On Palestinian economy prologue and epilogue: Western financial aid to the Palestinians has,the perverse and counterintuitive effect of increasing their rate of homicides, including terrorist ones. This week, of perhaps even stranger news about the many billions of dollars and record-shattering per-capita donations from the West: First, these have rendered the Palestinians poorer. Second, Palestinian impoverishment is a long-term positive development. To begin, some basic facts about the Palestinian economy, drawing on a fine survey by Ziv Hellman, "Terminal Situation," in the Dec. 24 issue of Jerusalem Report: Palestinian per year per-capita income has contracted by about 40 percent since its US$2,000 peak in 1992 (before the Oslo process began) to less than $1,200 now. Per-capita Israeli income, 10 times greater than the Palestinians' in 1967 is now 23 times greater. Deep poverty has increased in Gaza from 22 percent of the population in 1998 to nearly 35 percent in 2006; it would be about 67 percent if not for remitt The Palestinian Authority economy, Hellman writes, "is largely based on monopolies in various industries granted by PA officials in exchange for The PA's payroll is so bloated that the cost of wages alone exceeds all revenues. A dysfunctional judicial system in the PA means armed gangs usually decide commercial disputes. So,unsurprising Palestinian economy is ?in shambles?And no surprise,for as the late Lord Bauer and others have noted foreign aid does not work. It corrupts and distorts an economy; and the greater the amounts involved, the greater the damage. One telling detail: at times during Yasir Arafat's reign, a third of the Palestinian Authority's budget went for "expenses of the President's office," without further explanation, auditing, or accounting. The World Bank objected, but the Israeli government and the European Union endorsed this corrupt arrangement, so it remained in place. The Palestinian Authority offers a textbook example of how to ruin an economy by smothering it under well-intentioned but misguided donations. The $7.4 billion recently pledged to it for the 2008-10 period will further exacerbate the damage.. .
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from the article: Top PA official: Israel approved import of 50 armored vehicles