Oscar Wilde once defined a cynic as one who knows the cost of everything – and the value of nothing. That quip has been applied to us economists. That is why I face with trepidation the task of writing 2,000 words about the cost of the latest Gaza war.
Let me first state clearly: Lives are being lost on both sides of the Gaza border. And every human life is of immense value. Every violent action that takes a toll in lives is, by definition, part of a disastrous failure. Especially when the scenario resembles the movie Groundhog Day – endless repetition of the same folly.
Are we giving new meaning to déjà vu?
And how. February 29, 2008, Operation Hot Winter, in response to Qassam rockets fired from the Gaza by Hamas on Israeli civilians. December 27, 2008, Operation Cast Lead. October 2012, Operation Pillar of Defense. July 8, 2014, Operation Protective Edge. Flare ups: November 10, 2018, March 2019, May 2019, April 2021... and now, Operation Guardian of the Walls.
Why doesn’t Israel crush Hamas once and for all?
It is a failed strategy. As long as Hamas runs Gaza, Netanyahu and his government believe the Palestinian cause is split – Fatah controls the West Bank, Hamas runs Gaza – and the two groups hate each other. This division forestalls progress to a feared two-state solution. Hence, the Groundhog Day insanity. Fatah repeatedly, quietly, messages Israel to destroy its foe Hamas. Israel repeatedly says no.
What is the current economic situation of Gaza’s population?
Dire extreme poverty. Some two million Gazans are crammed into 365 sq.-kms. For reference: Tiny Hong Kong has three times that area and Houston, Texas, with the same population as Gaza, is five times bigger in area.
Gaza GDP per capita is only about $900, less than half that of the West Bank, or $2.50 a day per person, and about one-fiftieth that of Israel.
On May 7, Prime Minister Benjamin Netanyahu authorized an emissary from Qatar to bring $10 million in cash to Gaza for distribution to “10,000 needy families.” Since 2012, Netanyahu has allowed Qatar transfer $1 billion to Gaza. At least half of that went to Hamas – and in a sense all of it.
Money is fungible (transferable). Qatari money enables Hamas to use equivalent funds on rockets, instead of on food and electricity for its citizens.
Three days after the Qatari money arrived, on May 10, Hamas sent its ultimatum of a 6 p.m. rocket attack on Jerusalem – and fired its first salvo of 150 rockets.
Qatar has proposed funding a natural gas pipeline to Gaza, to help resolve the dire shortage of electricity. The current war will scotch that idea for years to come, along with other plans for badly-needed Gaza infrastructure – a modern port, air strip and power plant.
As I write this, Israel has used a brief lull in the fighting to supply humanitarian aid to Gaza.
How dependent is Gaza on Israel for fuel and electricity?
Before war broke out on May 10, almost all of Gaza’s liquid fuel and about half of its electricity were supplied by Israel. Hamas leaders hold Israel hostage to Gaza suffering, believing Israel has to supply Gazans’ basic needs no matter what Hamas does, due to international pressure. Gazan residents had only about five hours of electricity a day before the fighting began.
IDF officials said Hamas diverted fuel meant for Gaza’s water desalination plant for rocket use, cutting off water for 250,000 residents of the city of Beit Lahiya, in northern Gaza.
Early in the fighting, three Hamas rockets fell short and destroyed some of the electricity lines that bring power from Israel to Gaza.
What is the economic cost to Israel of Operation Guardian of the Walls?
Jerusalem Post reporter Zev Stub notes that each of the thousands of Iron Dome interceptor missiles fired against Hamas rockets costs between $50,000 and $80,000, totaling well over $100m.
An economist, of course, would note that this investment saved many times that in property damage and in human lives. Iron Dome is economical; it launches automatically, based on sophisticated software, only when the incoming rocket is found to aim at populated areas.
Stub notes that the cost to Israel’s private sector is $54m. (NIS 180m.) daily – so two weeks of fighting would cost nearly $800m. In southern Israel, which has absorbed most of the rocket fire, a third of the work force is absent, and about 10% is absent in central Israel, which has also been rocketed. Additional costs include cancellation of contracts, non-compliance with schedules, and other indirect costs. Property damage to homes, offices and vehicles also amounts of hundreds of millions of shekels.
Why is this a really bad time for another Gaza war?
The Israeli economy is just now emerging from the COVID-19 recession. It faces massive government debt, stemming from high government spending during the pandemic. The fighting may threaten Israel’s credit rating, which drives the interest rate the government pays for foreign borrowing.
How did Hamas and the Islamic Jihad amass such a huge arsenal of rockets, firing salvos of 200 or more at a time, for many days?
According to Mona El-Naggar, a New York Times correspondent based in Cairo, “they smuggle the parts or make their own, aided with know-how from Iran.They repurpose plumbing pipes scavenged from abandoned Israeli settlements and components culled from dud Israeli bombs. They assemble the rockets underground or in dense neighborhoods where Israeli airstrikes are likely to cause civilian casualties…. Despite Israel’s vaunted surveillance capability and overwhelming military firepower next door,Palestinian militants in Gaza have managed to amass a large arsenal of rockets with enhanced range in the 16 years since Israel vacated the coastal enclave it had occupied after the 1967 war.
Hamas… has parlayed the arsenal into an increasingly lethal threat.
“The arsenal pales in comparison to the vast destructive powers of Israel’s air force. But to Israelis, the rockets are the tools of what their country and many others including the United States regard as a terrorist organization, embedded among the nearly two million Palestinian inhabitants of Gaza.
“Israeli intelligence has estimated that Hamas, Islamic Jihad and other Palestinian militant groups have about 30,000 rockets and mortar projectiles stashed in Gaza. The rockets are of widely varying ranges and lack guidance systems, but the militants have been able to improve their accuracy.”
Is Israel using “disproportionate force” against Hamas?
Israel’s foes say this all the time. It is a ridiculous claim.
Take, for example, the famous prize fight between Mohammed Ali and George Foreman, “the rumble in the jungle,” in Kinshasa, Zaire (now Democratic Republic of the Congo), on October 30, 1974. Ali knocked Foreman out in the eighth round.
Suppose the rules were: Mohammed Ali may not use his prodigious left jab. After all, fair is fair. Would that make sense? When Israel is rocketed, should it use only medieval weapons made out of water pipes, as Hamas does?
Who is Yahya Sinwar, Hamas’s leader in Gaza?
He was born in Khan Yunis, in Gaza, in 1962. A militant activist, he was arrested and jailed in 1982 (and released), again jailed in 1985 (and released), and finally, convicted of masterminding abduction and murder of two Israeli soldiers in 1989 and served 22 years before release. He spent his years in Israeli jails learning Israel thoroughly.
In 2017, he was elected Hamas leader in Gaza. He and Hamas aspire to a religious vision of a Mideast caliphate, wiping Israel off the map entirely. Hence, he is far from an ideal partner for a peace agreement.
Hamas leader Yahya Sinwar and Prime Minister Benjamin Netanyahu meet secretly at the Erez Checkpoint, on the border between Gaza and Israel, on May 9.
Netanyahu says, “You know Yahya, you’ve spent a lot of years in our jails, you know us well, you know what we can do. And, well, we too know what you can do, in your less rational moments, which is nearly always. So let’s cut a deal.
Here is our best estimate of the cost of our upcoming round of fighting. For you hundreds of lives, infinite suffering. For us – lives, too, and disruption. It is a march of folly!
So let’s cut a deal. Let us declare that we both fought well, let’s skip the bloodshed and call it a draw in advance. We each pocket all those resources wasted on explosives and destruction. We use the funds to feed and clothe and house and educate our people. To provide medical care and build hospitals. To make their lives better. Make sense?”
Sinwar says, “Sure, why not. What’s the point of another round? It won’t change anything. Never has, never will.”
The two men shake hands and return home. Peace and sanity prevail.
Logical. Rational. Sane. Humane. But those qualities are hard to find on Gaza’s borders. As the saying goes, in the Middle East, reason and madness quarrel; reason flees abroad and madness settles down for the duration.
The writer heads the Zvi Griliches Research Data Center at S. Neaman Institute, Technion and blogs at www.timnovate.wordpress.com