In Israel’s Occupation (2008), Neve Gordon developed the idea that the privatization ideology has been implemented in the occupation of the Palestinian Territory, conceptualizing Israel’s reliance on the Palestinian Authority (PA) for policing and maintaining the occupation as a form of outsourcing. It was no coincidence that Gordon proceeded from researching the implementation of privatization in the occupation to the study of Israel’s arms industry (Gordon, 2009). And yet he did not discuss the connection between the two. The Israeli attack on the Gaza Strip in the winter of 2008/09 is a good example of this nexus. The PA played an important role in enforcing order in the West Bank and allowing the Israeli military to move its troops into Gaza (Human Rights Council, 2009:335–45). Following the attack, the Israeli military held a trade fair in which the technologies used in the attack were showcased and offered for sale (INN TV, 2009). Furthermore, this invasion brought to the fore the role of private economic interests in forming Israel’s security policies. In the years that followed the attack, a debate stirred inside Israel about the privatization of security, as evidenced in books by Yael Berda (2012), Yagil Levy (2012) and Erella Shadmi (2012a); in the film The Lab by Yotam Feldman (2013); and in a series of reports by the Van Leer Institute (Paz-Fuchs & Leshem, 2012; Paz-Fuchs & Ben-Simkhon-Peleg, 2013, 2014; Havkin, 2014). The political economy tools proposed in The Global Political Economy of Israel by Jonathan Nitzan and Shimshon Bichler (2002) are a way to measure who has profited from the privatization of security, who has lost, and how much.

Although Israeli institutions deny the very existence of privatization of security, the inconsistency of this denial is revealed in the “core vs. periphery” discourse which decision-makers adopt. This narrative justifies the privatization by distinguishing between aspects worthy of privatization and those which are not, a distinction between “core and periphery,” in which only peripheral functions of the security institutions may be privatized. However, empirical evidence shows that outsourcing started in 1994 of Israel’s core security activity: the occupation of the West Bank and Gaza.

The main question that I hope to answer in this book is what are the main reasons for privatization of security in Israel beginning in 1994? This question can be broken down into three smaller questions: (1) How allocation of Israeli public resources to security contributes to privatization, and what kinds of privatization were promoted by this resource allocation? (2) How did Israeli military and security policies affect the distribution of responsibilities between the state and the private sector in the application of force? (3) How have international developments in privatization of security (especially in the US) affected Israel’s security privatization policy, and how does the private security and military sector in Israel fit into the global market?

Mainstream as well as critical currents among Israeli political science scholars reject the idea that privatization of security in Israel is possible, and very few scholars have acknowledged this trend. Faced with evidence of privatization taking place, three causal hypotheses have emerged to explain it. The first, relying on official statements of government bodies, is that public security institutions fail to address the requirements of the Israeli government, which is then forced to turn to the private sector instead (see for example State Comptroller, 2010:13–38). An alternative hypothesis emerges from critical scholars that privatization of security contributes to the profits of Private Military and Security Companies (PMSCs),¹ and is driven through corruption and lack of public oversight over government decisions (see for example Paz-Fuchs, 2011:62–6). A third alternative hypothesis is that privatization of security is promoted to absolve state institutions of responsibility to human-rights violations committed by security bodies (see for example Gordon, 2002:321–37).

I wish to argue that a political economy perspective in the framework of the Differential Accumulation Theory (DAT) as developed by Nitzan and Bichler, as well as Securitization theory, can offer a different explanation. (1) Allocation of public funds and regular troops to Israel’s security missions has become a heavy economic and political burden, and privatization through sale, outsourcing and privatization by default (see below), in line with neoliberal beliefs and practices, shifts the burden to the private sector while weakening the tie between citizenship and military service in Israel. (2) The Israeli occupation of the Palestinian Territory contributed to securitization in Israel and to an accumulation of expertise and prestige among the Israeli security elite. These trends incentivized members of the Israeli security elite to leave the public sector and join the private sector. (3) The close security relations between Israel and the US have created pressure on Israeli public institutions to imitate US policies and even military doctrine, leading to the adoption of privatization of security policies, albeit at a slower rate than in the US itself. Although all three factors contribute to the same trend, each does so in a different way, while overcoming different forms of political and economic resistance.

Institutional political economy emerged as a critique of both Marxist political economy and neoclassical economics by replacing the concept of capital as a physical thing (such as land or machines) with a social concept of capital. As an alternative to understanding capital as ownership over the means of production, institutional political economy views it as a means of assigning value to what has already been produced. Instead of the Marxist emphasis on class relations as the object of study, institutional political economy focuses attention on social institutions.² DAT is a new theory (still undergoing development) within institutional political economy, which develops tools to analyze conflict between elite groups. As such, it is especially useful for analysis of policy decisions pertaining to the relations between the public sector and corporations. Pierre Bourdieu and Erella Shadmi, among others, offer useful insights that help us to round-out DAT in areas which are not yet fully developed.

DAT focuses on two objects of study: institutions and elites. It stipulates that decision-makers promote the interests of their elite group by attempting to accumulate capital away from competing elite groups. The point is not to accumulate as much capital as possible, but rather to accumulate faster than the others, hence the emphasis on differential accumulation. The size of the pie is secondary, but different elite groups vie to control the lion’s share. Wealth is secondary to power.

The historical context of the term privatization is important. It emerged from an economic and political science discourse embedded n the modern capitalist nation-state. The prevalence of private mercenary groups in pre-modern times (Kinsey, 2006:34–57) does not fall into the concept of privatization in its modern sense. The global rise of neoliberalism has placed privatization at the center of a constant debate over the distribution of roles between the state and the private sector as two distinct institutions. Neoclassical economic theory, the scholarly pillar of the neoliberal ideology, stipulates that privately owned assets would be better managed than publicly owned ones (ibid.:19–32). Therefore, privatization is an essential tool of neoliberal policy, as well as one of the ten recommendations of the Washington Consensus³ (Harvey, 2005:3, 60–5). Neoliberalism pushed, quite successfully, for massive privatization of government assets in many countries around the world. The neoliberal economic order, however, does not merely mean a decline of the state and the rise of the private sector, but rather a restructuring of the relations between the two. The concept of “governance” as the main function of the state according to neoliberal ideology does not eliminate the state’s role but redefines it (Abrahamsen & Williams, 2009:4, 9, 14).

The concept of privatization assumes the existence of institutions which act as agents of their own interests while interacting with each other. James Cockayne uses Principal-Agent Theory to analyze the privatization of security as a decision in which both the state (the “principal”) and the private security company (the “agent”) engage in negotiation and weigh the pros and cons of entering into a contract with one another (Cockayne, 2007:196–216). Privatization tenders and contracts are written precisely under this assumption. The porous nature of institutions, evident by the fact that state officials may move into the private sector and become employees of security firms and vice versa, undermines this assumption. Privatization, therefore, requires a more careful analysis of the non-homogeneous interests of various elements within the state and of various private agents.

A relatively rare view of privatization considers “privatization by default” to exist when the state withdraws from previously undertaken responsibilities, which are henceforth taken over by the citizens as individuals (Barak-Erez, 2008:475–6; Paz-Fuchs, 2011:62–6). This type of privatization is also called “commercialising” by Željko Branović (2011:3–4).

While the names of the first armed Zionist groups in Palestine were “Hashomer” (in Hebrew: “the guardian”) and “Hagana” (translated as “defense”), the word bitakhon became prominent when the State of Israel was founded in 1948, and with it “Misrad Habitakhon” (“ministry of security”) which is parallel to what is known in many countries as the “ministry of defense.” I will refer frequently to the “Israeli Ministry of Defense” (MOD), but one should bear in mind that the Hebrew name of that ministry is actually “ministry of security.” Another ministry in Israel is called in Hebrew Hamisrad Lebitkhon P’nim, with the official English name “Ministry of Public Security” (actual translation: “ministry of internal security”).⁵ The distinction between the concepts of defense and security has been obfuscated in Israeli Hebrew.

The distinction between defense and security is important. Defense can be understood as a reaction to an external attack, and a successful defense repels the attack and restores the state of peace. Defense can also be undertaken in preparation for a future or potential threat. Security has a subtly different meaning. It is a state of affairs that signifies an ongoing protection from threats, be they actual or potential. As it includes the notion of deterrence, security can be said to take place even in the absence of attack. Unlike defense, which comes into play in reaction to an external stimulus, security procedures and actions can also take place in complete absence of conflict. In Section 6.2 I will discuss the emergence of the security logic in the US and elsewhere, yet it is important to note that the logic has already been entrenched in Israel’s political culture from the founding of the state.

The word “security” also joins together, and thus blurs the distinction between internal and external security. While “defense” is usually understood in the context of defense against foreign attacks, “security” also means a constant effort to locate and remove threats from within. The Israeli army had been tasked with enforcing military rule on Palestinian citizens of Israel until 1966 and on Palestinian civilians in the Occupied Palestinian Territory (OPT) since 1967. Israel’s police force has been tas...