Israel Matzav

Economic peace process

Writing in Thursday's Wall Street Journal, Daniel Doron, the president of the Israel Center for Social and Economic Progress, makes the case for what he (and Prime Minister designate Binyamin Netanyahu) calls an 'economic peace process.'

In order to succeed -- finally -- peace efforts need to create positive incentives. An economic peace process can create such a reality, as it has in the past until political obsessions interrupted it.

Following Israel's conquest of the West Bank and the Gaza strip in 1967, Gen. Moshe Dayan wisely let the Palestinians manage their economic affairs. His "open bridges" policy facilitated the free movement of goods and people, and brought prosperity to the private sector. Hundreds of thousands of Palestinians were employed in Israel for much higher wages than under Jordanian and Egyptian rule. Living standards quintupled and agriculture, manufacturing, education, health and the status of women and children rapidly improved. Arabs enjoyed freedom of movement in Israel, yet there were practically no incidents of terrorism. Israelis shopped and ate in Arab towns. Their spending provided a lion's share of a skyrocketing Palestinian GDP.

This informal peace process was resisted, however, by traditional Palestinian elites. Modernization threatened their beliefs and their privileged status. Then, in 1987, an economic recession and harsher interference by Israeli bureaucracy in Arab life ignited an intifada that was taken over and politicized by the Palestinian Liberation Organization (PLO). Yasser Arafat's PLO killed whatever economic cooperation remained.

Today, many policy makers advocate a total separation between Israel and the Palestinians. But the latter cannot develop a prosperous economy and a viable state in economic isolation. Separation will result in economic ruin, as has already happened in Gaza. Israel and the West Bank are simply too small and too geographically integrated to support two economically divided entities. The fates of Israelis and the Palestinians are economically intertwined.

Doron's ideas make a lot of sense. The only problem with them is that they're not what the 'Palestinians' want.

When the Oslo Declaration of Principles was signed in 1993, we Israelis were sold a package of goods that I will call Shimon Peres' New Middle East. That's a term with which most Israelis (at least) are familiar. Peres' argument at the time was that if we raise the 'Palestinians' standard of living, they won't want to be terrorists anymore. Once that happens, we will be able to reach an accomodation with them (as an aside, I note the irony that Binyamin Netanyahu has now adopted Shimon Peres' worldview, but I doubt many commenters will disagree with me on that). The idea was to create all kinds of economic cooperation that would give the 'Palestinians' a stake in their own lives that would discourage them from endangering themselves. Netanyahu tried it during his first term as Prime Minister as well. It didn't work.

The reason it didn't work was that the 'Palestinians' weren't interested. I didn't read that anywhere. I heard it from Natan Sharansky, who served as Minister of Industry and Trade from 1996-99 - the years of Binyamin Netanyahu's first government. At a lecture sponsored by Columbia University's alumni club in Israel during the early part of this decade, Sharansky told us that every time they tried to raise economic issues with the 'Palestinians,' the 'Palestinians' tuned out. All they were interested in was borders and a 'state.' They had no interest in the basic elements that go into running a state: roads, sewers, school, industry, etc. All they wanted was territory.

Doron suggests getting around the 'Palestinian' elites by providing aid directly to the 'Palestinians.'

Wide-scale prosperity can come to the West Bank and Gaza by providing direct aid to Palestinian families still living in refugee camps. Unlike previous failed attempts, when aid was given to a corrupt Palestinian Authority, refugee families should get cheap loans and/or grants. Infrastructure construction should be allotted by competitive bidding to small and medium-sized Palestinian firms, not to politically connected mega-contractors. And to further perpetuate economic growth, the monopolies that now strangle both the Israeli and the Palestinian economies (often the same ones) must be broken.

I don't know how Doron proposes to administer this aid, but perhaps Israel's attempt to resettle 'refugees' in permanent housing in Gaza after the Six-Day War would be instructive (the link is to an article written by a 'Palestinian' in 1995).

Intensive discussion of the refugee issue started in the aftermath of the 1967 war at ministerial level in Israel. It was Yigal Allon (a prominent Labor Party leader and Cabinet member) who, in July 1967, was the first to suggest a "solution" to the refugee problem by resettling Gaza Strip refugees in the West Bank and Al-Arish (Zaru, 1991). In fact, the Galilee Document of the late 1960s, titled "Rehabilitation of Refugees and Development in the West Bank and Gaza Strip," was the first to suggest the allocation of funds for a four-year plan for development and rehabilitation of refugees. The basis of this plan was to effect changes in the living conditions of the refugees (by setting up new housing projects outside the camps and the renovation of camps), as well as the integration of refugees within the nearby towns, to be under municipal responsibility (Davar, August 16, 1973; Karawan, 1973).

The first concrete steps were taken in May 1970 when Shimon Peres set up a secret trust fund (Trust Fund for the Economic Development and Rehabilitation of Refugees) for this purpose. Peres hoped that, through the resettlement of Gaza refugees, the military government could replace UNRWA's work (The Jerusalem Post, September 22, 1971). The trust was secret because, in Peres' words, "the chance of success is in inverse proportion to the amount of publicity" (The Observer, August 1, 1971). The funds were spent without revealing the ultimate political goal of resettlement (ibid.).

The only sources available on the resettlement of refugees in the Gaza Strip are those of UNRWA, according to which two types of resettlement took place: the first involved the Israeli authorities offering the refugees housing units; and the second involved plots of land.

The first project to be established within the context of the first type was the "Canada Camp" before 1973. This project is a unique case because it was left in Egypt after the Israeli withdrawal from the Sinai Peninsula in 1982 as part of the original Camp David Accords between Israel and Egypt. In June 1985, the Egyptian government and the Israeli authorities agreed on a gradual return to the Gaza Strip of the refugees stranded in the Canada Camp project.

The other housing projects were:

1. The Shuqeiri Project in Khan Yunis, which commenced in March 1973; by June 1989 it had 135 families (848 persons) in 128 houses.

2. The Brazilian project in Rafah, started in April 1973; in June 1989 it had 436 families (2,820) persons in 422 houses.

3. The Sheikh Radwan project in Gaza City, commenced in March 1974; it had 790 families (5,029 persons) in 806 houses.

4. AI-Amal project in Khan Yunis, commenced in May 1979; it had 802 families (4,853 persons) in 842 houses.

In all, by June 1989, the number of houses reached 2,686, housing 3,054 families or 18,920 persons.

The second type of project involved the allocation of plots of land which started in September 1974. The initial size of each plot was 250 sq. m., subsequently reduced to 125 sq. m. In 1977, the Israeli authorities justified this reduction to shortage of land suitable for building purposes. However, this justification has to be examined against the authorities' policy to pave the way for future projected expansion of Jewish settlements in the Strip (UNRWA, 1989). In all, 6,642 plots of land were allocated, of which 250 were under construction. The project involved 5,428 houses and 6,905 families (ibid.).

The 'Palestinians' viewed the effort at finding them permanent housing as a way of making them forget their 'keys' to their 'homes' in Israel, and as such put a stop to this building by the end of the 1980's - when they started the 'first intifada.'

The Israeli strategy for the refugee resettlement schemes in the Gaza Strip reflects a belief that most political problems can be reduced to social and economic problems. Hence, the Israeli authorities' shock at the relo¬cated refugees' role in the Intifada. In some instances, confrontations with the Israeli forces exceeded those in the camps, even though the Sheikh Radwan resettlement scheme was called Kfar Shalom (the Village of Peace) for the calm that had reigned there prior to the Intifada.

The resettled refugees' involvement in the national struggle on an equal footing with camp refugees proved that refugees in resettlement projects were not isolated from the residents of other camps (author's sample survey), despite the fact that the infrastructure of resettlement projects has been set up with a counter-insurgency in mind. For example, wide roads, in contrast to the narrow alleys in refugee camps, were meant to facilitate control by military forces, in addition to the careful screening of refugees prior to admission into the schemes.

Doron's ideas sound good in theory, but in practice they have been tried by governments of both the left and the right and they have failed. The 'Palestinian' struggle is not about economics, nor is it even about establishing a 'state.' It's about destroying the Jewish state. Until Israel and its supporters recognize that reality, we will continue to recklessly endanger ourselves.

By the way, the picture at the top is of Yasser Arafat kissing Hamas leader Sheikh Ahmed Yassin. The 'Palestinians' are all unified and they are all pursuing the same goal: The destruction of the Jewish state. Their differences are only tactical.

posted by Carl in Jerusalem @ 4:12 PM