The Israeli Zombie Economy

Articles , English , Snippets , / Sunday, August 17th, 2025

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from Shir Hever’s Perspective

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Dr. Wael Shadid
Head of the Center for Leadership and Diplomacy
August 16, 2025
Describing Israel’s economy as a “zombie economy” is a striking characterization
intended to show that the economic system in Israel is not only unsustainable but is
also deeply intertwined with political disinformation, international complicity, and
the ongoing genocidal campaign in Gaza. This description is based on the insights of
Dr. Shir Hever (researcher of Israeli occupation, apartheid, and genocide; Managing
Director of the Alliance for Justice between Israelis and Palestinians; and author of
The Privatization of Israeli Security). Hever focuses on several dimensions: financial
instability, the collapse of institutional credibility, the role of propaganda, and the
geopolitical context of sanctions and popular opposition movements such as the
Boycott, Divestment, and Sanctions (BDS) movement,
providing a comprehensive picture of Israel’s crisis, framed through the metaphor of
the “zombie economy.” Below is a review of Dr. Shir Hever’s insights on these
interrelated topics.
1. Collapse of the Israeli Economy
The term “zombie economy” stems from the observation that Israel’s financial
system, according to standard economic indicators, has already collapsed. Israeli
government bonds are sold globally and bought for political motives, not for rational
investment expectations. Unlike the crises of Argentina or Greece, where economic
collapse was followed by restructuring through institutional continuity, Israel faces
a deeper crisis: the collapse of the
state’s institutions themselves. Despite this collapse, many Israelis continue their
lives as though nothing has changed. Paradoxically, the Tel Aviv Stock Exchange
continues to rise, reflecting the disconnect between economic
reality and market evaluations. This contradiction highlights the influence of
perceptions, speculation, and propaganda on material conditions in today’s global
capitalist era.
12. Disinformation and the “Zombie” Nature of the Economy
A zombie economy signifies not only collapse but also reliance on illusions. Dr.
Hever explains that Israel does not operate under an information economy but
rather a “disinformation economy.” Economic activities are sustained by false
narratives, misleading media, and political cover. Investors and governments
continue to treat Israel as though its economy is stable despite mounting evidence
to the contrary. This manipulation resembles the zombie metaphor in two ways: the
economy has no real life, and it continues only thanks to illusion, denial, and fantasy.
Israeli citizens also absorb this disinformation, creating a vicious cycle in which
truth seeps in slowly, only to be denied again. Lies about famine in Gaza, and
fabricated atrocities exemplify this ongoing flow of propaganda.
3. Media, Social Media, and the Manufacturing of Reality
The role of media is central in keeping the zombie economy alive. Traditional media
once maintained some journalistic integrity, but since October 7, most Israeli outlets
have become platforms for disinformation. Even the liberal newspaper Haaretz
initially spread lies, such as fabricated atrocity stories, before gradually returning to
more critical reporting. Yet even when journalists acknowledge genocide, they
rarely admit their own complicity
in spreading disinformation. Social media worsens the problem by creating
ideological bubbles in which individuals only see content reinforcing their existing
biases. This fragmentation of truth undermines accountability, enabling the state to
continue genocidal policies while maintaining the illusion of stability.
4. The Political Economy of Occupation
Contrary to assumptions that Israel benefits economically from occupation, decades
of research show it is financially unsustainable. While resources such as land and
water are exploited, the costs of security, settlements, and military infrastructure far
outweigh the benefits. Israel’s economy does not thrive because of economic
rationality but because of a societal value system rooted in apartheid privilege.
Many Israelis are willing to accept a lower standard of living if it guarantees
dominance over Palestinians. This perspective underscores that the occupation is
driven more by ideology than economics, further revealing the fragility of the
“zombie economy.”
5. International Complicity and the Question of Sanctions
Despite the fragility of Israel’s economy, international support sustains it. Israeli
bonds are not bought for profit but to fund its military campaign. Western powers,
2especially the United States, remain complicit through arms
sales, military aid, and political shielding in international forums. However, notable
recent shifts are evident. French President Emmanuel Macron’s recognition of
Palestine and limited sanctions on Israeli arms companies
mark the beginning of cracks in the wall of unconditional support. Colombia and
other states, including Spain and Portugal, have taken steps toward sanctions,
particularly restricting arms sales and transfers. These moves
indicate that sanctions are no longer a marginal idea but an emerging international
strategy.
6. The Role of the BDS Movement
The Boycott, Divestment, and Sanctions movement, launched in 2005, represents a
grassroots effort to pressure Israel economically. Initially focused on boycotts and
divestment, the movement has now reached a stage where state-level sanctions are
possible. This marks a decisive shift in the global struggle for Palestinian rights.
More importantly, BDS highlights how economic action intersects with political
morality: divestment from corporations complicit in occupation, and restricting the
arms trade are not symbolic gestures but actions that save lives and undermine
Israel’s war machine. The growing number of BDS supporters worldwide reflects
the global resonance of the Palestinian cause.
7. The Military-Industrial Dimension
Israel’s economy is tightly bound to its military industry, which depends on
international supply chains. For example, Israeli tank engines are manufactured in
Germany, and European transport routes facilitate U.S. arms shipments to Israel.
When countries like Spain and Portugal restrict the use of their territories for
weapons transfers, they significantly disrupt Israel’s military capacity. Moreover,
the energy that powers Israel’s AI-driven targeting systems, derived from imported
coal, underscores the state’s reliance on international economic flows. These
vulnerabilities provide opportunities for targeted sanctions to effectively pressure
Israel.
8. Ethical and Political Dimensions
Beyond economics, the zombie metaphor reflects the moral bankruptcy of a system
prioritizing apartheid privilege and genocidal violence over material well-being.
Israel’s economy continues to function not because it is productive but because it is
politically shielded and ideologically sustained. Citizens’ denial of atrocities, fueled
by propaganda, reveals a society willing to sacrifice comfort for supremacy. The
international community’s willingness to buy bonds and sell weapons highlights the
3ethical collapse of global institutions prioritizing geopolitical alliances over human
rights.
9. The Future of Israel’s Crumbling Economy
The sustainability of this crumbling economy is uncertain. Lies cannot endure
forever, and cracks in the disinformation machine are already visible. Journalists are
beginning to confront reality, some states are experimenting
with sanctions, and grassroots movements are gaining momentum. Yet the collapse
of such an economy is unpredictable. Unlike Greece or Argentina, Israel cannot
simply restructure, as its institutions themselves are collapsing under militarization,
apartheid, and international isolation. The final collapse may therefore be more
sudden and destructive, not only for Israel but also for regional stability.
Conclusion
Hever argues that neoliberal reforms since 1985 replaced collective privileges with
individual ones, further weakening Israel’s resilience. The tech sector, once a source
of national pride, became intertwined with military service incentives, creating
vulnerabilities when the sector faltered. Today’s collapse is not cyclical but
existential, with investors losing confidence and Israeli society facing demographic
and moral fragmentation.
Israel’s zombie economy reveals how disinformation, ideology, and geopolitical
complicity sustain an unsustainable system. It shows that the modern economy is
based not only on material production but also on perceptions, privileges, and
propaganda. For the world, it offers a harsh lesson in how political economy
functions in the 21st century: a mixture of illusions and violence concealing
systemic collapse. Whether the zombie economy stumbles on or collapses outright
depends on the interaction between internal disillusionment, international
pressure, and the resilience of grassroots opposition movements.
Source:
Interview: Israel’s Zombie Economy & The Road to Sanctions, with Dr. Shir Hever

Hever, Shir. “Shutdown Nation: The Political Economy of Self-Destruction.” Review of
Radical Political Economics, vol. 57, no. 2, 2025, pp. 320-329. SAGE Publications,
doi:10.1177/04866134251320667.