(photo credit: INGIMAGE)
In September 2016, Amos-6, the most advanced communication satellite ever developed by Israel Aerospace Industries, was lost when its launcher exploded in a pre-launch test in Florida.
Spacecom, the company that is the primary operator of communications satellites for Israel, sought to replace Amos-6.
“Buying Israel” by choosing IAI was something Spacecom would have preferred. But the firm, owned by the embattled telecom tycoon Shaul Elovitch, was forced as a business with shareholders and bondholders to think of, to choose the best option from a financial and technological perspective.
US company Loral Space Systems was awarded the $112 million contract to build Amos-8.
It was the second time that Spacecom passed over IAI. In 2016, Spacecom chose Boeing to build its Amos-17 communications satellite, slated to be sent into orbit next year.
IAI has found that, without state help, it cannot compete with foreigners. While IAI builds perhaps one communications satellite every four years, US and European firms produce as many as five a year. The higher level of production leads to streamlining and lower costs that translate into a more competitive price.
As avowed market capitalists, we believe, in principle, that competition is good and protectionism is bad. If an industry is unable to compete on the world market then it should either become more efficient or close down and make room for stronger, better firms.
Artificially propping up a firm that is inefficient, expensive or offers a substandard product is ultimately a self-defeating endeavor.
However, even proponents of market capitalism make exceptions when it comes to national security. Adam Smith, one of the founding fathers of modern capitalism, wrote in The Wealth of Nations
(1776) that while free trade is an important principle for healthy economic development, he made an exception “when some particular sort of industry is necessary for the defense of the country.”
For instance, Smith supported the Navigation Acts, passed by Britain to prevent colonies from trading directly with foreign powers. They kept the British battle-ready. Smith understood that when war breaks out free trade is disrupted and a nation must rely on its own production.
In World War II, for instance, it was the Allied powers’ ability to continue to mass produce planes, ships and tanks, and the Axis powers’ severely compromised production abilities, which shaped the outcome of the war.
The State of Israel’s short history has taught a similar lesson. French president Charles de Gaulle’s decision to place an embargo on Israel on the eve of the Six Day War was a turning point in Israel’s thinking about maintaining an independent defense industry.
Knowing that it could not rely on other nations pushed Israel to develop its first drone, flown over the Suez Canal in the summer of 1969; it pushed Maj.-Gen. Israel Tal to complete plans to design an Israeli tank – the Merkava; it pushed IAI to build its first fighter jet, the Nesher, modeled after the Mirage-5 fighter that the French denied Israel; and Israel began investing heavily in new fields of study such as computer science and electronic engineering and encouraging the creation of technological incubators.
Israel, surrounded by enemies, relies on comsats to, among other things, integrate communication among military units. The Jewish state simply cannot rely on the largesse of another country, no matter how friendly, no matter how good an ally, to provide it with an essential wartime technology.
Ensuring that Israel’s comsat industry is not shuttered would not require a huge budget. IAI sources say that an investment of around $20 million a year over several years would enable IAI to be in a position to build the next comsat in Israel.
We should of course ensure that IAI remains competitive and on the cutting edge of technology even as it receives state subsidies and is protected from competition.
There is no reason to believe this would not be the case. The knowledge that our existence depends on remaining a few steps ahead of our enemies through constant technological innovation has ensured that Israel’s defense industry remains competitive and among the best in the world. A similar dynamic would likely drive the comsat industry.
The de Gaulle lesson should not be forgotten. Israel can rely on no one but itself for its defense. Outsourcing our security requirements is not an option.