Israel, West Bank, and Gaza
A Story of Lost Opportunities
This article was written some years ago, and I never bothered to publish it, but in light of the recent conflict in Israel and Gaza, I am publishing it here. I realize that some people will be offended by the utilitarian (for lack of a better word) approach taken here, as opposed to a moral one, but please keep an open mind, and realize that in the real world, a feasible but imperfect solution is usually the best way to move forward.
Background
After the partition of Palestine into a Jewish and Arab area, and the end of the first Arab-Israeli war in 1948, there were three politically distinct regions left in the area that had been formerly known as the British Mandate of Palestine. There was the state of Israel itself, occupying by far the largest portion of this original Mandate area, and then there were the two separate regions known as the West Bank and Gaza, which fell respectively under Jordanian and Egyptian military control, until the Six Day War in June 1967, when Israel occupied both these regions.
Initially, the West Bank and Gaza were ruled as occupied territories by Israel, with partial annexation of land for settlements by Israelis, as well as increasing diversion of the resources of the West Bank, especially water resources, for the benefit of Israel. During this period, which lasted up to 1993, the two regions were treated almost like colonies; for instance, the Israelis extended the tariffs which protected their own economy to the West Bank and Gaza, in effect compelling the Palestinians to buy the tariff protected goods from Israeli producers, as imports from elsewhere became prohibitively expensive.
On the other hand, there was a virtually free flow of labor from these regions into Israel, which meant that employment opportunities for the Palestinians increased drastically — though if we were to take a theoretical and Marxist perspective, then we would say that this amounted to exploitation of Palestinian labor. In practical terms, however, as the Israeli economy was almost ten times bigger than that of the West Bank, and much more manufacturing oriented, this meant that Palestinian workers, who commuted daily across the theoretical border to Israel to work, benefited from a higher quality and range of employment opportunities. As is common under these situations, there was also a technology and knowledge flow in the other direction, as these workers brought a different set of skills back to their own region.
Practical Consequences
While we should by no means attempt to discount the negative effects of occupation, as well as the negative economic effects of the policies imposed by the Israelis, a strong argument can be made that the connection with a more developed economy created an overall benefit for the Palestinians during the early years of the occupation. In simple terms, and again emphasizing that we are ignoring the political dimensions of the linkage, there was an economic benefit to the Palestinians to be linked with a more developed economy (Israel) rather than a less developed one (Jordan or Egypt).
Incomes rose in real terms as the two Palestinian societies achieved almost full employment; from 1967 to 1986, according to the World Bank, the per capita GDP of Israel increased by one and half times, while that of the West Bank and Gaza doubled, indicating that there was real as well as relative economic growth, even if it was under less-than-ideal political conditions (at least for the Palestinians).
During this period, there was a subtle and practical shift in the Palestinian position as represented by the Palestine Liberation Organization (PLO). Perhaps recognizing that winning a war against Israel was not a realistic or viable option, the PLO slowly changed its political aim, giving up the idea of a Palestinian state within the entire land that had fallen within the original British Mandate of Palestine. Instead, it de facto accepted the idea of the two-state solution as had originally been proposed by the United Nations, with the West Bank and Gaza becoming in effect the Palestinian state, and Israel returning to the pre-1967 borders.
On the other side, the Israelis, now in a militarily strong position, showed no real inclination to accept this, and all indications are that at least a portion of the Israeli polity wanted to annex the West Bank and Gaza into a greater Israel. In fact, so vehement was the Israeli opposition to the PLO that all direct linkages or talks with the PLO were considered unacceptable, and Israel even went to war in Lebanon in 1982, to drive the PLO out of that country, and remove it as far away as possible from Israel.
It’s the Economy
Returning to the economic situation in the West Bank and Gaza, what if the economic linkage between Israel and the two Palestinian regions had continued to develop as it did in the two decades after 1967? Given that the Palestinians have been remarkably successful in other Middle Eastern countries as well as the western world, as entrepreneurs and businessmen, it is very possible, indeed likely, that greater economic integration between Israel on the one hand, and the West Bank and Gaza on the other, would have led to an erasure of the border between these regions, and a de facto if not de jure single state, with the Palestinians gradually increasing in economic strength, albeit without any political representation.
Now I realize that this may sound somewhat euphoric, as there are many things that could have gone wrong — but in light of what actually happened later, and is continuing to happen, one could make the following compelling argument: Had these two regions become completely economically integrated with Israel, this would have been the best and most pragmatic option for the Palestinians who were living there, even in the absence of their formal recognition as part of a separate state.
Instead, faced with a resurgence of Islamic-oriented parties against them, such as Hezbollah and Hamas, the Israelis very reluctantly came to the conclusion that the PLO was the lesser of two evils, and after long and protracted negotiations, a limited degree of self-rule was allowed to these two regions. The PLO leadership, which had stayed outside of Palestine in exile, was in effect given the keys to the West Bank and Gaza, even if Israeli restrictions meant that they could not drive too far, or go too fast.
For the Palestinians who had been living in the West Bank and Gaza, the change of leadership must have come as a great shock. The big elephant in the room, which no one likes to talk about in polite company, was how corrupt and venal the Palestinian leadership actually was. The importation of essential goods such as cement and gravel, required for construction, was licensed to one or two companies with links to the senior Palestinian leadership, or sometimes directly owned by a senior PLO member.
Bribes and extortionate customs duties were imposed for the importation of goods, which went straight to the pockets of the well connected. Even the official aid, received from international donors, did not escape the clutches of the well-connected; according to investigations carried out by these donors, at least half of this money from 1993 up to 2014 could not be accounted for, and there were numerous incidents of senior leaders within the Palestinian Authority (PA) being caught with questionable sums of money as well as unexplained sums in their bank accounts.
While it is true that some of this corruption was carried out in collusion with the Israeli authorities, most of it was home grown, though that did not stop the usual attempts to shift blame on to the Israelis. Even worse, in order to maintain credibility in the face of mounting criticism, the PA encouraged various insurrections and intifadas against the Israelis, who were more than willing to provoke as and when required, for their own political needs, and then retaliate in kind.
Economic Separation
The result was a significant reduction in the economic linkages between the Palestinian and Israeli economies, as walls, literal and metaphorical, sprang up between them. By 2002, the per capita GDP of the West Bank and Gaza was actually lower than it had been in 1993, while the Israeli per capita GDP was fifteen times bigger than the Palestinian one, a disparity that has gotten far, far worse since then, as the Israeli economy has surged ahead on the back of startups and technologically innovative companies.
Finally, in what amounted to an act of desperation, the Gazans decided to go their own way, and elected Hamas to replace the PA in elections that were held in 2006, a few months after the Israelis had unilaterally withdrawn from Gaza. The Israelis, aghast that the Gazans had dared to bring an Islamic government to power, initiated a series of measures to strangle the Gazan economy, including power cuts and restrictions on border crossings.
Rather than compromising for the sake of reducing the misery of its people, if not for economic development, Hamas responded by staking out an ideologically strong position, and a series of confrontations have ensued with Israel since then, all following the same pattern: Hamas fires rockets into Israel, killing Israelis, and Israel retaliates with a strong force of show, using its air force and army to move in and destroy parts of Gaza, killing hundreds of Palestinians, and making thousands homeless.
Rather depressingly, the cycle is still continuing, with one notable exception; the current conflict is an order of magnitude more intense than the previous ones, and there is now a small but distinct possibility that the war may spread regionally.
