Reducing Palestinians to the Poverty and Hopelessness of Canadian Indians

I was struck by the following lines from a recent World Bank Report on the Palestinian economy.

... However, much greater attention must be given to the removal of obstacles to allow real Palestinian private sector-led growth. The Oslo Accords of 1993 anticipated an arrangement that would last for a five-year interim period during which a permanent agreement would be negotiated. They did not anticipate the lack of forward movement on the political process that has been experienced with its concomitant economic effects. This so called status quo belies a process whereby the continuation of restrictions and the absence of real opportunities to open up the Palestinian economy are actually having a lasting negative impact on its overall competitiveness.While some of the costs imposed by the current situation are transitory and could be expected to disappear with a peace agreement, others are posed to remain and are likely to require significant time and financial resources to be remedied. 

The growth potential of a small economy depends to a large extent on its capacity to compete in global markets – yet, since 1994, the Palestinian economy has been steadily losing this capacity. In particular, the manufacturing sector, one of the key drivers of export-led growth, has largely stagnated between 1994 and the present and its share of Gross Domestic Product (GDP) has declined substantially. In the meantime, the agriculture sector has doubled its employment but sector productivity was roughly halved. 

The share of exports of goods in the Palestinian economy, at around 7 percent in 2011 (from around 10 percent in 1996), is among the lowest in the world. Moreover, Palestinian exports are highly concentrated in low value added goods and services and they are exported to only a small number of countries, with more than 85 percent of them heading to Israel. Even with the removal of exogenous restrictions, the Palestinian economy is ill-positioned to benefit quickly and sufficiently from export opportunities and adjustments would require significant resources and time. 

With low labor force participation and high rates and duration of unemployment, many Palestinians of working age do not have the opportunity to develop on-the-job skills. Furthermore, the concentration of the labor force in small enterprises for trade and services is not conducive to the development of skills that would render Palestinian workers competitive in the global economy. The growth in public sector employment has supported job creation but is not a sustainable solution in the medium and long term. The worrisome implication of these phenomena is that the long term employability prospects for the Palestinian labor force are being eroded. In addition to the economic implications, protracted unemployment, especially among youth, tends to weaken social cohesion. 

Poor performance of infrastructure sectors has also had a negative impact on the competitiveness of the Palestinian economy. The PA’s worsening fiscal space for infrastructure spending has severely constrained the accumulation and management of physical infrastructure despite contributions from development partners. Restrictions on movement and access have also led to the deterioration of the quality of infrastructure as evidenced in various sectors such as water, transport, and telecommunications, with its negative impact most significant in Gaza.

Of course, the main obstacle to Palestinian economic growth is the Israeli occupation and all it entails (see first paragraph above.) Nor should we assume that all this is just an unintended consequence of an Israeli security driven policy. It is more likely, in my opinion, that the Israeli government understands full well the economic and social results of its policies on Palestinian society: just as Canada and the U.S. used economic restrictions to break the will and strength  to resist of North American First Nations (aka Indians.) Will Israeli policies succeed in reducing Palestinians to the state of poverty and despair of so many North American aboriginal communities? The big difference of course is that the Palestinians form a much larger population relative to Israeli Jews. But you don't have to be a Marxist to believe that economics drives much of sociology and politics and that a people's will and ability to resists depends in large part on its economic base.

To read the full Word Bank report see here.

To read about the same phenomenon on the day to day micro scale see this article from 972.