Analysis: Palestinian poverty is a strategic threat

By Amotz Asa-el, December 11, 2008

It has been nearly a decade since Israeli authorities found anything worth celebrating in the Palestinian economy. But there seem to be some signs of life, including rising wages and declining unemployment.

But the Palestinian economy is still fundamentally deformed, its labour market excessively dependent on the PA and Israeli employers. With joblessness officially at 16 per cent (higher in reality) and with the average monthly income under £470, there is little consolation in the fact that the recent olive harvest’s revenue, about £87m, was more than twice that of 2008.

From an Israeli viewpoint, Palestinian poverty is a strategic threat, breeding the humiliation that has fed much of this decade’s violence, while Palestinian prosperity holds more promise than the most generously worded peace contract.

The Palestinian Authority must part with two legacies: Israel’s and Yasser Arafat’s. The former began in 1967, when Palestinians crossed into Israel as day labourers, and ended with the first intifada.

Arafat’s legacy was the creation of a statist economy where most jobs were government handouts, which in turn fed off foreign aid. Private enterprise was perceived as a threat, as demonstrated in Arafat’s obstruction in 1996 of an international plan for seven industrial parks. The problem with the post-1967 model was social, and the problem with Arafat’s model was, and remains, economic.

Israelis and Palestinians met daily at the workplace but always with the Israelis on top. Palestinian demand for this kind of labour is still high but the Israelis are no longer there to offer it, both because they fear terror and because the newly globalised economy has brought to Israel thousands of Chinese, Thai and other unskilled labourers who are apolitical and also cheaper. Consequently, what once peaked at 100,000 Palestinian workers in Israel has dwindled to 23,000 within pre-1967 Israel and 26,000 in West Bank settlements, all while Israel’s economy has more than doubled.

The only way for the Palestinians and Israelis to reach any kind of accommodation is for the two communities to be gainfully employed, and by their co-nationals rather than by the neighbour that most of them still see as the enemy.

Palestinian society emerged from the Arafat era with its armed forces de-centralised and the economy centralised. That is the opposite of what an impartial doctor would prescribe. Namely: domesticate the PA’s bureaucrat, divorce the Israeli employer, and engage the private investor.

Amotz Asa-el is president of Business Week Israel

Last updated: 2:27pm, November 8 2010