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Settlements Generate Virtually No Economic Activity

ancient mariner albatross

Like the Ancient Mariner, Israel is forced to wear the settlement albatross around its neck

You will hear Israel’s boosters brag about the Mediterranean Miracle that is the Israeli economy.  ‘Start-Up Nation’ and the like.  But you’ll hear virtually nothing similarly-claimed regarding the settlements.  Over the decades, the State has invested roughly $20-billion into the settlement enterprise (including military spending to defend them).  You’d think it would’ve invested similarly in creating a viable economy there.  It hasn’t.  Or if it has, it simply hasn’t worked.

Tucked into Jodi Rudoren’s latest NY Times article, which highlights (naturally) a settler website meant to generate economic activity and oppose BDS, is an eye-opening, even shocking fact.  If you didn’t read it carefully, it might’ve zipped right by you:

A recent Israeli government report estimated there are…$250 million in annual exports — 0.55 percent of the national total — from the West Bank, East Jerusalem and the Golan Heights, territories the international community generally considers illegally occupied.

Consider this, there are roughly 500,000 Jews living in the same Occupied Territories (note how Rudoren concedes they’re considered “illegally occupied,” but refuses to call them by their commonly-accepted term, ‘Occupied Territories’), which is roughly 8% of the overall Israeli Jewish population.  Yet, they produce only “0.55%” of the overall nation’s export product.  In other words, there is a mismatch by a factor of more than ten between the expected and actual export product of the settlements.  Which means that the settlements produce almost nothing of economic value.

What do they produce?  Ideology.  And you can export ideology.  But it has no monetary or economic value.  In fact, BDS makes a very good argument that ideology, in that sense, actually suppresses economic output (since BDS is harming Israel’s overall economic activity).

So what do they do in the settlements?  Most of the working residents are employed by government or local/municipal services.  In other words, the government pays these people to serve others like them.  There are also many settlers who work at actual productive jobs within the Green Line.  Their homes are not where they work.  So their economic output drives the economic engine within the Green Line, not outside it.

Which brings us to this basic truth: while the settlements make an ideological statement, they have no actual economic foundation.  This is the case despite fifty years of effort and massive expense on the part of the Israeli government, which offered the settlement enterprise every opportunity to establish itself.  So settlements offer almost no contribution to the nation’s overall GDP.  They are not viable from any realistic measure.  So the question arises: how long can Israel afford to carry this albatross around its neck before it realizes the huge bird will cause it to drown like shipwrecked sailors of old.

{ 19 comments… add one }
  • Shir Hever January 22, 2014, 2:07 AM

    This is a very interesting result of the Israeli misinformation policy. Any Israeli export which has at least a small portion produced inside Israel is marked as “made in Israel,” even if most of it was produced in the settlements, hence the low 0.55% number. This number was produced for the benefit of the OECD in order to convince them that the occupation is not a significant part of the Israeli economy. Of course the reality is that settlements export more than their share in the population (more than 8%), because of the massive subsidies which they receive from the government.

    Regarding those subsidies, the Macro study cited here about the 20 billion dollars deals ONLY with construction costs (and the cost of security for the construction sites). This is not the biggest subsidy provided by the government. Subsidies are also large in health, water, transportation, taxes, agriculture and industry, so the 20 billion are only part of the big picture.

    • Dave Terry January 22, 2014, 10:45 AM

      SH> “Of course the reality is that settlements export more than their share in the population (more than 8%), because of the massive subsidies which they receive from the government.”

      You are overlooking the fact that the HUGE subsidies should be subtracted from the overall value of exports. Thus it is quite probable that if you include ALL of the subsidies to the settlements, there is a net “DEFICIT” in the relative “exports” from the “occupied territories”

      It is important to note that this is all irrelevant to the Likud and other hardline Zionists, since the important “product” that the settlers provide is simple occupation and possession of territiory. PERIOD!

    • Richard Silverstein January 22, 2014, 8:07 PM

      @ Shir Hever: I knew I should’ve checked with you before publishing this, SHir. Who would’ve known that Israeli government reports would rely on outright subterfuge? How naive of me! I’ll add a major update with this information. ANd thank you again.

  • Ael January 22, 2014, 7:34 AM

    I expect that the statistics don’t tell the truth.

    To avoid labeling issues in Europe, I suspect a lot produced in the occupied West Bank is labeled “Product of Israel”.
    This dodge is accomplished by having corporate HQ inside Israel proper.

    Hence, the statistics show almost nothing made in the occupied territories is exported.

    • Oui January 22, 2014, 8:02 AM

      Sure, EU is stupid.

      Consumers who expect fraudulent labeling of OCT/Israeli goods, refuse to buy any goods labeled “Made in Israel” period.

  • Peter Belmont January 22, 2014, 8:52 AM

    RS: Do you know whether the 500,000 settlers number reflects ONLY West Bank without East Jerusalem? what about the Golan? I’ve read both 600,000 and 650,000 numbers, perhaps as as TOTAL settler ounts (including settlers in occupied parts of greater Jerusalem)

  • ben January 22, 2014, 9:42 AM

    Most of the people I knew when I was in Israel who lived on the other side of the green line just had homes there but worked in Tel-Aviv/Israel Proper.
    I was always under the impression that the settlements were a residential enterprise and not a commercial one.
    Though it does seem the talented and beautiful Scarlet Johansson is the spokesperson for Soda Stream which has a factory in Ma’ale Adumin which employs about 1000 Palestinians.
    0.55% of $250 million is $1.375 million in exports as compared. According to the CIA fact book the westbank exports $666 million a year. Though to be fair the website also states that Israels exports are $64.29 Billion a year. Do you have a link to this ‘recent’ report that states the exports are much lower? As 64 billion to 250 million is a rather large gap. I did a google search and was unable to find the report that was quoted in the NYT article.

    • ben January 22, 2014, 10:04 AM

      here is a pdf documenting the exports by the Israeli government: http://www.export.gov.il/uploadfiles/09_2013/developmentsandtrendsinisraeliexport_summaryoffirsthalf2013.pdf

      Though the report is only from the 1st half of the year and it does indicate a downturn from 2012 in exports. Just wonder where the NYT got this $250 million from?

      • ben January 22, 2014, 11:03 AM

        Nevermind I had read that wrong. the $250 million was the amount exported from the WB. Though this number is more then likely much lower as noted not all exports are labled. Though it is interesting that the Settler Exports are almost 40% of what the Palestinians produce. This is clear indicator that the West bank economy is in a terrible state as thats still less then 1% of what Israel’s anual exports are.

    • Davey January 23, 2014, 7:06 PM

      AS I read it, $250 million IS the 0.55%, so that the total is $250 million divided by .0055 or about a $45 Billion GDP.

  • ToivoS January 22, 2014, 1:50 PM

    The real advantage of the settlements is that it helps the BDS movement that targets the entire Israel economy and society. However, there are many people who think that goes too far so they only boycott the illegal settlement economy. Thus the illegal settlements allows people to boycott Israel just a little bit. Once they realize that the “Made in Israel” is a lie, they will graduate to a complete boycott. I think the inside the green line business community might be a little pissed about that.

  • Strelnikov January 22, 2014, 7:57 PM

    And this is why I buy nothing Israeli….was the item built by Israeli labor, or by chained Palestinian children in a basement in Yitzhar? We know the Chinese use prison labor; what sort of scams are going on in the (so-called) Holy Land?

    • Daniel F. January 23, 2014, 1:42 AM

      “………chained Palestinian children in a basement in Yitzhar?”
      Can you substantiate the suggestion above or is it merely a product of your bias?

      • Richard Silverstein January 23, 2014, 2:25 AM

        @ Daniel F.: Remember the old “two fingers up” rule I mentioned to Bob Mann? BTW, it’s a whole lot more civil than the “one finger up” rule, which is its offshoot. I hereby decree that anyone who seeks to make an ironic statement or joke at the expense of the Israeli Occupation must hold 2 fingers aloft as they do so. This should signal to readers the writer’s true intent. Watch for the 2 fingers!!

  • TMC January 22, 2014, 10:32 PM

    Ah, so Sharon made peace at the very end and then said, “Blood, blood…everywhere, and not a drop to drink!” before going into a coma? What is the difference between the settlement and the kibbutz other than a false moral rationalization? To Palestinians, it’s probably fitting that Israel is represented before the world by a group of lawless yokel settlers and land thieves, and a former furniture salesman/Boston Consulting Group corporate smoke and mirrors analyst is their mouth piece.

    Then there’s also that Moldovian in/out criminal trouble zany-eyed Foreign Minister. Oh, and the Defense Minister: lovely.

    America: “Enjoy Iron Dome and it’s 5% win rate/MM spend, Israel.” #bffs?

  • Robert Mullen January 23, 2014, 2:42 AM

    Re; Settlers – Take, take, take. Give a little (mostly rocks). Take, take, take. Etc., etc. UN report, abstracted in The York Dispatch, 15 Jan 2014: “UN says pace of Israeli settler attacks up 4-fold” [in 8 years]. Take, take, take. Give a little (mostly rocks). Take, take, take.

  • Robert Mullen January 23, 2014, 2:55 AM

    For those interested in source, which I neglected to include in previous note re: UN report: Military Intelligence of the Czech Republic, Prague. +420 973 378 303/Fax: +420 973 378 198/email: okno@uvoz.cz

  • SimoHurtta January 23, 2014, 5:43 AM

    As a former economist I see the settlements “not creating any economic activity” as somewhat wrong from the viewpoint of the whole Israeli Jewish side. Occupation, settlements and the land theft have generated (and still are) enormously economical activity in the Israeli (Jewish side’s) economy.

    First the occupation’s military costs are paid mainly by USA. The occupied populations costs are paid mainly by the international community. Both mean “fresh capital” flowing into the Israeli economy. The situation is as “idiotic” if during the Nazi occupation of Poland USA would have yearly sent billions to Germany in order to keep Germany “safe”. The “world” would have had to send billions to keep the occupied Poles “alive” and Germany would have forced the economy of the occupied go through Germany and the provisions bought with foreign money to Poles be bought from Germany. The dark reality is that the occupation doesn’t cost Israel anything (cleanly cut), it earns with it without needing to exploit to obviously Palestinians.

    Building is the Primus Motor of all economies, because the direct and indirect effects of the building generate most new GDP. Mainly because most of the materials, needed parts and work come from the local economy. That massive building of infrastructure, walls and settlements to West Bank has had a great influence in the Israeli economical growth. For comparison China’s fast economical growth is mainly in massive building of the country. The exporting “side” is only small part of the total GDP and its role is to finance, partly, the domestic growth.

    In West-Bank Israeli Jews have managed to get land with no payment or with minimal costs. Building houses on that land and being able to sell them to other Jews with the normal price of LAND + HOUSE is enormously lucrative “real-estate development”, especially when the government gives loans (=financing) to the “customers”. It is equal to that in USA or Europe “one” could take the lands of a Jewish landowner without paying, zone the stolen land to dense residential area (with the help of the government) and build houses with basically very cheep “slave” labor (= those poor Palestinians forced to build the settlements). And then sell those to Christian extremists relatively cheaply but still with a extremely high profit. Jews would call that as anti-Semitic violence (which it would be). But when they themselves do it, it is called what? Birthright, God gave this to us, you lost the war, you are only donkeys etc…

    This “do not produce economical activity” may be a reality to some extent, but bringing industry and service to those settlements is easy, when ever it is seen as necessary. Though Israel + Palestine is in total so small, that most settlements are in reality suburbs, which do not need industry or service to provide local workplaces. Their economical “input” is providing workforce for bigger cities. Israel also built those settlements in order then later be able to demand more land to them in order to make the settlements more “profitable” and self-sufficient by building industries and services. This emerging international “blockade” against settlement production is a preemptive move against Israel’s next step. Demanding more Palestinian land to get “workplaces” for Jewish settlers.

  • Yani January 24, 2014, 4:27 AM

    “they produce only “0.55%” of the overall nation’s export product” surely this makes it very clear that targeting the settlements alone with the BDS is a complete waste of time. Given the BDS will only ever be implemented by a fraction of the purchasers / investors clearly it will only make a difference if the total Jewry is targeted.

    That’s what Israel’s political elite fear most, that their ungracious actions will lead to a more general boycott of the Jewry and that is exactly what it should lead to in the shortest possible time. The need is for maximum pressure to create change in the shortest possible time frame. Not for protecting a group of people who have been actively engaged in 65+ years of supporting, what can only be legitimately described, as brutal fascism.

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