Thursday, June 6, 2013

What is “economic peace?”



These last few days, the term “economic peace” has been used to critique the decision of Secretary of State John Kerry to invest $4 billion in the West Bank. What is “economic peace” and why for many activists who wish to see justice in Palestine, is this controversial?

 “Economic peace” means that economic stability and prosperity in the Palestinian territories would be a good vector of political prosperity. However, what economic peace develops and promotes is the dependency of the Palestinian Authority on Israel.

The PA has no power to implement any form of economic policy to begin with due to the occupation. The Oslo Accords did not grant independence to the Palestinian territories but rather nominal control of certain parts to the PA. Decades later, the PA, with the help of the international community through plans like Kerry's, is trying to deliver growth and economic prosperity while ignoring the issue of occupation. Economic peace has meant the PA following global trend of adopting neoliberal policies that haven't actually helped alleviate poverty, let alone end the occupation. Donors have been giving funds to the PA that have exceeded $1.5 dollars annually since 2007, yet a third of the West Bank inhabitants live under the poverty line. Instead money has been going to the construction of international hotels, car shows and fashionable restaurants. It also created a bubble in the city of Ramallah.

The occupation means that the PA has to rely on Israel to establish any political or economic agenda. The PA has no central bank and therefore cannot control the interest rates and inflation or set a competitive currency exchange rate in support of export-led economic growth. Its commitment to the Economic Protocol with Israel means that it cannot independently reduce tariff rates or value Added Taxes. Well-defined property rights, which are a prerequisite for investment, are not present in the West Bank due to the limited jurisdiction of the PA. The PA only controls fiscal policy, notably through reducing public expenditure and increasing tax revenues. Almost everything else is dependent on Israel.

In the reports by the International Monetary Fund and the World Bank about the economic situation of Palestinians, the consequences of occupation are never mentioned. Both of these institutions use technical and neutral vocabulary and do not denounce Israel’s unlawful policies. Kerry's latest plans resembles past ones pushed by the United States and international organizations like the IMF and World Bank. These plans try to normalize occupation- economic peace, seems to be only another word for status quo. 

Even if one takes a neoliberal point of view, economic growth can only occur when there is a production of goods or services. Given that the Palestinians have no control over their production or their goods, Kerry’s plan or any other plan that does not ask for the end of the Israeli occupation is doomed to fail.
Occupation is still present because many companies in the United States and worldwide benefit from it. Kerry should consider supporting peace by promoting the BDS movement and ending U.S. military aid to Israel. This is an economic plan for Palestine that will cost less and achieve more. Isn’t that the goal given the current bad economy?