Economic Power and the Israeli Occupation

Dear econo-missed,

Is the Israeli occupation of the West Bank economically beneficial to either the state or to the private companies within it? How do economic benefits or lack thereof affect understandings of Israel and the occupation of the West Bank and Gaza Strip as colonial ventures? Are there other economic considerations?




Dear Charlie,

Thanks for your question – I really appreciate the excuse to learn more about the economics of the occupation and Israel/Palestine more generally. While I don’t have an extensive knowledge about colonialism or Israel/Palestine, I’m happy to offer my thoughts and research. It also seems worth mentioning that I grew up in a socialist-Zionist youth movement (where I always connected more to the socialism than to the Zionism) and spent a gap year first on Kibbutz Ein Dor and then in Be’er Sheva.

Like many others on the left, I tend to ignore the economics of the occupation because I don’t need to know the costs or benefits of displacement, exploitation, and the violation of international law in order form an opinion. That being said, the economic details do affect the debate about whether or not the Zionist enterprise is colonialist. More importantly, economic estimates and comparisons can shed a slightly different light on the occupation that may convince equivocating commentators.

One part of the debate about whether or not the Zionist enterprise is colonialist depends on whether Israel in general gains from the occupation. (Certainly, some companies’ business strategies rely the occupation, and they benefit tremendously from it.) Shir Hever argues that the occupation stopped being profitable around the first Intifada mostly due to increasing security costs. In 2011, Hever estimated that the occupation cost around 9 billion dollars, which was about 9 percent of Israel’s budget at the time. On the other side of this debate, Noam Sheizaf notes that this reasoning ignores how much Israeli companies and Israelis in general gain from land grabs, natural resource extraction, and labor exploitation. Unfortunately, Sheizaf notes how difficult it is to calculate these economic benefits. Regardless, in order to come to a conclusion, one must also take a stance on highly political questions such as historic rights to land, the legacy of anti-Semitism in Europe, Britain’s pre-1948 policies, and various political movements from the left and the right that have identified as Zionist for over a hundred years. I don’t have the knowledge or desire to jump into any of those debates.

Furthermore, when it comes to Israel/Palestine, I tend to think that semantic debates about whether or not Zionism is a settler colonialist project can distract from other aspects of the conflict. The words we choose often matter, but those arguments can lead to more bickering over the boundaries of concepts than to discussions of the violence on the ground or ways to transform it into a just peace. While I’m not going to take a stance on your primary question, some economic facts about the present occupation help to shed light on the power differential and make equivocating about the morality of the occupation and blockade less tenable.

In the Gaza Strip and West Bank, it is possible to estimate the infrastructure damage from the most recent war and some of the economic costs of the occupation. For the former, the Palestinian Authority estimates that the most recent war will cost $7.8 billion to rebuild in Gaza. For context, Gaza’s gross domestic product was $2.4 billion in 2011. (In contrast, the military grant to Israel from the U.S. in 2011 was $3.0 billion, which is in line with the years before and after it.) While finding more recent data for Gaza’s GDP is difficult, the cost of rebuilding is on the order of three times the size of Gaza’s economy; in comparison, operations for the Iraq War cost around 1 percent of U.S. GDP during the most expensive years of the war. Importantly, the cost of rebuilding does not come close to the total economic cost of the war, which should include estimates for the cost of work disruptions, lost educational investments, services to process trauma, etc.

Similarly, it is possible to calculate a conservative estimate of the yearly costs of the occupation in the West Bank and Gaza Strip. In 2011, the United Nations helped fund a study by the Palestinian Ministry of National Economy and the Applied Research Institute to look into these questions. The authors recognize the limitations of the data, and they consistently make conservative empirical decisions, which mean that their estimates are likely much lower than the actual amount. Despite this, the study finds that the occupation cost the Palestinian economy $6.9 billion in 2010, or 84.9 percent of total Palestinian GDP. Without the occupation, these authors determine that the Palestinian economy would be almost twice as large and not reliant on foreign aid. The costs come from limited resource access, movement restrictions, the Gaza blockade, etc. The graph below helps put some of this in perspective.


While Israeli spending on the occupation jumps out as a surprisingly large category in comparison, this was 9 percent of Israel’s budget and 3.9 percent of Israel’s GDP in 2011, both of which would soar over the other statistics if included. Also, it is worth pausing to reflect on the fact that all of the formal activity in the Palestinian economy (GDP) is about the same size as Israel’s spending on the occupation and only about three times the amount of money that the U.S. gives to fund the Israeli military. This matters because Israel’s economic power makes it relatively easy for the government to meaningfully improve the conditions of Palestinians or make certain economic concessions, which is somewhat similar to how their military power makes it easier for them to avoid breaking international law. Furthermore, the economic desperation of many Palestinians makes certain forms of violence understandable if not acceptable. Economic figures provide another way to talk about an imbalance of power.

in solidarity,

ben wolcott

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