Saturday, August 12, 2006

Paying the Piper

The Israel Treasury Ministry estimates that Israel's cost for the war with Hezbollah for the last month has been 23 billion Israel Shekels or $5.27 billion at today's conversion rate. The breakout for this amount is $1.6 billion for the direct military costs, $1.14 for direct and indirect damage to Israel property, $2 billion in lost productivity, and $0.5 billion in aid to first responders and local authorities. This total is about equal to the direct monthly costs of the US military effort in Iraq. (The absence of any direct American property damage associated with that effort just shows why, like the Bush administration claims, it is better we're fighting them there than here.) The total for either Israel or the US does not include the forward going costs of healing, rehabilitating and supporting those wounded in the war.

The continuing military operations and new damages, assuming the cease fire holds, will probably add another billion dollars to the total. The resulting six plus billion dollars is relatively a large enterprise for Israel. Here are some recent deals: Warren Buffet paid $4B for 80% of the Israel company Iscar, Hewlitt-Packard paid $4.5B for Mercury Interactive and SanDisk bought M-Systems, a fabless flash chip company for $1.56B. However, the largest Israel company Teva Pharmaceutical has a market capitalization of $26B and had $6.5B in sales last year.

Even without assigning cost for the near 150 Israeli dead, the war appears to have been very inefficient for Israel. Israel's declared main purpose in fighting a broad war was to destroy Hezbollah's personnel and armament. An optimistic Israeli estimate would put the number of Hezbollah fighters killed so far at 500 and the number of missiles used or destroyed at 5000. The elimination costs therefore were about $12 million per fighter or $1.2 million per missile. Israel would have done better by offerring Hezbollah fighters $2.5 million apiece (ten times his expected lifetime earnings) for retiring, plus a half-million bonus for each unfired rocket he brought to Israel. (The US Federal Witness Relocation Program might have been willing to take fighters who feared returning home.) Israel could have also gotten the Lebanese government to share in funding this buyout program. Like most Lebanese of a certain age, its members were well acquainted with the costs and inefficiencies of war.

"The past is dead," goes the Arab proverb, and that is more true in this case than most. Nevertheless, Israel decision makers might consider the buyout program the next time a flare up with Hezbollah seems imminent. Perhaps now during IDF's brief occupation of southern Lebanon, they might try it on a limited basis. Since I have no relatives who are or likely to become Hezbollah fighters, be assured I have no personal interest in such a program.


Anonymous shlomo said...

I am glad to read this post. You make good sense, Atik! This is really something that the government should pay attention to. Maybe you know some way to make them listen? I will talk to my brother-in-law, he knows everyone in the Knesset.

8:04 PM  
Anonymous Montag said...

IDF losses, dead and wounded, in Israel's wars:

1956: 190 d 900 w
1967: 980 d 4,500 w
1973: 2,800 d 8,300 w

2:30 PM  
Anonymous Anonymous said...

dude, in war nobody is a winner. pay or stay israel will be losing more face and endangering their country more by resorting to such atrocities. if thing could be solved diplomatically, israel could have gained some much needed face and appreciation in the eyes of the peace loving people of the middle east. i hope future leaders of israel see reason in this aspect. this is the real truth. thanks.

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