The Economic War Also Failed

Last week the World Bank released a synopsis of its soon-to-be-published full report on the crisis in the Palestinian economy. The national gross income per head is about half of what it was in 2000. Unemployment is 53 percent.

Statistical data, when it refers to the Palestinians, evaporates quickly. It happens to reports about the number of Palestinian civilian casualties killed by the army last month; it happens to the reports on the dimensions of the economic crisis in the West Bank and Gaza; and it happens even when the author of the report is an organization like the World Bank.

Last week the World Bank released a synopsis of its soon-to-be-published full report on the crisis in the Palestinian economy. The national gross income per head is about half of what it was in 2000. Unemployment is 53 percent. The Palestinian Authority's revenues from taxes and tariffs dropped from an average $91 million a month to $19 million.

Two million people - 60 percent of the population - live below the poverty line of $2 a day, compared to 21 percent below that poverty line in 2000. And the poor are poorer - the average daily spending of a poor Palestinian in 2000 was $1.47 and now it's $1.32. The report says 13.3 percent of the population of Gaza suffers from chronic malnutrition, which is on a par with Zimbabwe and Congo.

Here and there the Israeli press writes about it. And then the reports disappear. Prof. Aryeh Arnon, a Ben-Gurion University lecturer in economics, has been analyzing the Palestinian economy for years, including the Oslo period and the periods of direct Israel occupation. He says it is difficult to imagine the significance of these numbers on the ground.

It's a crisis on the scale of the late 1920s in Europe, he says. It's as if half of Israeli society saw its current income - around NIS 7,000 per family a month - drop to NIS 3,000 practically overnight. Arnon is amazed that the data and its even graver ramifications aren't causing any debate in Israeli society. The ramifications for the future from this data are far more important and fateful than the power struggles in the Palestinian leadership.

The World Bank report appears to shower praise on Israel for returning some of the tax money to the PA, increasing the number of work permits, and the collegial relations that have developed between the representatives of the international humanitarian groups and the government coordinator in the territories.

But the praise provides padding for the report's clearest statement - the Israeli closure policy is directly responsible for this economic crisis. This is especially true of the internal closures and the severe limits on transport that totally disrupt the movement of people and goods and sabotage any possibility of creating sources of revenue to replace those that have been lost.

The World Bank emphasizes that "Israeli government actions are the key for the Palestinian economy in 2003. The implementation of the closure policy has a much greater influence than the economic policies of the PA or the activity of the donor countries."

According to the World Bank, three factors have so far prevented a total collapse of the Palestinian economy. First, and most important, is the cohesiveness and resilience of Palestinian society. Levels of mutual aid have remained very high, despite the enormous difficulties.

Second, there are the basic services the PA continues granting the public. The World Bank says the value of the PA's emergency efforts is underestimated.

Third, the Palestinian economy survives because of financial support from the international community. However, the report emphasizes that even if that support were doubled to $2 billion - which won't happen - the poverty level would only drop to 54 percent by the end of 2004. Among other things, the closure prevents the foreign aid from raising real income because most of the funding is translated into imports and inflation, instead of local production.

Despite the good working relationship between the humanitarian groups and the government coordinator in the territories, the report notes a lack of coordination on the ground between those giving the orders and the soldiers, which undermines the effectiveness of the humanitarian effort and often exposes the foreign crews to real danger.

The World Bank is not in a position to question the Israeli security explanations for the internal closure policy. It only says that lifting the internal closure is necessary for reviving the Palestinian economy in the short run, to prevent a disaster.

Prof. Arnon defines the internal closure policy differently: "This is an economic war. Israel is using an economic lever on the civilian Palestinian population," hoping that the economic distress will force Palestinian civilians to press for an end to the use of arms in the territories and terror against civilians.

But like the military pressure on the Palestinians, the economic pressure is also not working. There's been no decline in the number of Palestinians swearing to take vengeance on Israel and Israelis, nor a decline in the number of their supporters.

Presumably, therefore, the Israeli conclusion will be that the economic pressure must be increased and the travel restrictions on people, raw materials and goods must be stricter. The results will appear in the next report by the World Bank.