The UN Conference on Trade and Development has issued a detailed report (full report here) on the Palestinian economy, which offers the chilling estimate that without Israeli Occupation it would be double its current size. Factors involved in styming Palestinian development are:
…The confiscation of Palestinian land, water and other natural resources; loss of policy space; restrictions on the movement of people and goods; destruction of assets and the productive base; expansion of Israeli settlements; fragmentation of domestic markets; separation from international markets and forced dependence on the Israeli economy. Moreover, a continuous process of de-agriculturalization and de-industrialization has deformed the structure of the Palestinian economy, the report maintains.
Over the past forty years, the portion of the economy devoted to agriculture and industry dropped by more than half (from 37 to 18% of the overall economy) and the level of employment these sectors generated dropped from 47% to 23%. The largest employment sector is public jobs, which are funded by foreign aid, rather than by domestic economic activity.
Area C, which is under Israeli control though it remains Palestinian, constitutes 60% of the West Bank and 66% of productive grazing land. Israel’s denial of access to this land deprives Palestine of one-third of its overall potential GDP. The situation is far worse in Gaza, where 85% of fishery resources are inaccessible due to violent Israeli harassment. The cost to the Gaza economy of the last three Israeli wars there amounts to three times the enclave’s current GDP.
Israeli forces have uprooted 2.5-million Palestinian trees since 1967, including 800,000 olive trees, which are one of the country’s most important agricultural products. Palestinians may not dig new water wells for crops and flocks, while illegal Israeli settlements have stolen 82% of Palestinian groundwater. In yet another cruel irony, Palestinians must import Israeli water to fulfill 50% of their consumption needs.
Israel also cheats Palestinians regarding tax collection. Though Palestinian goods amount to only 3.5% of the overall taxable products assessed by the Israeli tax authority, they amount to 33% of all the tax revenue collected. This amounts to an excess of $50-million which could reduce the overall deficit of the Palestinian Authority by nearly 4%. Palestine is a captive market for Israeli exports and over half of the former’s trade deficit is due to importation of Israeli products, many of which could be produced domestically if the economy was free, unfettered, and robust.
Unemployment in the West Bank was 28% in 2015 and 38% in Gaza. The vast majority of Palestinians are food insecure and 73% live off foreign humanitarian aid. This is a condition due completely to Israeli Occupation. Israel’s siege of Gaza also suffocates the local economy. The former’s purported fear of terrorist attacks restricts the importation of wood, communications equipment, pipes, and fertilizer. These are items without which a modern economy simply cannot function, which is just as well as far as Israel is concerned.
Israel’s disruption of the Gaza power supply cripples the opportunity to develop industrial production. Its refusal to permit the upgrading of Gaza’s sewer system and water treatment means 90-million liters of raw sewage are pumped directly into the Mediterranean each day. This in itself is a regional environmental disaster, all of Israel’s making. In the past five years (2008-2015), infant mortality in Gaza has nearly doubled from 13 to 20 per 1,000 births. This catastrophic statistic is only seen in countries afflicted by massive HIV outbreaks.
It is absolutely critical for Israel that Palestine be a crippled, dysfunctional state. If it was anything more than that it would provide a real threat to Israeli hegemony in the region. Not a military threat, but an economic, and therefore political threat.
Israel’s foremost economist of the Occupation, Shir Hever, offered some important caveats about the report. He noted that the notion of their being a “cost” of Occupation for Palestinians is a misnomer. They don’t pay a cost. Israel literally pays for its Occupation. The Palestinian “cost” is in suffering and lost economic opportunity. The Occupation is a condition inflicted on Palestinians against their will. THerefore, the term “cost” may imply that they participated in it in some way.
Though the Report claims that it is impossible to precisely measure the impact of the Occupation, Hever demurs:
…It is actually possible to create a systematic and comprehensive estimate of the impact of the occupation on the Palestinian economy, but for political reasons this method is not favored by the Palestinian government nor by the UN. It states simply that after 50 years of direct military occupation, the de-facto sovereign state (Israel) has an obligation to provide the same level of economic services, including education, infrastructure, etc. to the occupied population as it does for its own population. If that were to be the case, the Palestinians would have the same per-capita GDP as Israelis. So the Palestinian economy would not be twice as large, but rather 11.6 times as large as it is today. This is the ratio of per-capita GDP between Israel and the OPT…
For those wondering about the actual cost of Occupation to the Israeli economy, the RAND Corporation wrote an entire book (purchase it on Amazon or download Ebook for free) on the subject. It estimates that without Occupation, the economy would add $125-billion over a decade’s time. Another economist, Shlomo Swirkski estimated that as of 2005, the Occupation had cost Israel cumulatively $100-billion.
Hever shared the accompanying graph produced by Tel Aviv University, which shows that had Israel continued along the trajectory of its pre-1973 growth rate it would have been per capita wealthier than most European countries by 2020.
It’s appropriate to give Hever the last word:
Still, although I find these speculations interesting, I think that they are rather counter-productive. First, it has already been proven once and again that these arguments have no effect on the Israeli public opinion. As the paraphrase on Rabbi Ben Cheresh says: “It’s better to be a head of a fox than a tail of a lion.” Most Israelis prefer lower standard of living but dominance over Palestinians, than being better-off but without special privileges. Second, after 50 years of occupation, it is increasingly odd to speculate about the fate of that state of Israel from before 1967…and imagine that things could have been different.
Shir’s book, The Political Economy of Israel’s Occupation, was published by Pluto Press.
NOTE: I have contributed a chapter to a new academic essay collection on the prospects for a one-state solution: Israel and Palestine: New Perspectives on Statehood (see Amazon ad above). My essay is called, Israel and the Closing of the American Jewish Mind. If you are a teacher or undergraduate or graduate student, I urge you to seek it out in your school library. I hope you will also consider assigning it to courses in Israel and Middle East Studies. Thanks to the book’s editors, Yoav Peled and John Ehrenberg.