Analysis |

Mutual Suspicion Likely to Trump Economic Benefits of Peace for Israelis, Palestinians

Report forecasts that Israel could reap $123 billion peace dividend, but facts on the ground are likely to stymie any progress.

Amos Harel
Amos Harel
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Palestinians throwing rocks, a ubiquitous image of the intifada.
Palestinians throwing rocks, a ubiquitous image of the intifada.Credit: Emil Salman
Amos Harel
Amos Harel

The report released on Monday by the RAND Corporation that a diplomatic solution to the Israeli-Palestinian conflict would provide economic dividends to both sides is fine in theory but oblivious to certain facts on the ground which could well condemn it to obscurity.

The report estimates Israel’s “peace dividend” at $123 billion after 10 years, with the Palestinians benefiting to the tune of $50 billion plus a 36 percent increase in average GDP per capita.

The corollary, if peace is not achieved, could be renewed long-term armed conflict between the two sides could with severe economic repercussions for both. Israel alone could lose out on a projected $250 billion in economic opportunities over the decade.

The conclusions of RAND, a prestigious international organization, reflect what should already be understood: A permanent diplomatic solution between Israel and the Palestinians would bring economic benefit to both sides. It could potentially ease the security burden on Israel (even if, in that regard, the report isn’t very optimistic,) remove obstacles to international commerce – with the boycott movement showing signs of picking up steam – and would free up the Palestinian economy after many decades of hardly functioning in the shadow of occupation.

But the optimistic forecast touted by RAND should be read with a few caveats, which could undermine its entire theoretical success. First, as became clear after the most recent election, fear for personal security trumps possible future economic benefits for Israelis. The terrible memories of the Second Intifada, which ended only 10 years ago, are ingrained in the memory of every Israeli, as well as every Palestinian. Many Israelis would likely ask themselves: what if the agreement fails, and the territory we evacuate becomes a hotbed of terror once again? What price will we pay, both economically and in terms of loss of life?

Second, and perhaps just as much an obstacle as the first point, is that the Palestinians, according to RAND and other economists over the years, would be expected to be the big economic winners from a two-state agreement. Among them, as well, the potential for economic benefit would have to compete with the weighty issue of ideology – the willingness to accept Israel’s existence, as well as the other Israeli demands on which Palestinian negotiators, from Yasser Arafat to his successor Mahmoud Abbas, have been unable to soften their positions: Jerusalem, the future of refugees, borders and the settlements.

If the long years of frustrating failures have revealed anything, it’s that both leaderships (certainly Israel under Netanyahu, and the Palestinians under Abbas, though his approach is more rational than Arafat’s,) are incredibly suspicious of the other side. It seems that there is only a partial will to reach a permanent agreement. To that we need to add the other obstacles standing in Israel’s way, including the need to relocate at least a hundred thousand settlers from isolated settlements (of about 390,000 settlers in the West Bank, and a similar number over the Green Line in Jerusalem) – a difficult issue for the public, and an even more difficult order to give to the IDF, many of whose senior commanders are religious and support the settlements.

RAND’s report was published during a week in which Israel, with great public disinterest, marked 48 years since the Six Day War and the occupation of the West Bank. Despite their thorough analysis, research and good intentions, it’s likely that this promising vision will also crash against the shores of reality. Unfortunately, it’s likely that this report will do nothing more than accumulate dust in a desk drawer somewhere in the Finance Ministry or the Foreign Ministry. It’s definitely possible that in 10 years or so, someone will pull it out of the drawer and ask: What if?

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