In the past two months, as the issue of Palestine has once again come to the forefront of news and theoretical discussions, analysts have tried to clarify the dimensions of this historical issue from various angles. However, the place of economic studies, especially political economic analysis, is more or less vacant. The few existing economic theoretical interventions are mostly summarized in presenting economic statistics, for example, about the costs of military occupation and the like. However, a question that has been less raised and answered is, when we talk about the economy of Palestine, what are we talking about?
Given the humanitarian disaster in Gaza and the urgent state of war, an economic discussion about Palestine might at first seem untimely. However, some urgent economic issues, including the material damages of war and its effects on Palestine’s Gross Domestic Product (GDP) and unemployment, are already a primary concern for some Palestinian institutions. Besides the destruction caused by bombing, there are also issues with delayed taxes and canceled work permits. Naturally, any political solution to end the war must consider economic factors, such as how to fund the costs of reconstruction and revive Palestine’s economy.
Recently, the Palestine Economic Policy Research Institute (MAS) warned of a serious economic recession whose effects were felt during the war and will continue afterwards. According to this report, Palestine’s GDP will decrease by at least 25% by the end of 2023, and the unemployment rate will reach 30% in the West Bank’s active population and 90% in Gaza.
the economic situation in occupied Jerusalem and the Palestinian areas inside Israel is not less challenging, even if we exclude the possibility of entering military confrontations, which may incite right-wing extremists to commit even more attacks and killings exceeding what we have seen so far. Regarding East Jerusalem, where about a third of its workforce relies on jobs in Israeli markets, these jobs are now at risk or cannot be easily preserved. A similar percentage of residents heavily depends on international and Palestinian tourism, which has come to a complete halt, including the weekly convoys of Palestinian residents from the 1948 territories who visit the city for prayers and shopping. These trends indicate an increase in unemployment and people reliance on minimal monthly allowances, healthcare, and municipal services. Additionally, the 350 thousand Palestinian Jerusalemites are isolated and disconnected from jobs, relatives, and services in the West Bank. They go about their lives at the mercy of the Israeli security apparatuses that are equipped to suppress any popular movement or national expression and face approximately 650,000 Israelis who live in the city of Jerusalem, including about 250,000 settlers.
From the MAS report
It is almost clear to everyone that the war between Israel and Palestine is not a normal war between states with national sovereignty and more or less equal legal status in the international order. As past war documents (like the United Nations fact-finding mission report on the Gaza conflict – 2009) show, Israel’s attack goes beyond the military dimension and includes raids on the material tools of the Palestinians’ social reproduction. The war here is a continuation of an economic policy that cannot be understood and examined without referring to its history.
Theoretical framework for the study
Before any economic discussion about Palestine, two points must be emphasized:
- Dualistic approaches that analyze the situation of Palestine and Israel separately are misleading.
- Economic analyses that presuppose the separation of economy and politics are unable to explain the situation.
To avoid these theoretical pitfalls, Taher Labadi proposes three hypotheses for understanding the economic situation in Palestine:
- The economic situation of Palestine should be understood within its colonial context.
- International aid to Palestinians exacerbates their dependency and subjugation.
- The Palestinian economy is dominated by a globalized group of rentier elites.
Labadi suggest that “the Palestinian economic reality does not seem to be understood from its borders, which do not say much about the powers and struggles that make it up. Which does not mean that we should abandon the idea of a Palestinian economy and its development.” To explain the formation of this rentier elite minority, some focus on a specific economic regime that emerged following the Oslo Accords in 1993, based on a form of neoliberalism. However, the issue is more deep-rooted, tracing back to years before the 1990s.
A more historically grounded framework for analysis is settler colonialism studies (colonization accompanied by land seizure), which try to link the various forms of dominance and violence arising from the Zionist movement and subsequently the state of Israel.
Settler colonialism studies came into focus from the 1960s, especially after the famous article by the French historian and sociologist Maxim Rodinson titled “Israel: A Colonial-Settler State?” (1967).
The main advantage of these studies is overcoming the “analysis gap”: on one hand, they address historical ruptures and political fissures of 1948, 1967, and 1993; on the other hand, they focus on the geographical divide between the West Bank, Gaza, and Jerusalem.
The settler colonialism approach also pays attention to a comparative study of Palestine’s situation with South Africa, Australia, Algeria, etc., which can mitigate empirical directness or methodological exceptionalism in understanding Palestine’s situation.
The economic foundation of settler colonialism
The starting point in the analysis of settler colonialism is the Zionist movement’s land acquisition from the late 19th century. From the outset, various Zionist funds (including the Jewish National Fund) were established to assist Jews in purchasing land in Palestine. The economic process of land acquisition, accelerated with the British occupation of historic Palestine in 1917 and later during the Mandate period, was a determining factor in creating a system of differentiation that laid the foundation for the Palestine/Israel economy. Lands purchased privately and commercially were politically and publicly represented as “Jewish people’s land.” In this process, dozens of Palestinian neighborhoods disappeared before the Nakba and the establishment of the state of Israel in 1948.
If we name the first phase of the establishment of the Palestine/Israel economy as the “Jewish land” phase, the second phase revolves around “Jewish labor.” This phase included facilitating conditions for agricultural cooperatives managed by the Zionist movement. These cooperatives, and in fact all Jewish or British employers, were encouraged to prioritize the employment of Jewish workers. Although many Jewish employers preferred to use the cheaper and more skilled Arab workforce, conditions were arranged to make employing Arab workers extremely difficult. As a result, unemployment became a significant challenge for Arabs, and many colonial employers eventually had to return to Europe.
Thus, the prosperity of kibbutzim in the first half of the 20th century was more a colonial necessity for organizing Jewish labor collectively and reducing its cost in competition with Arab labor, rather than an expansion of socialist ideals or a dream of transcending capitalism.
As Gershon Shafir writes in “Land, Labor and the Origins of the Israeli-Palestinian Conflict” (1989), kibbutzim, supported by Zionist organizations, provided the means to better absorb settlers and strengthen the economic community of Jewish settlers while completely rejecting Arab workers. Later, the myth of self-managed socialist communities became a source of inspiration and attraction for new waves of Jewish immigrants from Europe to Palestine.
According to Zeev Sternhell’s “The Founding Myths of Israel: Nationalism, Socialism, and the Making of the Jewish State” (2004), the Histadrut, the Jewish labor union established in 1920, was a major player in this so-called initial accumulation phase. The union was at the forefront of a large economic empire consisting of agricultural colonies, transport cooperatives, industrial, commercial, and financial institutions. It played a crucial role in creating exclusively Jewish economic enclaves and in the process of intimidating employers to fire Arab workers and hire Jews.
Thus, colonialism in Palestine took flight with the two economic wings of “Jewish land” and “Jewish labor.” After the Nakba, this colonial economy continued, with the difference that it now relied on state machinery and a set of laws and policies.
Colonization, exploitation and control
After Israel’s occupation of the West Bank and Gaza Strip in 1967, policies of differentiation and segregation entered a new phase. The Israeli military government adopted a policy of de facto integration of the newly conquered areas, without granting citizenship to their residents. This integration policy included not only control over land and natural resources (such as water, oil, and gas) but also over labor and commodity markets. It’s important to remember that until 1993, it was the Israeli government that issued the necessary permits for construction, drilling wells, trade, and import or export of goods in the occupied territories.
Gradually, Palestinians became dependent on imports from Israel to meet their consumer needs. Government measures were adopted to prevent the formation of any Palestinian competition, and instead, encourage contractor relationships in favor of Israeli producers. Relative economic growth in certain areas such as cement production, textiles, or auto repairs in the occupied territories was directly related to the economic needs of Israel.
Even after the establishment of the Palestinian Authority in 1993, the situation did not fundamentally change. The privileges granted to this self-governing state were constantly revoked in practice. 62% of the West Bank remained directly under Israeli military control. Israel also maintained control over monetary and financial regimes, as well as borders and transportation routes.
A significant portion of the Palestinian Authority’s revenue depended on taxes collected by Israel from Palestinians, and another part came from international aid. This economic dependency greatly affected the political autonomy of the Palestinian Authority.
In short, the Palestinian economy essentially remained under the oppression and bloodshed of the Israeli economy. The statistics are telling: between 1972 and 2017, Israel accounted for 79% of Palestinian imports and 81% of exports.
In this completely dependent situation, Israel often filled its labor shortages, especially in the construction sector, with residents of Gaza and the West Bank. The existence of this cheap labor force, which earned 50 to 75 percent less than their Israeli counterparts, meant that the economic recession in Israel between 1973 and 1976 had virtually no impact on Israel’s unemployment rate and only led to a reduction in the number of Palestinian workers with and without permits coming from the occupied territories. This cheap labor force, constituting one-third of the active Palestinian population in the 1970s and 1980s, was later substituted by Israeli efforts to replace Palestinian Arab workers with migrant labor from Asia, although the trend of employing Arab labor resumed in the 2010s.
In 2023, about twenty thousand Palestinians from Gaza and approximately one hundred and sixty thousand from the West Bank worked in Israel or in the settlements, including about fifty thousand workers without permits.
Here, the issue is not just exploitation, but the transformation of work into a tool for the security control of the population. Obtaining a work permit in Israel or the settlements for Palestinians is contingent upon approval by Israeli military institutions. A Palestinian worker employed in Israel or the settlements must not have any history of political or syndicate activities perceived as against the occupation. In this comprehensive economic-social-political engineering, private companies also collaborate with the Israeli government.
Fencing and siege, creating a hierarchical differentiation regime between Jews and Arabs, exploitation, and mechanisms for controlling land, population, and commodities are all intertwined aspects of a single process that results in the livelihood, survival, and right to life of Palestinians being held hostage. In this regard, economic policy for Israel serves the same function as bombs and bulldozers.
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