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Trump’s Sliced-and-diced Palestine Is a Recipe for Economic Failure

David Rosenberg
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A demonstrator holds a Palestinian flag in front of Israeli forces during a protest against the U.S. president Donald Trump?s Middle East peace plan, in Jordan Valley in the Israeli-occupied 0
During a protest against 'Peace to Prosperity' in the West Bank, January 29, 2020Credit: RANEEN SAWAFTA/ REUTERS
David Rosenberg

Of all the people who read all the way through “Peace to Prosperity,” the documenting outlining the Trump peace plan, probably only a few noticed a note on its map of the future State of Palestine. Hanging down by a line representing a connecting road from the Gaza Strip is a blue blob labeled a future “high-tech manufacturing industrial zone.”

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Today that space is empty desert, which by itself is no reason why it couldn’t become a manufacturing zone (at least, there’s plenty of potential for solar power).

But a successful industrial zone doesn’t arise because planners –  or even worse, politicians – decide on it. Yes, they can build infrastructure, provide tax breaks and grant subsidies and cheap loans, but as Israel’s own experience amply demonstrates, that’s not nearly enough.

You need skilled entrepreneurs, a trained and disciplined workforce, and good government: you need not only to build infrastructure but to maintain it and provide an encouraging regulatory environment. If all these things could be created by planners with good intentions, the world would be suffering a lot less poverty and underdevelopment.

But for every Singapore and China there is, there are many more Bolivias and Senegals.

The Trump plan proposes a bunch of ways to get around that giant pothole on the road to Palestinian prosperity. First is by lavishing $50 billion over 10 years in grants and subsidized loans. Second is by giving Palestinians crash courses in governance and best-practice regulations as well as by upgrading schools and maybe a free-trade agreement with the United States.

That looks like all the ingredients Palestinian needs for the economic takeoff the Trump plan envisions -- except that it was all done at the start of the Oslo process, too. What happened, however, is that the development money was mostly squandered and good-government programs had no serious impact on the way the Palestinian Authority rules.

Corruption and nepotism are rife. Palestinian-ruled areas are in the bottom half of world rankings for ease of doing business. The occupation made matters worse, but the fact remains that even if all the checkpoints were removed, Palestine would not be a lot better off economically.

Of course, the Trump plan calls for a State of Palestine in place of the occupation, but how much of a difference is that going to make for economic development?

Not much, according to the plan’s own terms. Even if by some miracle all $50 billion was actually all disbursed and spent well, and even if the PA suddenly turned into a model of good government, the fact is Palestine would remain far too handicapped to ever seriously compete in the global economy.

The Palestine Trump envisions looks like a Rube Goldberg contraption more than a state. The land areas it will control are sliced and diced by Israeli controlled roads to isolated settlements. Passage between Gaza and the West Bank will apparently be unfettered, but entry and exit out of Palestine will be subject to Israeli security, which will no doubt be onerous.

Palestine won’t have its own port or airport. It will get “earmarked” facilities run by Palestinians in Israeli ports – but subject to Israeli security, and probably subject to it twice, since traffic will have to pass crossing points to get to Palestine.

When one and one make zeroThe Trump plan is replete with all other kinds of oddities. For instance, it proposes giving Palestinians a piece of the tourism action in Israeli-ruled Jerusalem by building a “special tourist zone” north of the city in a Palestinian-ruled area where hotels, restaurants and shops cater to Muslim tourists, who visit the city via dedicated transportation. It proposes a joint free trade zone with Jordan, thereby enabling Palestine to join forces with another country that has no industrial capabilities either. Here, one and one do make zero.

All of this amounts to bureaucratic and political tangles that will dash any Palestinian hope of developing a real business sector. No foreign investor would choose a place like this over a country with normal borders and border controls. Palestinian entrepreneurs might be willing to bet on the long odds, but they would have to be unusually talented to compete in the global market. The local market alone would hardly be worth the trouble.

In the final analysis, it might seem silly to be devoting time to unraveling the economic component of a plan that will almost certainly never see the light of day. But the fact is, shorn of its dubious political dimension, the economic component of Peace to Prosperity could just as well have come out of the Obama White House or the European Union.

The Trump plan employs all the assumptions, the language and the prescriptions of the international-economic development establishment – a mixture of wonkish policy fixes, paeans to technology and free enterprise, and a tip of the hat to faddish priorities, like women’s empowerment. It’s all sweetness and light World Bank-style, but it’s about as relevant to the real world of economic development as Esperanto is to the problem of intercultural communication.

Thus, even if the Trump plan is deposited in the dust heap of history, as is almost certain to be the case, the next peace plan to come around is likely to contain the same economic recipe for failure. This is a case where everybody would be better off throwing out the baby with the bathwater.

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