they sought refuge, including the contiguous and predominantly Palestinian state of Jordan when it ruled the West Bank between 1948 and 1967. But after 1967, and under Israeli rule, the Palestinians proved that by focusing on enterprise complementing the Israeli economy they could become prosperous.
In the face of this history, international organizations, from the World Bank to the United Nations Conference on Trade and Development (UNCTAD), have performed a series of further analyses of the Palestinian economy, including the experience of the Arabs within Israel. Their consensus is that foreign aid has been inadequate to meet the acute needs of the Palestinian Arabs. Meanwhile, the growth of the Israeli economy is ascribed largely to its exploitation of the Palestinians.
In essence, the growth of the Israeli economy emerges in these studies as the gigantic and intolerable “imbalance” in the region. This imbalance is seen to perpetrate huge “gaps.” Contemplating this weighty matter, academic and political sages imagine that a more “balanced” outcome, gapwise, would be “a convergence of Israeli and Arab incomes in the area.” The absence of such a convergence is somehow Israel’s fault, or, for the more globally-oriented, the fault of world capitalism.
In 1948, when Arabs comprised roughly 66 percent of the British Mandate of Palestine, their share of a national income of perhaps $2 — $3 billion dollars was 40 percent. To an observer who views economic advance as a good thing, both enriching its entrepreneurs and providing economic opportunities for neighboring areas, the contributions of Zionism to the region would evince a need for yet more Zionist enterprise. This boon, in fact, occurred.
By 1992, the economy of Israel, including the predominantly Palestinian territories of the West Bank and Gaza, had grown to some $130 billion (in constant inflation-adjusted dollars). This 40-fold rise was accompanied by a near 10-fold rise in the output of the territories, to some $11 billion in constant dollars. By almost any standard, a 10-fold increase in real output over 43 years is a considerable achievement, made to seem modest only by the extraordinary success of Israel.
Alas, 1992 would turn out to be the zenith for the Palestinian economy. The early 1990s saw a resurgence of suicide bombings, kidnappings, and missile attacks on Israel. The economic deterioration that began with the acceptance of the PLO as the official voice of the Palestinian cause after Oslo became real collapse with the so- called “Second Intifada” beginning in 2000. By the estimate of the World Bank, the economy of the territories had shrunk by some 40 percent in the first half decade of the new century.
This acute downsizing occurred despite a continued influx of foreign aid from international bodies, a 20 percent rise in remissions from overseas Palestinians, and Israeli support and subsidies for the Palestinian Monetary Authority that was charged with upgrading banking in the Palestinian territories. Despite all this aid, however, per capita income in the territories continued to stagnate.
To the sages at the UN and in universities and think tanks, the diminution of the Palestinian economy stemmed not from Palestinian violence but from Israeli restrictions on the free movement of Palestinians and impediments on their “access to natural resources.” However, the most revealing gauge of the impact of the Israeli economy on Arabs — as opposed to self-inflicted disruption of terrorism — is the performance of the one-fifth of Palestinian Arabs who live in Israel as citizens.
A recent thicket of sociology was planted on the subject by the UN economist Raja Khalidi in the
Concludes the UN guru: “The marginalization of Arabs in Israel is not unrelated to the state’s Jewish character and its Zionist development policy preferences and priorities… [These] political, economic, and social processes… began well before 1948 and continue today to lock in and further degrade the position of Arabs [in Israel]…”
“These gaps are not coincidences of history… rather, they emanate from distinct external processes that impede the free operation of theoretically perfect (but actually imperfect) markets. Although economic convergence in the long term is promised…” it requires “leveling the playing field”… both “between developed and developing countries” and in Israel.
There you have it all — “gaps” and “imbalances”; “economic convergence”; access to “natural resources”; unequal educational attainment; capital accumulation; playing-field leveling — and the old UN favorite since the days of Secretary General Raul Prebisch of UNCTAD — deterioration of the “terms of trade” (the relative value of the goods and services exchanged between two political entities). In Israel’s case, the terms of trade have supposedly shifted against Arabs peculiarly denied “access to natural resources,” chiefly land, after they sold it to Israelis and suffered sellers’ remorse. Apparently, they did not anticipate that the land (these “natural resources”) could yield the region’s most fertile farms and could give rise to skyscrapers and high-technology factories. Why didn’t anyone tell them? Now they want it back, along with the skyscrapers and technologies.
The formidable successes of Palestinians working with Israel fail to impress Khalidi. According to him, Israel’s own data on the Arab-Israeli economy “paint a dismal picture of the results of sixty years of failed integration (and Arab exclusion).” To rectify this Israeli failing requires “sustained policy intervention,” if not by missiles and suicide bombers, then by the equally devastating ministrations of pious UN development officials. And there you also have the perennial Socialist invocation of “imperfections” in “theoretically perfect markets” to justify the eclipse of the market by managerial global bureaucrats and politicians.
Raja Khalidi’s entire argument itself suffers from a huge gap — namely, the absence of a scintilla of evidence that Arabs anywhere in the world other than in the United States, have performed as well economically as the Arabs in Israel. Contrary to the claims of deterioration and “lock in,” the Arab average annual per capita income in Israel is $600 per month (i.e., an annual household income of $14,400 for a family of four). This compares with an average annual income of $9,400 for a family of four in sparsely-populated Jordan, which roughly matches the average throughout the Arab world. Moreover, while Palestinians in the Gaza and the West Bank have undergone a catastrophic drop in income since the PLO’s resurgence, the income gap between Israel’s Palestinian Arab population and Jewish population has actually been declining. Some of the difference reflects the greater youthfulness and lesser workforce participation of Arab families. By the ultimate measure of longevity, Arabs in Israel are thriving, with a life expectancy growing over the past 40 years from about 52 years to more than 73 years.
Moreover, any income gap between the Jewish and Arab populations of Israel is clearly attributable to the prowess of Jewish entrepreneurs and other professionals, whose emphasis on higher education and professional achievement produces similar gaps in every free country on earth with significant numbers of Jews. Jews, for example, outearn other Caucasians in the United States by an even larger margin than they outearn Arabs in Israel. This probably reflects the fact that the United States used to have a freer economy, by most standards, than Israel.
Amid all the dismal talk of lock in and privation, even the UN guru Khalidi is impelled to acknowledge that “proximity to the more advanced Jewish economy has allowed for ‘gains’ [the quotation marks are Khalidi’s] that many Palestinians living under occupation or in exile would envy.” But to the UN economist, who wants to have it every which way, the so-called economic gains mask a “degradation of
Khalidi’s gingerly attitude of suspicion toward successful Arabs in Israel who may not share his political obsessions reflects the unwillingness of the quango economic establishment to recognize the one major obvious fact that looms over all their endless data. Arabs constitute roughly 50 percent of the population of the entire Israeli-Palestinian area but contribute only 1 1 percent of its output, and that mostly in public-sector employment. Per capita income of Palestinians outside of Israel is roughly one half that of their counterparts within Israel. Following the surging growth of the Palestinian economy during the second era under Israeli auspices, these statistics on the performance of Israeli Arabs suggest that nothing would benefit Palestinian Arabs more than an Israeli takeover of the entire territory from the Jordan River to the sea.
