Economics of Intifada

Jon Stewart and the Economy The Daily Show25 August 2012

Why the Palestinian economy sucks

As so often on the Internet, this started with a video gone viral. When I first saw it shared, I thought don’t these people know the Daily Show is supposed to be satire. Then the second came and the third. I began asking myself a question. Don’t they care that Jon Stewart is a comedian and then it hit me. Doesn’t Jon Stewart care that he is producing material that follows the complete Palestinian line and can and will be used to attack the Jewish state?

It’s a standard Palestinian claim, Palestine 101 if you will. Every problem the Palestinians face is 100% Israel’s responsibility. If their economy sucks, blame the occupation, the wall/fence or the checkpoints. Never anything they do or have done. Stewart was trying to propagandise for Obama by attacking Romney. Never, ever, ever consider that it is something in their character that needs changing. If that’s not culture, what is?

Let me make my expertise, or lack of it, clear. My high school Economics results were very much in the David, can do better class. In fact, the morning of the Year 12 Higher School Certificate† exam my teacher came up to me, stuck his face up to mine and told me, “You’re going to fail and I’m going to laugh”. I didn’t and as he probably stayed a high school Economics teacher in a mediocre, working class school I probably had the last laugh. I did better in my one university Economics class but some things are so obvious you don’t have to have professional qualifications to spot them unless of course you are a supporter of Palestinian claims. Then finding your behind with both hands can be difficult. Most of the Palestininan Authority’s economic problems are of their own making. Real economists might like to check out Trading Economics for West Bank and Gaza – World Bank Data.

Only a Palestinian and now apparently Jon Stewart could think that making war on your closest and largest employer, supplier of raw materials, customer, market, port for your exports, investor and technical partner would not have serious economic fall-out. Add to that you are making war on your only possible power (as in electricity) source and water. If the Palesinian economy is screwed it is because they have ignored the financial implications when they chose the political ones. Arabs start wars, lose wars and then complain of the consequences.

How the Palestinians screwed up …
& how did this escape the analysts’/satirists’ attention

Follow the money

Has Fatah made the difficult transition from terrorist group to mafia? Don’t bet on it. It’s possible to be both.

Most of us know by now that the Palestinians receive more foreign aid money, per head, than any other group, Most of us also know that that money doesn’t necessarily land on the heads of the average Palestinian. From the days when Yasser Arafat controlled the PLO by keeping his hands on the purse strings and stole-borrowed-misplaced about $1.3 billion till the days when Mahmud Abbas and his family took only about $200 million, corruption, at all levels, has played a part. The monopolies established by the Arafat are still very much in place. further handicapping the Palestinian economy. Among the many unique and hopefully inalienable features of the Palestinian condition is that normal economic rules don’t apply.  Corruption and monopoly are major handicaps for the Palestinian economy.

I’m vaguer about the financial mess in Gaza but all indications are they are just as corrupt. The Gazans blame the blockade for their woes and they have a point,  although barely. The Gazans play tunnel tax and that does raise the price of goods. Israel’s decision to allow the import of cars was condemned by the Gaza car dealers because it left them with an inventory of over-priced vehicles.

Yasser Arafat and Saddam Hussein

Palestinians supported Iraq’s invasion of Kuwait and paid the price

Don’t bite the hand #1

The economists call it remittance income. That’s when workers in foreign countries send their wages home. Oil rich Kuwaitis didn’t want to get their hands greasy with the actual business of raising the black gold and selling it or even the business of selling the products that oil money made available. The Palestinians, in Kuwait, the other Gulf States and even Saudi Arabia could do that.

Palestinians made up about 30% of Kuwait’s population of 2.2 million in 1990. Their remittances were a major part of the foreign income for their families at home. More than that Kuwait and the other states collected income tax from the Palestinians and funneled it into the PLO’s coffers.

It was a sweet deal until Yasser Arafat backed the wrong horse when Saddam Hussein invaded Kuwait. Following the 1991 Gulf War, Palestinians in Kuwait were reduced from a thriving immigrant community of more than 400,000 to less than 30,000 in 1998. Kuwaitis forced them out of the country using a systematic and violent campaign of ethnic cleansing. The Palestinian official support for Iraq during the crisis was used as an excuse for that campaign (http://www.gulfwar1991.com/). Other Gulf States followed suit and few Palestinians have returned. If the media had been interested or perhaps if Israel had been involved this would have been called a second Nakba and admitted it was far more violent than the first. Nor was their any argument about whether the Palestinians were pushed or left of their own free will.

Looking at this from a purely economic perspective  Kuwait expelled an estimated 443,000 Palestinians mostly workers. Their wages were lost, their taxes were lost, donations to the Palestinian cause fell to nil, those that could return to West Bank/Gaza swelled the ranks of the unemployed and those who were injured in the expulsion had to be treated. It was a major and unanticipated blow to the economy.

IntifadaDon’t bite the hand #2

Those who experienced the First Intifada (December 1987  to 1993) might be surprised to discover that it was the non-violent Intifada. They might be further surprised that it was led by a Gandhi‡. 160 Israelis died, 1,400 Israeli civilians and 1,700 Israeli soldiers were wounded. On the Palestinian side 1,087 Palestinians were killed by Israeli security forces, 75 Palestinians were killed by Israeli civilians and approximately 1,000 Palestinians were killed by Palestinians. I don’t have figures for wounded but there were plenty. Perhaps the best approach is that of the Global Nonviolent Action Database. There were distinct nonviolent aspects but that phase of the campaign came to an end in the fall of 1988.

However we are not concerned with the morality or even the effectiveness of the techniques as we are of the financial effects. Awad believed that the Israel economy was dependent on the Palestinians and withdrawal of labour in the form of general strikes, boycotts on Israeli products, refusal to pay taxes and barricades would bring her to her knees. Not all Palestinians were happy with this but what the advocates of nonviolence couldn’t achieve by persuasion was achieved by force. At the end of the Intifada some six years after it started the Palestinians declared victory from their knees.

What happened was instead of intimidating Israelis into accepting their demands they convinced them that Israel doesn’t need the Palestinians: not as a labour force; not as a market for Israeli goods and not as a tax revenue source. The Former Soviet olim and guest workers from Thailand, China and Romania among others proved to be cheaper, safer and more reliable. Mechanisation of processes took a giant leap forward (and became an additional Israeli income source) and new, profitable markets were developed. Until the mid-1990s, up to 150,000 people—about a fifth of the Palestinian labor force—entered Israel each day. As they were in Kuwait the Palestinians were replaced.

On a more personal note. I was a soldier during the Intifada. Territory shopkeepers were forced to participate in the general strike and the metal doors to their businesses were locked and sometimes welded until the IDF would ‘force’ them open. On occasion we were a little late and the businessmen would complain of our tardiness. Jews didn’t shop there – only Arabs and they had to make a living.

Palestinian soldiers train

No security force ceremony is complete without flaming hoops

WAR what is it good for?

Yasser Arafat protected his position by the formation of many, overlapping security organisations. That way no one group would be strong enough to stage a coup against his rule. It was also easier to pay off the leaders and potential competitors. An additional advantage is that employment could be found for bored, disgruntled youth.

The disadvantages, apart from the tactical weakness against Israel is that in economic terms this is a very unproductive use of labour. The PA lacks the capacity to procure and manufacture arms openly, and is economically dependent on international donors. The security forces neither produce nor are major consumers of Palestinian production but they do eat up resources and salaries need to be paid if only to keep those with weapons in their barracks.

As bad as they say?

Palestine Stock Exchange

Implicit in the charge that it is Israel, being mean and oppressive, that handicaps the Palestinians economically is the assumption that were Israel to leave all would be wonderful. All I can say is hmm.

Palestine exports $529 million of Olives, Fruit, Vegetables, Limestone, Citrus, Flowers and Textiles. It imports $3.772 billion of Food, Consumer Goods, Construction Materials (and off the books items as weapons). The huge shortfall is made up by foreign aid. That’s not exactly reassuring. Palestine doesn’t really produce anything that the rest of the world really want. I would go as far as saying that an independent Palestine would soon be an economic basket case.

That said, for the moment Palestine (both sides) seems to be doing OK. There are enormous gaps between rich and poor but this is the Middle East.

The Stock Exchange is but one indicator of the current state of the economy. If it is Israel’s actions that are suppressing its economy what is suppressing everyone else?

Regional stock exchganges

Palestine Stock Exchange in comparison with other regional exchanges July 2012

It’s not all about Israel

Surely the Daily Show could find something to joke about in Palestine’s economy other than snide and unfair remarks about Israel? Palestine’s corruption, squandering of capital, over-stuffed security apparatus, twice demonstrated taste for alienating their employers, lack of products and dependence on other people’s money must be worth a giggle. It that isn’t enough, bad, bad, decisions ought to be.

Or is that getting too close to culture? 


Regular readers are aware that occassionally Five Minutes for Israel awards red clowns noses. The ‘winners’ are accomplished people who step outside their expertise to pontificate negatively and there is no other word for it, stupidly, about Israel. I was contemplating this for Jon Stewart but decided against it. Firstly because as a professional comic he might think the clown’s nose is an honour. However, mostly because unlike politicians whose gaffes are judged by an electorate; academics whose ideas are open to criticism by their peers and debunking in critical papers or journalists who, at least in theory, can be held accountable for breaches in journalist ethics, television comics have a bullet-proof defence. It’s just entertainment. Stewart has successfully hidden behind it for years. If his production is only fake news where does one begin to critique? At least Stewart, born Jonathan Stuart Leibowitz, doesn’t make his position as-a-Jew, as far as I know. With this in mind this posts Five-in-a-star icon doesn’t place the red nose on his face but has him with his eyes firmly fixed on the prize he might win as a politician, journalist or academic whose misrepresentations have personal consequences. Those of you who are more familar with Jon Stewart might note I have flipped his image horizontally. Like his political efforts he comes from the Left. (Photography by Rubinstein)

† The New South Wales Higher School Certificate is the  a secondary school credential in New South Wales, Australia. In England, Wales, and Northern Ireland, the equivalent is the the A-level. In France it is the Baccalauréat.
‡ Mubarak Awad, the first in a line of ‘Palestinian Gandhis’ encouraged Non-Violent Resistance as a Strategy for the Occupied Territories. He was just a great deal more liberal and pragmatic in his interpretation of what nonviolence means than either Gandhi and Martin Luther King, Jr. He didn’t see his tactics as replacing armed struggle rather as the most effective method. The tactics he used included “cutting telephone, water and electric lines and blocking roads; all are measures which can cause casualties and defy the sense of non-violence.” He was deported in 1988.

About David Guy

B.A./B.C.A. (Communication and Media Arts) University of Wollongong, AUSTRALIA M.A. in Government (Diplomacy and Conflict Studies) Inter Disciplinary Center, Herzliya, ISRAEL Twitter @5MFI
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