Arab Economic Spring Notebooks: This series of reports on different Arab countries will highlight the latest economic development challenges and policy responses revealed by the mass uprisings that have gripped the region and the world since 2011. The “Arab Spring” in its broader democratic and revolutionary sense may yet be diverted by sectarianism, populism, petrodollars and geo-political external intervention. But popular contestation of underlying social and economic failures in the region, the Arab “Economic Spring”, have yet to be fully comprehended, much less addressed in policy reformulation. These reports aim to better inform the concerned public and re-examine conventional wisdom regarding the region and the upheaval it is experiencing.
What economic future for Palestine?
… Quite naturally, we allowed ourselves to be seduced by the effects of the prosperity of the centres… our whole future lay in extreme growth, in exploiting the markets of the centres.
Raúl Prebisch – The Inaugural Raúl Prebisch Lecture, UNCTAD, Geneva, 1982
Part I: The Arab-Jewish / Israeli-Palestinian“dual economy” fallacy
When Don Raúl Prebisch reflected with some impatience thirty-odd years ago on the meager outcomes until then of global economic development, the study of which he had pioneered three decades earlier, he was also looking forward. The core truths of his “dependency theory”, which more than any other intellectual tradition informs what has come to be known as “development studies”, ring true today as they did when he first elaborated them in the context of Latin America of the 1950s, and as when he revisited them in Geneva prior to the latest wave of globalization.
Certainly, today there is less evidence of the most blatant forms of “dependency” of commodity-reliant, newly-independent-but-poor “peripheries” upon former-colonial, industrialized “centres”, which Prebisch studied in his earliest work and elaborated in the United Nations agencies he built and led. Even while great disparities still exist, these have been overshadowed by the rise of the so-called BRICS and the successes chalked up in poverty-reduction in the first decade of the 21st century. If anything, those emerging economic poles, no longer so peripheral, have become closely enmeshed in the global capitalist system. Rather than posing alternatives, they have largely pursued “neoliberalism with a Southern face”.
The temptation to move away from traditional development/dependency theory and policies became especially seductive since Prebisch departed the scene, spurred by the refutation of Keynesian economics in the North in the 1980s and the growth-inducing impact of liberalization of trade and globalization of finance in the developing South in the 1990s. But just as the pendulum swing since the 2008 global financial crisis has led to a questioning of macroeconomic policy wisdom away from “austerianism”, so has the South begun to reconsider extreme neoliberal, export oriented development strategies.
Palestine represents a relatively insignificant corner of the otherwise (allegedly) flat global economy and has no impact in the global or regional economies. This is a world where borders, walls, seam zones, bypass roads and tunnels, checkpoints and areas of differential jurisdiction define the geography of the political and development economy. And yet, it remains at the heart of the conflicts that continue to define the Middle East in the global setting and its economy the target of ongoing international donor aid and interventions.
Here, the cumulative impact on the indigenous Arab people and economy of Palestine of a century of Israeli settler-colonial “nation state-building” has put to severe test naïve assumptions about the infallibility of the market as the driver of development or the supremacy of property rights as the sine qua non of social justice. Nevertheless, donors and international development agencies continue to advocate policies deriving from such principles, and public authorities are wedded to the same neoliberal formulae that evidently deliver economic growth and individual prosperity for some but poverty, underemployment and dependency for many.
In the absence of a political settlement on the horizon, the temptation to pursue economic “prosperity”, if nothing else, has proven difficult to resist for Palestinian venture capital, policy makers and war-weary consumers. The idea that somehow markets may constitute a neutral meeting place where politics, nationality or class do not matter was epitomized in 2013 for example, by: renewed Palestinian-US-Israeli promises of funding for mammoth economic development projects regardless of progress to a political settlement; the ubiquitous expansion of the Israeli supermarket low-cost commercial outlets serving poorer Israeli settlers and Palestinians alike; not to mention the Palestinian shopping spree in Israeli West Jerusalem malls during the Ramadan Feast when hundreds of thousands of entry permits were issued to West Bank Palestinians to enable them to taste a bit of the “good life”.
A simplistic reading of the map suggests a narrative that neatly partitions the area of historic Palestine into two territories, peoples and economies, one for the State of Israel and another for the (still not born) State of Palestine. Vigorous efforts continue to be mounted to achieve a political settlement along those contours. Indeed, the territories in 40% of the West Bank under the jurisdiction of the self-governing Palestinian Authority (PA) and the economy they encompass are defined as “the Palestinian economy”. This economy is supposedly amenable to the usual set of policies suitable for dealing with development challenges as may be applied in any “middle-income” developing country. The economy of the occupying power since 1967, Israel, is conceived as a separate, globally linked economic entity unto itself, pursuing its distinctive economic trajectory, while retaining ultimate policy making power over the economy of the occupied Palestinian territory. This widely applied dichotomy allows for comparing development indicators and gaps within the same referential framework and provides a convenient assumption of parity and eventual mutuality of interests, fitting comfortably within the two-state paradigm.
Such market based understandings of the Palestinian economy, widely translated into Palestinian “economic policy” until today, hark back to the standard conceptual framework for analyzing Arab-Jewish economic relations and performance in the British Mandate period, known as “dualism”. This framework assumed the parallel existence of two separate economies within the broader Mandate economy, interacting selectively in specific areas but otherwise each on a development path determined by its own capital/financial assets, technological capacities, entrepreneurial culture and social structure. By the terms of the UN Palestine Partition resolution of 1947, this dualist model was to be the basis for a full Economic Union between the two envisaged States, a union that is effectively in force today under the sovereignty of one state (Israel).
While this approach acknowledges differences in growth, wealth and income distribution between the two sectors of the dual economy, they are attributed to the internal dynamics of each and are hence supposedly comparable. The exogenous factors shaping them and each economy’s interaction with external forces are secondary in dualist approaches. They dismiss the Palestinian Arab understanding that the development challenge has never been primarily one of economic modernization or good governance. Rather for Palestinians, development has always been about at once enduring and confronting a massive settler colonial enterprise with international dimensions and incontestably superior financial and technological power.
(Part II will follow tomorrow.)