With the eruption of the confrontations in September 2000 and the subsequent tight closures of the Palestinian territories, the slim and unsustainable recovery begun by the Palestinian economy in 1998 came to an abrupt halt. In the 20 or so months since then, the economy has been decimated. The Israeli economy has also been negatively affected, although unlike that of Palestinians, it is far ahead of barely surviving.
Does Israel want a proletariat revolution in the West Bank and Gaza Strip and against whom? Is the Israeli objective to test the accuracy of modern weapons against suburban revolutions as Alain Joxe suggested in his May 19 lecture, “Countering Israel’s role in the strategy of hegemony,” at Birzeit University? Or are mere security concerns on the minds of the Israeli government?
The economic war waged against the Palestinian people is part of Israel’s military and political war aimed at tiring Palestinians and bringing them to their knees. In the words of Israeli commentator for Yedioth Ahranot Ron Ben Eshai, “It is impossible to vanquish the Al Aqsa Intifada military, but it is definitely possible to frustrate it and to wear out the Palestinians physically and economically until it dies out.”
The strict land, sea and air blockade imposed on the 1967 Palestinian territories and between all Palestinian cities and villages is placing a stranglehold on the economy and its future prospects. The closure prevents 125,000 day laborers from getting to their jobs in Israeli markets. The resulting daily losses in remittances have been estimated at $3.4 million dollars, which removes a principal source of income for the Palestinian National Authority (PNA). In 1999, those 125,000 workers contributed $1.3 billion dollars to the Gross National Product – a fourth of the total. The World Bank estimates the total loss in Palestinian GNP at $2.4 billion in real terms from September of 2000 until the end of December 2001.
In addition, more than 200,000 workers in the domestic economy are now unable to go to work due to the closure of roads between Palestinian towns. Even those who can get to work have not maintained the same level of contracts, wages or salaries. The percentage of unemployment in the occupied territories ranges between 40 to 50 percent, making the very concept irrelevant. The ratio of poverty in these areas is now unprecedented. The World Bank speaks of 1.5 million people living below the poverty line of two dollars a day.
This mounts to pauperizing the masses. Workers are thriving to survive under unbelievable conditions of suffocation. The result is obvious: continuous violence. The reaction is obvious: armed incursion and heavy military response for what Israel proudly calls the “destruction of terror infrastructure.” It is a vicious circle.
The full blockade has virtually suspended the import of goods to the territories from abroad (including Jordan and Egypt), and between cities, not to mention the internal trade. Construction activities, the leading sector in the nineties, have come to a halt. Only those engineering firms fulfilling contracts with the PNA for a few European Union- or Japan-funded projects still have something to do. Tourism that was to flourish in peace is nearly dead. Those who built hotels, restaurants and so on have lost hope. The agricultural sector has been severely damaged, resulting in un-harvested crops and oversaturated West Bank and Gaza Strip markets. Fishing has been banned in Gaza, depriving hundreds of families from their main source of income.
Total losses to Palestinian infrastructure have amounted to more than $750 million since the beginning of the confrontations.
The PNA is effectively bankrupt, since tax revenues have dwindled to one fifth of previous levels. There is a sharp drop in PNA revenue collections associated with declining economic activity and disrupted tax administration, as well as Israel’s suspension since December 2000 of the transfer of tax revenues collected on the PNA’s behalf (over $500 million at that time) and increasing emergency expenditures, particularly in the health sector.
The present situation is unsustainable. Households have in many cases exhausted their savings and capacity to borrow. Emergency employment schemes, for all their merits, have not significantly dented unemployment. The fiscal situation continues to deteriorate, and donor contributions have not closed the budget deficit. Up to now the PNA has managed this deficit by borrowing from commercial banks, cutting salaries, squeezing operating costs and delaying the payment of bills, but all of these strategies are reaching their limit. By the end of 2001, the PNA’s arrears amounted to $430 million, most of these owed to Palestinian commercial suppliers (in turn placing significant pressure on Palestinian commercial banks). Significant health and environmental issues are arising with the increase in poverty.
Since the occupation in 1967, Israeli policy has continued to attempt to bind the occupied territories to the Israeli economy, both as a source of cheap labor and a captive market for its goods and services. The territories make up the third biggest buyer for Israeli exports, importing $2 billion worth of Israeli goods annually while exporting only $250 million in exchange. Hence the renewed interest of the Israeli and Palestinian bourgeoisie in returning to the “peace process” and cementing the economic subjugation of the Palestinians. The continuity of the confrontations constitutes an enormous source of danger to the Israeli economy and its investments.
Yes, security remains the top priority on the Israeli agenda. But the economy of confrontations tells us that squeezing Palestinians economically is a backfiring weapon against the Israeli economy itself inasmuch as the “war on terror” creates a vicious never-ending circle of violence. What is left, after all, is the fact that peace can only be achieved through genuine efforts at the negotiations table to achieve development, so that the process of twinning peace and development can create the social base for a long-lasting peace.
Adel Zagha is Dean of the Faculty of Commerce & Economics of Birzeit University.