SEEKING MIDEAST PEACE? THINK ECONOMICS
Leonard J. Marcus and Raja Kamal
August 17, 2002

A FUNDAMENTAL question faces those seeking to calm the latest round of conflict in the Middle East. What is it that could ultimately transform the face-off beyond the current stalemate and toward a new and more stable balance?

Primary attention focuses on the gruesome daily measure of violence plaguing Israelis, the humanitarian crisis crippling Palestinians, and the tenuous political maneuverings consuming all sides. On the other side of this conundrum, is there some constructive diversion to lure the parties toward their senses?

Some believe that change will come after a virtual shock to the system, such as an attack resulting in mass casualties.

Could there be an alternative incentive with less tragic consequences that could provide a similarly effective encouragement toward cessation of deadly hostilities?

The most reassuring source of hope and normalcy for both Palestinians and Israelis will emerge from jump-starting the economic machine that has ground to a dangerously lethargic pace.

The impact of the economic slowdown can be seen throughout the region, fostering bitter hopelessness on a deeply personal level, igniting the anger and emotions that fuel violence. Unemployment in Israel has moved beyond 10 percent and for Palestinians it is well beyond 25 percent.

At present there is a horrendous negative economic impact imposed upon people on both sides of the dispute. The recent deployment of substantial reservists in the army is costing Israel millions per month. This is in addition to the opportunities lost to boost the Israeli economy while these reservists are on active duty.

At the same time, the Palestinian economy is being strangulated by curfews, fear, and shutdowns of basic support systems, including water and electrical supplies.

Beyond the immediate desperation, there is a long-term predicament that cuts even deeper into the economy. There is growing evidence that many talented Israelis are leaving their country. Israel faces a mass exodus and stands to lose a significant portion of its educated population despite the ideological draw that has caused meteoric growth over the past 50 years.

The scientific and technological flair of its intelligent work force has been a draw for the capital that has fueled the growth of the Israeli economy. Remove the people, remove the confidence, and with time, so too go investment opportunities.

The economic loss for the Palestinians is also significant. The 120,000 Palestinian workers that earned their daily livelihood legally in Israel are now jobless. Their imposed unemployment is a financial blow to both the Israeli and Palestinian economies. In Israel they were the foundation of the construction and agricultural sectors. In the West Bank and Gaza their income fueled their poor communities.

This will add to the numerous armies of the unemployed - a fueling incubator of fanaticism. Since their economies are so closely linked, weakness in the Israeli side of the balance causes even deeper weakness on the Palestinian economy.

And then, of course, there is tourism. The US government among others is officially discouraging visits to the region. One of the prime industries of the region is brought to a standstill. The summer months, normally one of the high tourist seasons of the year, were nearly devoid of visitors. The most recent Hebrew University bombing will further stifle student exchanges to Israel and further discourage the already ambivalent visitor.

How can the world respond? International humanitarian assistance pouring into Palestinian areas could alleviate immediate human suffering, which is reason enough to begin the process. This assistance could also spur related activities to reinvigorate the economy. There are roads, buildings, and infrastructure to repair and construct. This activity will calm tensions on the West Bank and Gaza and thereby alleviate the disturbances that spill into Israeli areas.

A reduction in the daily violence is necessary if the political process is ever going to get off the ground. The American political adage "it's the economy, stupid" may actually have a great deal of relevance in the resolution of this conflict.

What might such a momentary calm accomplish?

It is time for this conflict to return to a battle of words and not an escalation of death. The most immediate incentive to reengage people into a sense of normalcy and security would be to reinvigorate the economies of both sides. Get people back to work. Get people back to a sense of personal and financial well-being. This will restore even the smallest sense of hope and future.

In the long run, that hope and anticipation will be the foundation upon which a long-term peaceful solution to the conflict will be established.

© Copyright 2001 Globe Newspaper Company

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