May 28, 2004

One State or Two, Israelis and Palestinians Share the Same Economy


Mislam Alshwa, a butcher in Gaza City's central market, has seen his sales plunge by 90 percent since the intifada began in the fall of 2000. That's because, at a time of heightened tension, hardly anyone is being allowed to cross over into Israel to work. Israel has taken to importing Thai and Filipino laborers to replace the Palestinians it once hired.

"Things won't get better until the borders are open so that people can earn money again," he said on a recent Saturday.

One of his few customers that day, Abu Ahmeed, didn't quite agree. "Why should we work in Israel?" he asked. "The Palestinian state will be a reality soon, and we can build factories here." Mr. Ahmeed works for the Palestinian Authority, which explains why he can still buy meat.

Both men may be right — Mr. Ahmeed in believing that a Palestinian state is inevitable, and Mr. Alshwa for sensing that it may not be the answer to his business woes.

The two-state solution to the Israeli-Palestinian conflict, once the idealistic aspiration of peace-minded people on both sides, is now seen as the lesser-evil option by mayhem-weary realists. The prevailing Israeli sentiment runs something like this: Take your territories. and let us wall them off so we never have to deal with each other again. Though understandable, that sentiment could prove a dangerous fantasy for Israelis. Despite the seeming tidiness of a two-state solution, Palestinians and Israelis will continue to live in a shared economy. Israel will only undermine its own security if it ignores this fact.

Gaza offers a cautionary tale of what a hopeless Palestinian state would be. Sealed off, the Gaza Strip has become an increasingly radicalized prison of 1.5 million inmates; it is run by Hamas and other terrorist groups. The percentage of Gazans in poverty — defined as a daily household income of less than $2.10 — has exploded to 80 percent from 20 percent in less than four years.

The territory is also a microcosm for everything about the Israeli-Palestinian conflict that outside observers find maddening. Gaza is hardly in dispute, after all. Nearly three-quarters of Israelis — including Prime Minister Ariel Sharon — are eager for Israeli troops and the 7,500 Jewish settlers there to withdraw.

But on May 2, a minute slice of Israel's electorate managed to block Mr. Sharon's withdrawal plan in an ill-conceived Likud Party referendum. Turnout was light, partly because many would-be "yes" voters were repulsed by the brutal killing of a Jewish settler and her four children in Gaza. Extremists on both sides once again hijacked the debate.

Since then, at least a dozen Israeli soldiers and close to 100 Palestinians have died in some of the most ferocious fighting seen in recent years. Mr. Sharon has reiterated his determination to leave Gaza, and he is expected to have his cabinet vote on Sunday on a revised withdrawal plan.

Even if an Israeli withdrawal does eventually take place, once-optimistic proposals for the Israeli and Palestinian states to form a single customs union and a common market have been shelved. Instead, Israel is intent on erecting a massive wall that offers Palestinians an economic future as bleak as the present. "No modern economy has ever gone through as devastating a recession as the West Bank and Gaza have," said Nigel Roberts, the West Bank and Gaza director for the World Bank.

The effects of the intifada wiped out almost 40 percent of the per-capita domestic product. Private investment plummeted to less than $100 million in 2002 from nearly $1.5 billion in 1999.

International charity has helped avert a greater calamity. The Palestinians are receiving more annual foreign aid than any other people, some $325 a person. But welfare is not a development strategy.

The Palestinians had tried to build an economy based on cheap labor for Israel. Until waves of suicide bombers poisoned the daily migration, this was a symbiotic relationship. The number of Palestinian migrant workers in Israel has declined to fewer than 50,000 from some 150,000 on the eve of the latest intifada.

Israel has also paid a price for the mayhem of recent years, but a relatively small one against the backdrop of its prosperous economy. High-tech venture capitalists in Tel Aviv like to say their fates are more tied to what happens on the Nasdaq than in Nablus, and there is much truth to that. That it was Palestinian violence that led to their own economy's meltdown leads even the most well-meaning Israelis to shrug helplessly at the Palestinians' plight.

Still, it is in Israel's own security interest to foster a sense of well-being and hope in the Palestinian territories over time.

Nobody can reasonably expect Israel to open its borders to all comers, but in the long term, Israelis and Palestinians will have to find ways to establish an orderly flow of workers, perhaps one that would be coordinated by unions and businesses and could entail background checks.

Moreover, Israeli policy makers need to realize that the more punitive aspects of their occupation backfire by increasing Palestinians' desperation. This is true of the demolitions of Palestinian dwellings, the internal roadblocks and the ban that keeps 16- to 35-year-olds from leaving Gaza.

The economic viability of the eventual Palestinian state must also worry Israel. It will need to accept greater Palestinian sovereignty over such important matters as water rights unless it wants to have a homicidal, desperate neighbor forever. That is what Gaza is becoming.

Copyright 2004 The New York Times Company