David's Harp Can a Patch of Desert Bring Down Israel's Economy?

Netanyahu is on his way to a massive election victory but still feels compelled to kowtow to right-wing voters no matter what the cost to the country’s international standing.

David Rosenberg
David Rosenberg
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David Rosenberg
David Rosenberg

Maybe it won’t be the tycoons’ debts, or the pauperization of the Israeli middle class, or the failure of the educational system that will bring down the Israeli economy. Maybe it will be a patch of desert between Jerusalem and Ma’aleh Adumim.

At least that was the impression you got last week when many of Israel’s overseas friends – among them France, Britain, Spain, Sweden and Denmark – called in their local Israeli ambassador for a tongue-lashing amid lots of talk about sanctions and abrogating trade agreements over plans to build in the so-called E-1 area.

As politics go, the decision to punish the Palestinians was an act of superfluous stupidity. At home, Netanyahu is on his way to a massive election victory but still feels compelled to kowtow to right-wing voters no matter what the cost to the country’s international standing. Overseas, it was a gratuitous slap in the face to countries that had given their backing to Israel during Operation Pillar of Defense and might have done the same at the United Nations vote on Palestinian observer status if Netanyahu had been less bloody-minded.

The fact that the prime minister’s office put out a statement declaring that E-1 as well as the decision to build more homes in West Bank settlements was done to defend the country’s “vital interests” is insulting to anyone who isn’t entirely reliant on the far-right side of his brain for thinking. Indeed, if Netanyahu had the slightest interest in reaching an agreement with the Palestinians, he would have been quietly thrilled that Mahmoud Abbas was able to show some small and symbolic achievement to shore up his rule at a time when his rival Hamas is racking up small and symbolic diplomatic victories.

But here was more evidence of Netanyahu’s policy of inaction motivated by fear. The status quo of an enfeebled Palestinian Authority and an embattled, but never quite defeated, Hamas-ruled Gaza Strip is his ideal – no difficult decisions have to be made either to engage in costly war or undertake a risky peace, no constituencies alienated, all controversies avoided. We’re on our way to another four years of coalition stability.

Stupid, yes, but is Netanyahu risking Israel’s political and economic isolation as Ehud Olmert charged last weekend?

Despite all the brouhaha, no one in power in Europe – much less America – has even raised the issue of trade sanctions except when asked about it, in which case the answer was a unanimous no. Maybe a few countries would bar products made in the settlements from being designated "Made in Israel." The settlers would take umbrage and the government, falling into line would echo them, but the economic impact would be minimal: Nothing much is made in the West Bank and no one looks at labels anyhow. The few consumers who would put back on the shelf a product made in the settlements probably wouldn’t buy something made in Israel either. But there are so few of those that Israel has nothing to fear.

Take South Africa, for example. If you examine the local boycott, divestment, sanctions website, you would get the impression that the country is humming with anti-Israel activity amid widespread public disgust at the Jewish state. At the end of November the Public Services International trade union federation meeting in Durban voted to support BDS. In early November, a chain of toy stores called Reggie’s was forced to briefly close its door due to protests over its support of the Jewish National Fund. At the end of September Wellness Warehouse was reported to have removed Ahava cosmetics from its shelves and earlier in the month the University of Witwatersrand’s student council approved a cultural and academic boycott of Israel. In August, a delegation of KwaZulu-Natal politicians cancelled a visit to Israel and in May, Industry and Trade Minster Rob Davies said he would issue a directive banning the "Made in Israel" label on goods made in the West Bank.

But read between the lines. Nothing has really happened. Israeli exports to South Africa grew from $258 million in 2010 to $266 million last year, a 3% rise, and in the first 10 months of 2012 reached $232 million, a 2% rise over the same time in 2011. These are not impressive growth rates but then again South Africa itself is experiencing sluggish economic growth. No major businesses have announced they are boycotting Israel.

The real threat to Israel comes from governments acting. In a single sweep of the hand, they can do away with free-trade agreements, impose sanctions, bar exports of vital goods and engage in systematic harassment of people doing business with the targeted country -- if they are moved to do so. That isn’t very often, and it usually comes when a country feels its vital interests are at stake.

There might have been a time when policymakers thought the Israeli-Palestinian dispute was a matter of strategic importance, the key to ensuring regional stability in the Middle East. But the Arab Spring has put paid to that. The region has been shaken to its core over the last two years with no discernible connection to the fate of a Palestinian state. What has changed is that Egypt is no longer in America’s pocket, so Israel becomes an even more important strategic asset to Washington than it was in the past. Syria and Hezbollah are fighting for their lives now rather than fighting Israel. The Arab world and Washington are preoccupied with maintaining some semblance of regional stability and contending with Iran, which unlike the decades-long Israeli-Palestinian conflict constitutes a strategic threat big enough to justify the painful process of imposing economic sanctions on it.

To sort of quote Rick Blaine from Casablanca, “It doesn't take much to see that the problems of two little peoples don't amount to a hill of beans in this crazy world.” The Palestinians will get a lot of verbal encouragement and Israel will be chided, but nothing more. They have simply been moved down the priorities list. The E-1 decision was stupid because it brought the world’s attention back to the problem for a few days, but the decision was not fatal. Neither the UN vote in favor of the Palestinians nor the protests against Israel’s reaction signal any change.

The real economic threat of Netanyahu’s policy of perpetual status quo is that he is leaving sores of unemployment and economic distress just over our borders to fester. The blockade of Gaza and the paralyzed peace talks have turned the Palestinians into wards of an increasingly reluctant international aid community. The prime minster has had his cake and eaten it, too: He has neither had to give them an inch politically nor has he had to pay the bills for maintaining Israeli rule over them. But that situation certainly can’t last forever. It will have to end in a Palestinian state or another initfada.

A view of the West Bank settlement of Ma'aleh Adumim is seen near Jerusalem.Credit: Reuters

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