Atleast Israel is a democracy.
If you're Jewish that is. Most government services are denied to non-Jews since they are more often than not barred from serving in the military and they would also be unable to go to Yeshiva. This is a way to deny services based on race/religon/ethnicity without having a law that expressly does it. You can also see how Israeli policy targets Israeli Arab and Druze villages by regularly denying basic servies offered even in the Occupied Territories like electricity and water, yet non-Jews still have to pay taxes. And yes, water and electricity are still state-owned and operated government agencies (as they should be), but then again, given the Israel budget crunch, there have been pushes by individuals to privatize these basic services so this may end that practice assuming these entities would even have any economic incentive to bring services to the regions. Even if this were to happen, I'd doubt the welfare of these villages would improve at all.
You also cannot live anywhere you want either, especially if your a non-Jew. The JNF regularly denies renting (it's virtually impossible to buy land in Israel since they want to prevent Jews from actually buying the land and giving it back to their legal Palestinian owners) land to non-Jews for one reason or another. JNF reforms are coming and there has been a push, by Likhud no less, to start allowing the sale of land.
If you're a Jew it's more ... subtle. The Israeli government subsidizes and offers so much free services for it's illegal settlements, it's almost an inevitiablity that the poorest of the Israeli population HAVE to move to the territories. This was one of the policies Sharon had instituted when he was the Minister in charge of it; policies which rebuilt his shattered political career after the Lebanon mess he got Israel into.
Even the newspapers are regularly censored.
They also imprisoned a man for 18 years (11 in solitary) for blowing the whistle on what most people knew anyways. Israel had the bomb. The agency that controls the bombs is literally beyond Knesset accountability. They can arrest and detain anyone they want. The problem now is that others are coming out with stories of near nuclear-accidents, attempts by the Israelis to land-swap with Palestine and secretly giving Palestine a nuclear waste dump, contamintated workers and rampant cancers, etc.
Even after all of this, Israel is more of a democracy than the USA since they actually counted votes and determined their leadership that way instead of running to the SCOTUS for a Presidential selection.
The aid to Israel is rather irrelevant now.
Israel receives more than $3 billion, and some say $5 billion if you read the US budget's fine print each year. That turns out to be about $21,000 for each Israeli. The average Israeli even receives another $5000 per year, on average, from the state of Germany. Not that your average Israeli ever directly get any of this money, unless you refer to the $494,000 each Israeli family received as a bribe to evacuate the Sinai under the Camp David accords during the Carter administration. Anyone who still believes crime doesn't pay should read up on this little issue. Then again, the Israeli government doesn't get free reign with this money either, since, by law, there are restrictions on what may or may not be purchased, or where it may or may not be spent. And surprise, surprise! Eighty percent of it is usually spent in the USA and some have told me there are actually legal demands written in by Congress to force Israel to spend most in the USA. So, is Congress helping Israel, or helping it's corporate backers? Could this support actually be a cover for blatant corporate welfare?
You take this huge sum of cash out of any similar-sized economy and you have a disaster in the making.
What products do Israelis actually make? Very little. They don't have to. Their lives are largely insulated from the realities of world markets because of this huge influx of free cash. Even Intel openned a plant into Israel (on confiscated land no less) because of the tax and government grants. Remember when the Pentium 3 was supposed to come out? Originally they were to be made in the newer Israeli plants but shifted once news circulated that Intel's plant was built on illegal territory, the production of Intel's flagship of that time was shifted elsewhere. Like any other corporation that receives free money, once that well dries up, they're gone to other greener pastures. It's a race to the bottom and Israel couldn't compete without drastic cuts to their lifestyles.
It's economy is built up enough, and they have enough reserves of weapons, plus nukes, that even without US support, they can continue to do whatever they want.
As for Israeli economy, their banks are in trouble, their pension funds are largely insolvent and literally without cheap labour from the territories to work product for export, their economy barely functions. Like anywhere else on the planet, economics eventually drives overall policy.
Israel couldn't afford to maintain a nuclear program without the massive influx of cash from the USA; they couldn't afford it by themselves. A nuclear device is not all that complicated to make; after all, it was the only weapon system of WW2 that operated 100% correctly the first time it was used. They're just really, really expensive, and the industry needed to keep an arsenal would be huge drain on any nations treasury. Few nations are unable to do so without incurring huge social distorting problems. Look at the state of North Korea , Pakistan and India.
