What will fix the Palestinian economy?

Timothy Taylor summarizes two recent reports.

What are some potential areas on which economic growth in the West Bank and Gaza might build? One possibility is to seek to build ties of trade and migrant workers with Arab countries across the Middle East. Another is to emphasize better conditions for businesses to operate in the West Bank and Gaza. For example,the World Bank report notes at one point, “[I]t is vital for the PA to address institutional reform to ensure that energy suppliers are paid for their service – which is critical for both energy imports and investment in generation.” That advice hits at a deeper problem for any business thinking about operating in the area.

I would say it’s the kleptocracy, stupid. And just as in many countries having natural resources strengthens kleptocracy, I would say that in the Palestinian territories the large sums of foreign aid have created a situation that rewards success in the struggle for political power much more than success in enterprise.

I think that this is clearly a case where the GiveDirectly model would work much better than existing aid approaches.

13 thoughts on “What will fix the Palestinian economy?

  1. It would be interesting if these places could be subdivided and then test what kind of policies worked in the targeted areas…come to think of it it would be nice if these united States were allowed to do it too.

    • Another recurring thought is all the research and military bases have to be somewhere, so why not throw Keynes a bone and put them in depressed places. Granted, military bases might not be a great idea in Gaza (but they could be in Detroit, and moving around is not necessarily all loss for a military who needs to learn to move a lot), but we could research desalination, solar, etc. The military could learn Arabic. We need to study security methods. The Peace Corps could be targeted to places of relative safety and strategic interest. Just having people go would help more of us understand the challenges and feasibility of solutions. Maybe the term could be “Mutually Beneficial Aid.” I suspect this learning underlies a lot of what we are already doing in the hot zones. Maybe if we did it in “warm” zones we’d have fewer hot zones.

  2. How about the alternative message, allow Palestine to completely interact with the growing Israeli economy? (It is a single state!) Reviewing the Palestine economy, it sounds a lot like the segregated African-American communities of the early 1960s where they were given lots of aid but not treated equally in the total Israeli private economy. So we can’t fix it from the outside but possibly allow individual Palestine citizens to profit from hard work.

    Maybe, looking at the former California ghettos… Grow Palestine with Israeli gentrification!

    • I’m NOT criticizing, so bear with me. The settlements have cause lots of angst. The Palestinians don’t like it. So, they have to break the Catch-22 where integration is viewed as domination.

      • I’m actually optimistic because integration is the solution, but they just managed to make it into a problem. I don’t have any problem with anybody here as long as they don’t blow me up. I have multiple nationalities, religions, and races within rock throwing distance and nobody throws rocks. They have 2 and it’s the end of the world.

    • I given up all hope that Palestine can thrive at this point separate from Israel and Israel really wants the land. But nobody wants to admit it is a single state.

      And yes, Palestine is a bad combination of kleptocracy and a defined minority.

  3. I’ve written elsewhere that conflict will persist for as long as the Palestinian leadership is rewarded for persistent conflict. The economics (and politics) of foreign aid and sympathy make war far more rewarding than peace and therefore the leadership has a lot to lose and little to gain through settlement. The optimal strategy is to keep peace on the table, but juussst out of reach — governing is hard, but being a high status charity case is pretty great (for the leadership). (https://intellectuallyhonestest.wordpress.com/2017/01/20/an-equilibrium-of-perpetual-conflict/)

    Colin, I think Israel would prefer economic integration, but the Palestinians (and Left) call this “normalization.” Rightly or wrongly, Palestinian leadership doesn’t want to alleviate the conditions of the occupation (without controlling the spigot) because then people might realize that The Occupation is just an occupation and not as bad as they claim — and more importantly, self-determination and political rights (as opposed to civil rights) are not the be-all and end-all. Remember that before West Bank Arabs were Palestinians, they were Jordanian foreign nationals. That’s why the territory (previously (and still) called Judea) is now known as the West Bank (of the Jordan River) to distinguish it from the rest of TransJordan that lies on the East Bank. Now, however, the only “just” outcome is an independent state, which is convenient for the would-be leaders of that state (and the Hashemites, who want nothing to do with the Palestinians after their own brutal war with Arafat in the 70s, i.e. Black September).

    Integration and gentrification (although it wasn’t known as such) is what let the “evil Zionists” get their foothold in the first place: they bought a lot of land, invested a lot of capital and raised productivity (drawing many Arabs to the region). The much maligned “settlers” do exactly the same thing (and used to employ a lot more Arab labor and buy a lot more Arab goods). The local Arab leadership responded then as they do now: by fomented riots against the Jews (and the British) to put a stop to immigration/settlement. It’s the Palestinians who want to be completely Jew-free, and not the other way around. A desire for self-segregation is also why selling land or property to Jews is punishable by death: the leadership knows that self-determination is their dream, but not necessarily the dream of ordinary Palestinian Arabs.

    I don’t mean to suggest there isn’t a laundry list of legitimate grievances. There most certainly is. Bigger picture, though, that is driven by a leadership that zealously guards its kleptocracy and the foreign proxies that keep it profitable.

    For a different version of this take, I highly recommend Matti Friedman’s evergreen How the Media Makes The Israel Story https://www.theatlantic.com/international/archive/2014/11/how-the-media-makes-the-israel-story/383262/

    • I have the opinion of the Palestine people much like the old Ireland of 1970s and 1980s. They have very legitimate grievance but are taking them out in the worst destructive way. However, I don’ hear that most Israeli leaders saying that they really desire one state with equal treatment of the Palestine people either. They state they officially support a two state solution but deep down they are appear very Bibi election position which the status quo with slow building of settlements.

      • It depends on what you mean by “equal treatment.” Full citizenship? No, I agree with you, that won’t happen until there is a comfortable majority. Full civil rights (which could be accompanied by a reinstatement of Jordanian citizenship)? Israelis would leap at that, but it’s a political non-starter from Jordan’s perspective and potentially de-stabilizing to the Hashemite regime–which Israel does not want either. It would also require Israel to return to its policy of deporting people for criminal activity, which is similarly politically fraught.

        I agree with you that “grit and bear it” has become the preferred policy, for lack of an alternative. Israelis cannot make any more concessions to an obviously hostile polity (or at least a polity unwilling to police itself, or be policed by others). They also cannot apply any additional pressure without outrage from (a) their neighbors who cooperate on security; and (b) the “international” i.e. technocratic community.

      • Also, while it’s considered unhelpful to suggest as much, I’m still not convinced there is a Palestinian “people” unified by anything other than its opposition to Israel. There has never been a distinct Arab polity tethered to the territory called Palestine, until Arafat/PLO made one up in the 50’s (and even then, it was a pan-Arab movement with aspirations to supplant the Hashemites in TransJordan). I used to be more cynical about that argument, but recent events in Syria, Libya, Iraq, Yemen and Lebanon (always) have changed my mind. Hamas and Fatah cannot stop killing each other and Gaza and the West Bank are functionally different places.

        • Also, while it’s considered unhelpful to suggest as much, I’m still not convinced there is a Palestinian “people” unified by anything other than its opposition to Israel.

          That is why I compare Palestine to Ireland and Britain of the past. The Irish population could not agree on much but it was always the British fault. And when you occupy an area, then you become the fault of everything. I suspect if Palestine was suddenly free, they literally not know what to do. I do believe that is little bit what happened to African-American communities in the late 1960s and 1970s in which with sudden freedom weakened some of the African-American communty institutions. (Middle class doctors moved away and churches diminished.) And Palestine is much more dangerous than even that experience.

  4. More free advice, Arnold, have you written an essay/article on the Resource Curse analogy to Foreign Aid? Why do we participate? Are we ignorant, or is it intentional to buy off the shot-callers in the target country (Economic Hit-Man style). Or is it the combination of it sounding like charity, voters being ignorant, and the insiders knowing what is going on and believing they are pursuing our interests?

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