Supporting Palestinians to fail?

While the Palestinian Authority has been steadily widening political support for the upcoming UN vote, the international community has diverted attention from a central issue: the economic and social sustainability of the future state.

Anyone viewing the bonanza of a West Bank economy growing at a yearly rate of 9 percent, cannot be anything but surprised. However, a recent World Bank report warns that the remarkable growth, reflected in the real estate boom in Ramallah today, should be considered a matter of concern, come September.

It so happens that the economy has been fueled for years by external funding aimed to counter the high levels of public spending done by the Islamist group Hamas in Gaza, and the West Bank Fatah Party.

It is noteworthy that through the Palestinian Reform and Development Plan approved three years ago, the Palestinian Authority was allowed access to grants of $7.7 billion, but Abu Mazen’s inefficiency in developing the infrastructure for economic independence has led this support to become an impediment to the future sovereignty of the Palestinian people.

Economic asymmetries

Since 1948, the Jewish state has faced and overcome existential challenges characterized by huge regional disparities. As enunciated by Golda Meir, Israel’s secret weapon in their fight against the Arabs was to have no alternative.

In contrast, Israel today has an historic opportunity to take an active role in the creation of a Palestinian state, by helping to improve their institutions and reducing economic asymmetries. The failure of neoliberal theories shows that market mechanisms are insufficient for this task and that correcting asymmetries to ensure a non-belligerent status quo with the inhabitants of the West Bank and Gaza, will depend largely on the role to be adopted by the Hebrew state.

According to the Central Intelligence Agency, the per capita income in the West Bank and Gaza in terms of purchasing power parity, which is used to compare the economic variables of different countries in terms of cost of living, was $ 3,351 in 2010; almost nine times lower than the per capita income in Israel, which stood at $ 29,805.

Although the Central Bureau of Statistics of the Palestinian Authority reports that unemployment in its territories has been declining since 2008, official sources in the United States assert that at the end of 2010 the unemployment rate, given by the percentage of unemployed persons looking for a job in relation to the active population in the labor market, was 37.4 percent in Gaza and 16.5 percent in the West Bank. These levels of unemployment are considered extremely high, accounting together for 254,310 unemployed workers. While Israel, for the same time period, had an estimated 192,740 unemployed workers, the unemployment rate of the Jewish state was estimated at only 5.8 percent and explained largely by frictional unemployment, which reflects workers transitioning from one job to another.

The scourge of unemployment is of course highly correlated with poverty, and data provided by the CIA is consistent with estimates of the United Nations Development Programme, indicating that over 70 percent of the population of the Gaza Strip and 46 percent of the population of the West Bank, is under the poverty line, so that the estimated total of poor in both territories is nearly two and a half million people. Israel claims a 23.6 percent poverty rate, but the basis of calculation: $ 7.30 per person per day, as compared to the standard set by the World Bank of $1.25 PPP, prevents a quantifiable comparison with its Palestinian counterpart.

State Building vs. State Declaration

The declaration of independence of a Palestinian state is likely to respect territorial criterion based on 1967 borders, but the economic and social development plans in favor of coexistence, are still uncertain.

The relative inability of the Abbas Government to confront these urgent challenges, and the impossibility of envisioning the scene with a new moderate Palestinian partner, requires reformulating the approach to the upcoming Arab state.

The magnitude of the asymmetries between Israel and the Palestinian Authority favors the position of political fundamentalist groups funded by Iran. To counter this and have a mutual chance of survival, Palestinians and Israelis must stop the current Game of Chicken, and see themselves as indispensable parts of a common solution, that would honor the words of Prophet Isaiah, “I will make peace your governor and righteousness your ruler”.

• Gabriel Bacalor is managing director of Bacalor Strategic Consulting. She can be reached at


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