The Palestinian economy: Why we should care

WASHINGTON — A new report from the Moshe Dayan Center at Tel Aviv University paints an alarming picture of a Palestinian economy on the West Bank on the verge of collapse.

The report, by Ephraim Lavie and Yitzhak Gal, painstakingly examines the Palestinian economy, concluding that it suffers from several fundamental structural weaknesses that developed under Israel’s direct rule from 1967 to 1993 and have only deepened in the past 22 years under the Palestinian Authority.

These weaknesses include an underdeveloped economic infrastructure now beset by decades of underinvestment and a complex system of obstacles arising from restrictive economic and trade agreements with Israel, as well as restrictions on movement and access under the occupation. Added to this is an unemployment rate, which exceeds 50 percent among young university and college graduates who join the workforce in large numbers each year.

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The growing economic integration of the West Bank and Israel have driven up prices of goods and services in the Palestinian territory until they are almost as high as in Israel. But Palestinian average salaries are only a quarter of the Israeli average. The result is that Palestinian households have virtually no money to spend.

The downswing in the Palestinian economy has already claimed the scalp of former Prime Minister Salam Fayyad, one of the most pro-peace interlocutors Israel has had to deal with.

Some readers of this newspaper may ask, why should we care? What have the problems of Palestinians, some of them no doubt self-inflicted, to do with us as American Jews and supporters of Israel?

The answer has to do with Israel’s security. The authors of the report note that political stagnation twinned with this economic crisis have weakened support for the Palestinian Authority, perhaps fatally.

“The P.A. and its security apparatus increasingly seem like Israel’s proxies and servants of its policy, with no end in sight to the occupation,” Lavie and Gal write. “Palestinian public opinion is that its leadership has failed and its ability to govern has weakened.”

If Secretary of State John Kerry’s current peace efforts fail, things could get very ugly very fast both for the Palestinians and for Israel. Some international donors, whose aid is the only thing currently keeping the Palestinian economy afloat, may decide to disengage. Popular unrest will grow, the position of Hamas and other extremists will strengthen and the Palestinian Authority may well disintegrate.

While there are good reasons to criticize Palestinian President Mahmoud Abbas’ leadership of the P.A. and some of the decisions he has taken, he must be given credit for one key attribute: He has constantly stated his support for a strategy of nonviolence and he has stuck to it.

In 2005, Abbas told an American TV interviewer: “We stopped the culture of violence and the Palestinian people have started looking at it as something that should be condemned and it should stop.”

Abbas, who was born in the Israeli city of Safed, also enunciated that while he would like to visit his birthplace, he recognized that he could never return there permanently. “It’s my right to see it, but not to live there,” he said. “I believe that the West Bank and Gaza is Palestine and the other parts are Israel.”

Clearly the construction of the Israeli security barrier, fencing and walling off the West Bank from Israeli population centers, had much to do with the cessation of suicide bombings — but that is far from the only factor. Let’s recall, tens of thousands of Israeli civilians live beyond the barrier in settlements. And although there have been some isolated and tragic attacks on settlers, the number is relatively small. This could quickly change if Abbas loses power and Hamas replaces him.

Israeli military officials are the first to acknowledge that close cooperation with Palestinian security forces has been crucial in maintaining calm. The P.A. has also prevented Hamas from organizing effective resistance cells in the West Bank and using the territory as a staging post for attacks on settlements or on military roadblocks and installations. But cooperation will clearly fray if Palestinian soldiers and police are not paid on time due to the financial crisis overwhelming the P.A.

As Secretary of State John Kerry said in his recent speech to the American Jewish Committee, “In this conflict, the simple fact is tomorrow is not guaranteed to look like today. And the people who think somehow because there is a fence and because there’s been greater security and fewer people hurt are lulling themselves into a delusion that this somehow can be sustained. It cannot be.”

Abbas may not have been the perfect partner for peace — but Prime Minister Benjamin Netanyahu must also shoulder much of the responsibility for the current impasse. Israel has continued building settlements and has frozen Palestinian tax and customs funds that it collects on behalf of the P.A. more than once to show displeasure with Abbas.

I suspect we’re going to miss Abbas once he’s gone. And we’re going to learn that the health of the Palestinian economy and the welfare of individuals and families across the Green Line are all too relevant to the well-being and security of Israelis too.

(Alan Elsner, a former State Department and chief political correspondent for Reuters, is now vice president of communications for J Street.)