard’ – chalk this one up to “learning something every day”.

    Since that was more or less a meaningless phrase to me, I looked it up.

    Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions.

    Exactly! Israel knows that it can get away with virtually anything – at least in the US of A.

    As for Sweden and Britain, I’m not very impressed with that ‘recognition’, for I suspect it’s merely a way to avoid coughing up serious money to pay for Israel’s rampage. Talk’s cheap, as they say.

    Israel is a despicable little piss-ant of a nation state. It’s also winning. The whining and gnashing of teeth by all concerned doesn’t bother it a bit. IT’S WINNING!


    The most recent “mowing of the grass” was monstrously disproportionate. It was designed to make a huge section of Gaza unlivable, and the operation was completely successful. And the cost was negligible – live fire practice for the goonish IDF, and the US will pay for the munitions.

    Gaza is being made uninhabitable for a good reason.

    Now that Egypt has been reduced to lap-dog subservience of Holy Israel, it’s fully cooperating with the next Nakba.

    When the inhabitants of Gaza are finally pushed out of their rubble into Egypt, I expect Britain and Sweden will praise the operation. Bless it on account of the new situation being the best ‘compromise’ for all concerned.

  5. Hillary
    October 17, 2014 at 11:27

    “ The long-term part is the continued Israel occupation of conquered territory, with the accompanying subjugation of Palestinians and denial to them of political rights.”
    Paul R. Pillar
    And the shorter term is the murder ,destruction that the Israeli military regularly wreaks on the Gaza Strip as “Mowing the lawn” & repeated every few years.

    BTW – What happens to “War reparations” to be legally claimed from Israel ?
    Israel’s ‘Moral Hazard’ in Gaza or ANYWHERE is not in danger as it is backed 100% by the U.S. Congress & the UK.
    Yes indeed — A UK shamefully responsible for the Illegal creation of Israel has a lot to answer for.
    And the bottom line is the “Illegal Occupation”

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