Economic Peace Through the Israeli Lens
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CORE Metadata, citation and similar papers at core.ac.uk Provided by Calhoun, Institutional Archive of the Naval Postgraduate School Calhoun: The NPS Institutional Archive Theses and Dissertations Thesis Collection 2014-03 Economic peace through the Israeli lens Davis, Rachel N. Monterey, California: Naval Postgraduate School http://hdl.handle.net/10945/41365 NAVAL POSTGRADUATE SCHOOL MONTEREY, CALIFORNIA THESIS ECONOMIC PEACE THROUGH THE ISRAELI LENS by Rachel N. Davis March 2014 Thesis Advisor: Robert Springborg Second Reader: Glenn E. Robinson Approved for public release; distribution is unlimited THIS PAGE INTENTIONALLY LEFT BLANK REPORT DOCUMENTATION PAGE Form Approved OMB No. 0704–0188 Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instruction, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202–4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704–0188) Washington DC 20503. 1. AGENCY USE ONLY (Leave blank) 2. REPORT DATE 3. REPORT TYPE AND DATES COVERED March 2014 Master’s Thesis 4. TITLE AND SUBTITLE 5. FUNDING NUMBERS ECONOMIC PEACE THROUGH THE ISRAELI LENS 6. AUTHOR: Rachel N. Davis 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 8. PERFORMING ORGANIZATION Naval Postgraduate School REPORT NUMBER Monterey, CA 93943–5000 9. SPONSORING /MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSORING/MONITORING N/A AGENCY REPORT NUMBER 11. SUPPLEMENTARY NOTES The views expressed in this thesis are those of the author and do not reflect the official policy or position of the Department of Defense or the U.S. Government. IRB Protocol number ____N/A____. 12a. DISTRIBUTION / AVAILABILITY STATEMENT 12b. DISTRIBUTION CODE Approved for public release; distribution is unlimited 13. ABSTRACT (maximum 200 words) The economic factors in the Arab–Israeli Conflict are often overshadowed by its more powerful political features, but economics plays a significant, if not equal, role in the conflict’s protracted nature. Like politics, however, economics cannot singlehandedly harbor a solution. From Israel’s perspective alone, a solution based on economic peace faces serious obstacles: Israeli nationalism, the State-reliant structure of Israel’s economy, and the imbalance of power between Israel and Palestine mean the preconditions for economic peace are currently unattainable. This thesis outlines the obstacles to economic peace but does not hasten to reject an economic approach to an ultimate agreement. Rather, this examination of why, under existing conditions, economic peace will fail exposes the political economy of the conflict in Israel. Until the obstacles to economic peace, as defined by scholars rather than politicians are addressed and surmounted, peace, whether it be called a primarily economic or political peace, will remain elusive. Economic peace, therefore, warrants serious consideration as a gauge of both the economic and political conditions necessary for any lasting compromise and as a means to mediate the polarizing effects of identity politics, ideology, and isolation. 14. SUBJECT TERMS economic peace, Arab-Israeli conflict, Israel, Palestine, identity politics, 15. NUMBER OF economics, solution, challenges, peace plan, Saudi Initiative, Israeli Peace Initiative, political PAGES economy, cosmopolitanism 133 16. PRICE CODE 17. SECURITY 18. SECURITY 19. SECURITY 20. LIMITATION OF CLASSIFICATION OF CLASSIFICATION OF THIS CLASSIFICATION OF ABSTRACT REPORT PAGE ABSTRACT Unclassified Unclassified Unclassified UU NSN 7540–01–280–5500 Standard Form 298 (Rev. 2–89) Prescribed by ANSI Std. 239–18 i THIS PAGE INTENTIONALLY LEFT BLANK ii Approved for public release; distribution is unlimited ECONOMIC PEACE THROUGH THE ISRAELI LENS Rachel N. Davis, Civilian, Department of the Navy B.A., University of Santa Cruz, 2009 Submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS IN SECURITY STUDIES (MIDDLE EAST, SOUTH ASIA, SUB-SAHARAN AFRICA) from the NAVAL POSTGRADUATE SCHOOL March 2014 Author: Rachel N. Davis Approved by: Robert Springborg, Ph.D. Thesis Advisor Glenn E. Robinson, Ph.D. Second Reader Mohammad Hafez, Ph.D. Chair, Department of National Security Affairs iii THIS PAGE INTENTIONALLY LEFT BLANK iv ABSTRACT The economic factors in the Arab–Israeli Conflict are often overshadowed by its more powerful political features, but economics plays a significant, if not equal, role in the conflict’s protracted nature. Like politics, however, economics cannot singlehandedly harbor a solution. From Israel’s perspective alone, a solution based on economic peace faces serious obstacles: Israeli nationalism, the State-reliant structure of Israel’s economy, and the imbalance of power between Israel and Palestine mean the preconditions for economic peace are currently unattainable. This thesis outlines the obstacles to economic peace but does not hasten to reject an economic approach to an ultimate agreement. Rather, this examination of why, under existing conditions, economic peace will fail exposes the political economy of the conflict in Israel. Until the obstacles to economic peace, as defined by scholars rather than politicians are addressed and surmounted, peace, whether it be called a primarily economic or political peace, will remain elusive. Economic peace, therefore, warrants serious consideration as a gauge of both the economic and political conditions necessary for any lasting compromise and as a means to mediate the polarizing effects of identity politics, ideology, and isolation. v THIS PAGE INTENTIONALLY LEFT BLANK vi TABLE OF CONTENTS I. “THE DOG THAT DIDN’T’ BARK” .......................................................................1 A. ECONOMIC PEACE THEORY ....................................................................3 B. IDEOLOGY’S INCENTIVE: WHY POLITICS SUBORDINATES ECONOMICS ..................................................................................................7 C. ISRAEL’S ECONOMY: UNSUITED FOR COMMERCIAL PEACE ....12 II. NATIONALISM VS. RATIONAL MATERIALISM ............................................15 A. IMAGINING ISRAEL ..................................................................................20 B. A CENTURY OF “ECONOMIC COOPERATION” DOUBLETALK ...30 C. THE GENESIS OF A MILITARY STATE ................................................34 III. ISRAEL’S SILENT SECTOR: WHY CRIES FOR COOPERATION FROM ISRAEL’S CAPITALISTS ARE BARELY AUDIBLE .........................................39 A. MILITARY/DEFENSE R&D COMPLEX..................................................44 B. WHAT FREE MARKET? ............................................................................51 C. ECONOMIC POWER DISPARITIES: THE PROBLEM WITH ELITE-INITIATED PEACE ........................................................................58 IV. NEGLECTED OR JANUS-FACED: THE MISSING ECONOMIC PEACE .....65 A. ECONOMICS, POLITICS, AND THE OSLO ACCORDS ......................72 B. ECONOMIC PEACE-BUILDING IN CONTEXT ....................................75 C. OSLO: EVIDENCE FOR THE CO-DEPENDENCE OF POLITICS AND ECONOMICS IN SECURING PEACE .............................................80 V. A NEW MEDITERRANEAN SOCIETY: WHY ECONOMIC PEACE WARRANTS FURTHER STUDY ...........................................................................91 A. THE PROBLEM OF LEVERAGE ..............................................................93 B. ECONOMICS AND THE CASUS BELLI ..................................................98 C. ECONOMIC PEACE AS COSMOPOLITANISM ..................................102 LIST OF REFERENCES ....................................................................................................107 INITIAL DISTRIBUTION LIST .......................................................................................117 vii THIS PAGE INTENTIONALLY LEFT BLANK viii LIST OF FIGURES Figure 1. National expenditure on civilian R&D, as a percentage of GDP among OECD countries, is highest in Israel, 2011. ....................................................45 Figure 2. Stockholm International Peace Research Institute (SIPRI), top 100 arms- producing companies (excluding China) 2005, 2006. Israel’s four companies took 1.3 percent of the arms market. .............................................47 Figure 3. Capital Consolidation by proportion of holdings on the Tel Aviv Stock Exchange, 1999. ...............................................................................................54 Figure 4. Press-Barnathan, Summary of Hypothesis.. ....................................................60 ix THIS PAGE INTENTIONALLY LEFT BLANK x LIST OF ACRONYMS AND ABBREVIATIONS IPI Israeli Peace Initiative IDF Israeli Defense Forces IDB Israeli Discount Bank API Arab Peace Initiative OT Occupied Territories (of Palestine) PLO Palestine Liberation Organization PA Palestine Authority GCC Gulf Cooperation Council GDP gross domestic product MENA Middle East and North Africa xi THIS PAGE INTENTIONALLY LEFT BLANK xii ACKNOWLEDGMENTS Thank you Susan Dooley, CDR Jeff McCollum, Keith Snider, and Wesley Vo, my supervisors over the last three years,