ME conflict poses economic threat to Israel

Whereas other Western countries face financial crises, dispute with Palestinians imposes additional economic risk on Israel, according to recently released Adva Center study.

Trader watches the stocks 311 (photo credit: AP)
Trader watches the stocks 311
(photo credit: AP)
“The ongoing Israeli-Palestinian conflict disrupts Israel’s economic stability, limits its social development, draws on the energies of its political leadership, undermines the IDF’s legitimacy and isolates Israel in the international arena.” So states a report by the Adva Center for Information on Equality and Social Justice in Israel, released last Tuesday.
“The Burden of the Israeli-Palestinian Conflict, 2010 Situation Report” by Adva academic director Shlomo Swirsky, published once every two years, analyzes the economic, social, military, political and diplomatic cost of the conflict to Israel and Israelis.
The Adva Center is a left-leaning think tank whose mandate is to examine Israeli society from a perspective of equality and social justice. The report was published to mark 43 years of Israeli rule over the West Bank.
According to Swirsky, Israelis often don’t realize the full costs of the conflict and the occupation. The report aims to present decision-makers and the public with the wider picture.
“What we’re saying in this report is actually fairly simple: Whereas most other Western countries face economic risks in the form of financial crises or recessions, we in Israel face an additional economic risk in the form of violent conflict,” said Swirsky. “When we combine the two risks, we get a worrying picture.”
The Adva report is divided into six chapters. In the first, “Economy under the shadow of conflict,” Swirsky claims that despite growth rates in the past decade that are higher than Germany and the US, Israel enjoys less growth than China and India, or even Poland.
“If Israel wants to achieve its vision of catching up with the leading economies, it requires growth rates higher than theirs. Such growth was achieved between 2004-2008, but it didn’t compensate for the low growth between 2001-2003, caused by the second intifada,” says Swirsky.
“From the day the Palestinians first accumulated enough collective ability to rise up against Israeli rule, they have been able to undermine Israel’s economic stability. Each of the two Palestinian uprisings – the first between 1978-1993 and the second 2000-2003 – shrunk Israel’s economic activity, caused a decrease in incoming tourism, reduced investments, increases in unemployment and a reduction in the public’s consumption power.”
Swirsky said that the drop in growth that occurred in the end of 2008 and beginning of 2009 was the result of both the global financial crisis and of Operation Cast Lead.
He points out that despite Israel’s relatively high ranking in the United Nations Human Development Index (Israel is ranked 27th out of 182 countries) its security situation produces low credit ratings.
“Israel’s credit rating is substantially lower than that of the 26 countries who precede it on the HDI list. While most of those countries enjoy credit ratings of AAA or AA, in 2010 Israel had a ranking of A.
The second chapter focuses on the annual budget, Israel’s defense expenses from 1967 to now, under the heading “Guns or Butter.” Swirsky claims that Israel has constantly had to choose between security expenditure and social expenditure.
“In the budget cuts following the second intifada, Israel’s social expenditure for the entire decade fell below the 2001 rates; and for four years, even below the rate in 2000. In parallel, per-capita security expenditure was higher than per-capita social expenditure during the entire decade apart from 2003 and 2004, when the intifada died down. Only in 2008-2009 did social expenditure exceed per-capita security expenditure,” reads the report.
The third chapter, “Society in the Shadow of Conflict,” deals with the social gaps that developed in Israel due to the security situation. Swirsky finds that populations which suffered from poor performances in 1967 – periphery dwellers, Israeli Arabs and haredi Jews – have since had difficulty in closing the gap; the gaps have hardened and, in some cases, even grown.
“In Israel today, one out of every five families lives under the poverty line compared to one in 10 in the 1970s,” writes Swirsky. He adds that while some inequalities came about due to neo-liberal economic policies and would have occurred anyway, some were directly affected by the security situation. Examples: The erosion of Israeli workers’ negotiating power with the introduction of unprotected Palestinian workers and, later, of foreign workers; the state’s investments in settlements instead of urban renewal; and the poor integration of Arab Israelis in the workforce.
Israel’s investment in defense at the expense of higher education will create continued financial challenges for many years to come, Swirsky says.
Chapter four of the report deals with the military. Swirsky claims the IDF’s routine activity in the West Bank has made it part of the political arena. Citing examples like the IDF presence in the settlements, Operation Cast Lead and the recent raid on the Gaza Aid Flotilla, he says the IDF is being used as a political tool to enforce policies instead of as a defensive measure. This leads to an erosion of the IDF’s legitimacy in the eyes of the Israeli public and a drop in some sectors of the population’s motivation to serve.
Chapter five deals with the local political arena and shows how theIsraeli-Palestinian conflict has come to dominate the public debate tosuch a degree that it prevents other burning issues from making anappearance.
“Whereas in other countries, socioeconomic issues are what differentiates between political camps, in Israel thedividing line between left and right is policies in regard to thePalestinians… The main result is a shortage of public debate on issuesthat determine the standard and quality of life as related to thepresent and the future,” writes Swirsky.
“For years Israeli governments have risen and fallen because of theirtreatment of the Palestinian issue instead of issues such as economicdevelopment, wages, education, health and the social safety net.Political parties don’t even bother developing a socioeconomic agenda,”Swirsky points out.
The last chapter deals with Israel’s world status. Swirsky lists aseries of Israeli policies that, according to him, are not formallyrecognized by any nations, including: “Israeli rule of the Palestinianterritories,” “Israel’s annexation of Jerusalem,” “The settlement ofPalestinian territories,” and “The route of the security barrier.
“The Israeli-Palestinian conflict in general and the occupation inparticular, weaken Israel’s international standing, cast doubt on thelegality of its actions and hurt its status as a democratic countrycommitted to human rights, in the eyes of international publicopinion,” writes Swirsky. This, he said, has led to the boycottmovement in the West.