A radical new treatment: boosting Israel's economy through peace with Palestinians.
By SHLOMO MAITALTreatment(photo credit: Avi Katz)
One of the trends sweeping the world, and beginning to impact Israel, is evidence-based medicine – using the latest data to assess risks and benefits carefully before deciding on treatment. Could the use of real evidence actually spread to Israel’s foreign policy? What if our political leaders dropped their slogans, clichés, posturing and demagogy and embraced evidencebased policy? What if Israel’s policy toward the Palestinians were built on real data? Aradical new policy might emerge – finance and develop our foes, rather than fight them.A remarkable natural experiment is now underway in Gaza and the West Bank. Gaza, ruled by the fanatical, uncompromising Hamas, faces rigid Israeli economic sanctions; partly as a result, the economy of 1.5 m. Gaza residents stagnates. Rocket attacks from Gaza recently resumed.In contrast, the West Bank has seen the restoration of personal security, elimination of some (though far from all) road blocks, growing trade with Israel and substantial capital inflow. The result: Growing prosperity for 2.5 m. West Bank residents. Terror attacks have declined sharply.According to the Palestinian Central Statistical Bureau, the Gross Domestic Product (GDP) of Gaza has fallen by 30 percent since peaking in 2005. In contrast, West Bank GDP has risen by 47 percent since 2005, a torrid 8 percent average annual growth rate, double that of Israel. According to the Peres Center for Peace, some 90 percent of West Bank exports go to Israel.Based on the evidence, which “treatment” is working best? There is, of course, a chicken- and-egg issue here. Is the West Bank prosperous because it is cooperative or cooperative because it is prosperous? Is Gaza intransigent because Israel is squeezing it or is Israel squeezing it because Gaza is intransigent? Of course, they are both cause and effect – in other words, feedback loops. One of them improves life; the other degrades it.What does history teach us about the link between economics and war? In his 1977 book “The Passions and the Interests,” American economist Albert Hirschman shows how the rise of capitalism in 18th century Europe diminished wars. When society stopped believing that avarice is venal and began believing that greed is good, the passions of war were transformed into the interests of growing rich. When you and your foes each have wealth, why risk it in war?Capitalism did not end wars – there were two disastrous world wars in the 20th century – but one can argue that World War II sprang out of Germany’s impoverishment and resulting turn to fascism, by the excessive reparations imposed on it by the Treaty of Versailles that ended World War I.American political scientists Bruce Russett and John Oneal studied wars around the world, from 1886 to 1992. In their 2001 book “Triangulating Peace,” they offer evidence that three factors _ economic interconnectedness, democratic traditions and membership in international organizations – reduce the likelihood of war by 71 percent. This evidence suggests Israel should build trade with the Palestinians, help foster their democracy and, of all things, help them gain admission to the United Nations.
Building on Russett and Oneal’s evidence, research by Erik Gartzke, Quan Li and Charles Boehmer, published in the academic journal “International Organization,” 2001, found that financial interconnectedness (capital flows) is a better predictor of (the absence of) war than the three factors studied by Russett and Oneal. The three scholars showed that the higher the foreign direct investment (as a percent of gross domestic product) between two nations, the lower the rate of wars and conflicts between them. (Foreign direct investment is investment in a foreign country that results in owning assets, like plants and buildings, rather than owning securities.) Conclusion: Israel should fight its foes by funding them, i.e. investing in their economies and businesses.Five years ago, the Peres Center for Peace published a report, “The Untapped Potential,” showing that within 5-10 years of political peace, stability and security, Palestinian exports could cumulatively rise to some $11 billion per annum from $500 million in 2005, creating 500,000 new Palestinian jobs and tripling GDP. For Israel, the report shows, expanded trade with the Palestinians and a proposed Arab Free Trade Area would boost exports by $12 b., creating 400,000 new jobs and increasing GDP by 10 percent.There is deep anxiety in Israel about the Palestinians’ intention to seek United Nations General Assembly recognition of their independence in September. The result has been to push the Palestinian Authority and Israel toward what outgoing US Mideast envoy George Mitchell calls a potential “train wreck” in September. It is entirely possible Israelis and Palestinians will, through stubborn intransigence on both sides, ruin the Peres Center’s win-win scenario, in favor of a disastrous lose-lose. After popular protests in Israel over the price of cottage cheese, and now housing, perhaps this issue is worth another such uprising. I’d be the first to join.If Prime Minister Benjamin Netanyahu and Foreign Minister Avigdor Lieberman were to consider the evidence, they might weigh a radical new alternative “treatment.” Let Israel be the first to recognize the Palestinian state (its borders to be determined later) and act to strengthen and help fund its economy, so that a third intifada would be so costly and damaging, it would be unthinkable.We’ve fought our foes for 63 years. It has not brought peace, nor will it. Isn’t funding them worth a try? The writer is senior research associate, at the S. Neaman Institute, Technion.
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