SECURING PEACE IN THE MIDDLE EAST:
Project on Economic Transition
Various authors. The Institute for Social and Economic Policy in
the Middle East, Harvard Univ. Cambridge, Massachusetts, June 1993.
115 pp. No price stated.
PEACE PAYS:
Palestinians, Israelis & the Regional Economy.
Simcha Bahiri and Samir Huleileh with Daniel Gavron.
Israel/Palestine Center for Research and Information IPCRI,
Jerusalem, 1993. 129 pp. No price stated.
The fact that the success of the historical Israeli-Palestinian
agreement of September 13, 1993 depends upon an economic
"revo¬lution" in the life of the Pales¬tinians already
sounds so much like a hackneyed cliché that one is reluctant
to reiterate it yet again. The Rabin-Arafat agreement indeed holds
out the prospect of ending a hundred years of conflict and
bloodshed; but economists warn, and politicians agree, that "Gaza
First" could turn out to be an empty slogan unless the overdue
satisfaction of legitimate political aspirations is accompanied by
real change in the hard daily life of the people there and on the
West Bank. It is no coincidence that the first issue of
Palestine-Israel Journal chose to focus on economics.
As their titles imply, these two booklets deal with the problems
and perspectives of peace eco¬nomics. In a spirit of cautious
optimism, they make an important contribution to our understanding
of the subject since, although they were both published shortly
before the breakthrough in the peace talks, their approach is both
timely and realistic. Happily, although they deal with complex
economic topics, laymen as well as specialists can read and
appreciate nearly all the material. Securing Peace in the Middle East is a longer and more
expensively produced work than the more compact and readable Peace
Pays. (Although even on a limited budget it would have paid the
producers of the latter booklet to employ somebody to proof read
the text). Whereas Peace Pays is mainly the work of three
writers, including one Israeli and one Palestinian economist,
Securing Peace enjoyed an editorial board of three, seven working
groups and over 50 participating economists, Israeli, Palestinian,
Jordanian and American (as well as an impressive list of supporting
individuals and organizations). It deals both with economic
analysis and the structural-organizational ramifi¬cations. All
this gives it an academic, comprehensive, detailed and
authoritative flavor. Peace Pays is also professional, but
more ideologically-oriented. However, despite their differences,
they are both important, the most signi¬ficant point being
that they repre¬sent common professional endeavors of Israeli,
Palestinian, and - in the case of Securing Peace - Jordanian
Economists, working as equals and grappling with the vital question
of what peace may bring the peoples of the region in economic
terms.
In comparing economic futures the authors of Peace Pays
differentiate between (1) normative forecasting: what must be done
in order to achieve certain results (2) explo¬ratory
forecasting: what happens if certain actions are taken (3)
extrapolative forecasting: project¬ing existing trends into
the future, and (4) intuitive forecasting: utilizing specialist
knowledge and expert opinion - often involving analogies. There is,
of course, no clear borderline between these four categories.
Anyone expecting more precision from those engaged in economics
than from (say) sociologists, not to speak of politicians, might
note how much unreliable economic forecasting has been thrown at
the public in the press since the Israel-PLO agree¬ment was
announced.
For example, how much outside financial support will the
Palestinians need over the next 10 years to support the peace
agreement? The generally accepted figure, that of the World Bank,
is $3 billion over ten years. However, the head of the economic
department of the Israeli foreign ministry reportedly put it at
$4.3 billion (Yedioth Aharonot 8.9.93). A team of 100
Palestinian economists headed by Prof. Yussuf Sa'id says a modern
Palestinian economy will need investments of about $11.5 billion
over seven years (Yedioth Aharonot 7.9.93). It looks as if
there is a discrepancy between those figures and those of the World
Bank. Israel's Finance Minister speaks of pouring $600 million a
year into the territories. In Peace Pays, it is estimated
that the Palestinians will be able to mobilize some $1.2 billion
for investment annually by 1998, and this will increase in the
subsequent period. Securing Peace, which in general tends to
concentrate on thorough economic analysis and to eschew economic
forecasting, is more careful about entering into detailed estimate
of the likely future revenue needed by the Palestinian Interim
Self-Governing Authority. Like the World Bank, its rough estimate
is that $3 billion will be needed for investment in the Palestinian
infrastructure over 10 years. The broad lesson here seems to be
that, while our current world is incomprehensible without
economists, even the best trained and best intentioned experts are
fallible human beings whose work is not lacking smaller or larger
margins of error.
One unconventional Israeli economist even dismisses much of the
talk about regional peace dividends as "pie in the sky" (Eliahu
Kanovsky, Jerusalem Post 29.9.93); but there seems to be a
general feeling among many knowledgeable observers, based on past
experience, that foreign aid, vital as it is, must be carefully
used.
Both these works are to be recommended. The former
Director¬General of the Israeli Finance Ministry, Yaakov
Lifshitz wrote of Peace Pays (Ha'aretz 14.9.93). "It is an
attempt to undertake a full and long term macro-economic reckoning,
using a systematic formal model so as to prove professionally that
'peace pays'''. As for Securing Peace, the prestigious
sponsorship (Harvard and MIT) and the large number of distinguished
participants (too many to mention here indivi¬dually)
guarantee its professional credentials. It is not without reason
that the authors write of their "hope and belief that the report
and spirit in which it was written will contribute to the economic
development of the Palestinian, Jordanian and Israeli economies,
and thus to peace."
For a non-expert, one of the surprising aspects of both works is
their generally optimistic tone. After all, the starting point of
the Israeli and Palestinian economies is totally distorted.
Israel's GNP is about 15 times that of Jordan, 30 times that of the
West Bank and 60 times that of Gaza. However, it is pointed out
that the Palestinians are rich in human resources, which can be
fully exploited in an independent state, integrated peacefully into
the region and enjoying the support of its own Diaspora and of the
international community. Both the Israeli and regional economies
have no less to gain than that of the Palestinians from
peace.
The mechanisms of peace economics are differently examined in the
two publications. Securing Peace suggests that,
notwith¬standing the government's role, the Palestinians
should rely not only on substantially free trade but also on the
leading role of the private sector and market forces. For its part,
Peace Pays contends that the important work of disarmament
and industrial conversion needs government intervention and
comprehensive planning. Both, however, without underestimating the
problems ahead, end up with optimistic appraisals of the economic
future of the parties to the Israel-Arab conflict and of the region
as a whole. While the Peace Pays projections range far ahead (up to
2008), Securing Peace deals only with the interim
self-¬government period until 1998.
Thus in a comprehensive peace scenario Peace Pays projects
an Israeli population of 7.2 million by the year 2008 with a GNP of
over $118 billion, about twice today's figure. By that date, it
forecasts, the Palestinian GNP will approach $9 billion (more than
a threefold growth) for a population of 4.5 million. These leaps
forward will of course be expressed in living standards. On the
other hand, in the event of "frozen autonomy", entailing continued
Israeli occupation of the territories, less than half such progress
is forecast.
It is interesting to note that according to Peace Pays
(Bahiri) Israel was making a handsome profit from exploiting the
territories up to 1987; but the Intifada converted this into a
loss. As for the Palestinian economy, it initially experienced
growth under the occupation; but generally Israel made use of its
political and economic advantages to the detriment of the
development of the Palestinian economy.
Huleileh notes that "the Palestine to which the first Jewish
immigrants came (about a century ago D.L.) possessed a viable
subsistence economy, which was one of the most developed in the
Middle East". Under the British Mandate, "the Palestinian Arabs saw
one set of aliens (the British) handing over their country to
another (the Jews) with the cooperation of absentee feudal
landlords". Not always seeing eye to eye on the past, Bahiri and
Huleileh write separately on the economic background up to 1992.
Huleileh is one of the economists contributing to these two
booklets, who were appointed as members and advisors of the
delegations to the current peace talks.
The authors of Peace Pays call themselves "pragmatic
vision¬aries", while those of Securing Peace write that
we "occasionally marveled to ourselves over the extraordinary fact
that Palestin¬ians, Jordanians and Israelis were sitting down
together to try to solve the problems posed by the economics of the
peace process." These are first steps along what is bound to be a
long and arduous road for both peoples. Let us hope that, with the
way having at long last been opened, what seems extra¬ordinary
to those bold enough to take the first strides will look
increasingly commonplace as the peace process moves forward.