Money can’t ‘fix’ Palestine’s occupied economy

Whatever the Bahrain workshop proposes is doomed to failure. Here is why.

Israel occupation
Israeli security forces pass by a shop selling decorations for the upcoming holy month of Ramadan as they patrol an alley in Jerusalem's Old City on July 8, 2013 [File: Reuters/Ammar Awad]

Editor’s note: This piece was originally published on June 25, 2019, ahead of the Manama Summit.

This week the much-awaited Bahrain workshop is to take place in Manama, with various Arab and Western officials in attendance. The event is supposed to present the new economic plan for the occupied Palestinian territories, besieged Gaza and the wider region, which will allegedly get the Palestinian economy “going the right way“. 

While we shouldn’t be surprised that a rich white man, such as President Donald Trump, wants to throw money at a problem to make it go away, it is quite disappointing to see that there are some who are buying into the narrative that a simple economic plan can be a solution to the decades-old “Palestinian issue”.

It should be obvious to all that an occupied economy cannot “go the right way” even if billions are poured into its sectors. An occupation stunts economic development by default and no proposed financial “fixes” would ever work until it is fully lifted.

An economy under occupation

The economy of historic Palestine, once a thriving region, sharply deteriorated after the foundation of the Israeli state in 1948 and the subsequent occupation of Palestinian land. A series of “peace” agreements made in the early 1990s as part of the Oslo Accords brought Palestine under complete economic subjugation.

The 1994 Paris Protocol was particularly damaging. It imposed an unequal customs union, granting Israeli businesses direct access to the Palestinian market but restricting Palestinian goods’ entry into the Israeli one; it gave the Israeli state control over tax collection; and it further entrenched the use of the shekel in the occupied Palestinian territories, leaving the newly formed Palestinian Authority with no means to impose fiscal control or adopt macroeconomic policies.

This in effect means that today Israel has full direct and indirect control over the levers of the Palestinian economy. The military occupation complements it by allowing the Israeli state to exercise physical control over the Palestinians’ everyday economic activity and expand the colonisation of Palestinian land. What does this look like on the ground?

In Gaza, 35 percent of the farmland falls within the so-called “buffer zone” designated and enforced as such by the Israeli army. Farming this land leaves people at risk of coming under live fire. Other farmland in Gaza has been periodically aerially sprayed with herbicides by Israeli planes which resulted, on one occasion in January 2018, in losses worth $1.3m.

In the occupied West Bank, most of the natural resources and most fertile land fall in Area C (61 percent of the West Bank) which is under absolute Israeli control. This includes 95 percent of the Jordan Valley, which is heavily cultivated by illegal Israeli settlements. Indeed the loss of access to Area C is estimated to cost the Palestinian economy around $480m per year and is responsible for the unemployment of 110,000 Palestinians.

The Bantustanisation of the West Bank further stunts economic growth by restricting freedom of movement both people and goods. Israel is in complete control of most of Palestinian infrastructure and is able to restrict access to it, as it pleases. For years, it curbed the development of mobile services by imposing various restrictions on it, including a ban on the introduction of 3G technology. One report estimated that as a result, Palestinian mobile operators suffered losses of between $436m and $1.5bn in the period of 2013-2015.

Israel also restricts Palestinian access to various roads and passes in the West Bank on an everyday basis. A World Bank study estimated that in 2007, the Palestinian economy lost $229m or six percent of its GDP due to the negative effects of the numerous Israeli checkpoints dispersed across the occupied territories.

In Gaza, Israel has upped the ante and imposed a complete blockade, restricting the entry of almost all goods. This has devastated the agriculture and the manufacturing industries and resulted in the unemployment of 50 percent of the population. In addition, the Israeli army bombs regularly the strip completely destroying basic infrastructure, rending the area uninhabitable by 2020, according to the UN.

As a result of the combined effects of economic and military occupation, the Palestinian economy is severely underdeveloped, local production diminished, unemployment skyrocketing and traditional sectors reduced to shambles.

Given the domination and privileges of the Israeli economy over the Palestinian one, the Palestinian business can neither compete nor produce enough to meet local demand. Israeli businesses are making money not only by dominating the Palestinian market and exploiting their privileged position, but also by using Palestinian labour rendered extremely cheap by the lack of native economic opportunity.

As a result, many Palestinians find themselves in the unenviable position of being forced to buy goods produced by their occupier on land stolen from them with money earned in labour for occupying businesses and in currency imposed on them again by the same occupying forces.

Neoliberalism and depoliticisation

Apart from entrenching Israel’s dominance over the Palestinian economy, the Oslo Accords also produced a governing entity highly dependent on outside forces – the Palestinian Authority (PA). Under Western pressure, it has fully embraced neoliberalism and helped create an ever-increasing wealth gap within the Palestinian population, making life much harder for the Palestinian working class.

The PA’s restructuring in its 2007 “Palestine Reform and Development Plan”‘ is an example of this par excellence. It was developed with the help of the World Bank and British Department for International Development (DFID) among others and introduced various damaging policies, including massive reductions in public spending. In 2015, only 16 percent of the PA’s annual budget was spent on education, nine percent on health and one percent on agriculture, whereas 26 percent was dedicated to the security sector (which through its policy of coordination works with the Israeli occupation to suppress Palestinian resistance).

The restructuring also encouraged borrowing, increasing the indebtedness of the general population manifold. Currently, the private sector owes close to $2.8bn to banks, while private individuals have taken out loans worth some $3.2bn. Over the past 10 years, car loans have jumped sixfold from $40m in 2008 to $250m at the end of last year.

Thus, in Ramallah, the de facto capital of the PA, could easily be mistaken for a prosperous city with middle-class neighbourhoods full of plush villas and shiny BMW’s. But this is just a facade for the devasting effects of neoliberalism and occupation on the Palestinian people. 

The indebtedness of Palestinians also allows for furthering social control and depoliticisation. Today, some 150,000 Palestinians are employed by the PA and some 100,000 others work in Israel, many of whom have taken out loans. They all face the threat of losing their employment (and potentially their home, car, etc) if they are seen to be involved in “undesirable” political activities. The Israelis regularly rescind work permits for entire extended families if a member is found to be engaged in anti-occupation activities.

The result of all of this is not only increasing poverty and hardship, but also growing individualisation which has contributed to fragmentation and political polarisation within Palestinian society.

It is within this context that the Bahrain workshop is to be held. Whatever the outcomes, they will not “fix” the Palestinian economy because they would not address the main problem: the Israeli occupation. The colonisation and oppression of Palestine cannot be remedied with a depoliticised economic solution.

To Palestinians, it is clear that the “economic peace” that is on offer is just another attempt to buy them off. Even the PA and prominent Palestinian businessmen have rejected it.

Yet the workshop is a symptom of a much larger global problem. Systems of racial domination and capital work together to oppress; it is in their interest to ensure that politics are kept separate from the economy.

In post-apartheid South Africa, liberation was not fully achieved because of the separation of politics from economics. While racial capitalism was an important part of the ideological discussions of the African National Congress, it restricted its own anti-apartheid agenda to the political and social spheres. It made significant concessions to the economic elites and embraced neoliberalism, which today is responsible for the gross inequality in South African society and the continuing suffering of the black urban working-class and rural populations.

To avoid repeating the mistakes of the past, it must be recognised that in Palestine, there can never be “economic peace” as long as Palestinians are being denied their rights. The world must join the Palestinians in rejecting Trump’s deal and the Bahrain Workshop and reiterating that the only solution to the Palestinian question is a political one – i.e. the complete lifting of the Israeli occupation and the dissolution of its apartheid regime. Anything short of that is doomed to failure.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.