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The Cost of the Occupation to Israeli Society, Polity and Economy

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The Cost of the Occupation to Israeli Society, Polity and Economy The Burden of Occupation The Cost of the Occupation to Israeli Society, Polity and Economy 2008 Update Shlomo Swirski Copyright © 2008 Adva Center Adva Center, POB 36529, Tel Aviv 61364, Tel. 03-5608871, Fax. 03-5602205 e-mail: [email protected] web site: http://www.adva.org 2 Acknowledgments I wish to thank Oxfam G.B., and the Catalan Agency for Development Cooperation, Spain, without whose help this study would not have been possible. I would also like to thank the members of the Adva Center research team who participated in the project: Yael Hasson and Noga Dagan-Buzaglo, for their research assistance; Etty Konor- Attias, for preparing the statistical data; Alon Etkin and Fanny Pisakhov, for participating in the early stages of the study. I would also like to thank Barbara Swirski, Yaron Yehezkel, Alon Etkin and Ishai Menuchin, for reading the manuscript and making valuable comments. The Burden of Occupation, 2008 The Adva Center, POB 36529, Tel Aviv 3 Table of Contents Introduction 5 PART ONE: OCCUPATION AT A BARGAIN: 1967-1987 9 Chapter One: Low Cost of Administration, Low Cost of Defense 10 The Low Cost of Governance 10 The Low Cost of Military Control 14 Chapter Two: A Positive Economic Balance - Israel’s Corporate Gains from 17 the Occupation Dimensions of Trade 19 A. Israeli Exports to Palestine 22 Electricity 22 Fuel 24 Telecommunications 25 Cement 26 Agriculture 26 Food Industry 27 B. Israeli Firms Benefitting Directly from the Israeli Occupation 28 Construction of Housing 28 Road Construction 30 The Separation Wall 31 Security: Road-blocks, Settlements, Gates and Crossing Points 31 Industrial Parks in Settlements 32 The Advantages of the Settler Economy 33 The Future of the Settler Economy 36 The Future of the Israeli-Palestinian Economic Connection 37 Chapter Three: A Positive Economic Balance: Cheap Palestinian Labor and 39 Other Perks Payroll Taxes on Palestinian Wages 43 Other Perks 46 a. Profits from a Compulsory Customs Union 46 b. Stolen Water is Sweet 48 Chapter Four: The Settlements – the Single Largest post-1967 Civil-Military 51 Project Brief Review of the Development of the Settlements 51 The Public Cost of the Settlements 53 Municipal Budgets 54 Construction 55 Taxes 56 The Health System 56 The School System 56 Water Supply 57 The Settlement Division of the Ministry of Agriculture 58 The Rural Construction Administration at the Ministry of Construction and 59 Housing Roads and By-Pass Roads 59 Industrial Parks 59 An Additional Cost – the Disengagement from the Gaza Strip 60 Future Costs – The Removal of Settlements in the West Bank 60 Summary 61 Chapter Five: Israelis Who Paid a Price 62 a. Settlements vs. Development Towns 62 b. Israeli Workers, Palestinian Workers 66 The Burden of Occupation, 2008 The Adva Center, POB 36529, Tel Aviv 4 The Declining Status of Israeli Blue-Collar Workers 66 Cheap Labor and Split-Track Economic Development 68 PART TWO: THE ERA OF THE UPRISINGS 70 Introduction 71 Chapter Six: The Political Cost 72 Chapter Seven: The Military Cost 78 The Rise in Military Expenditures 78 The Size of Military Presence 79 The Defense Budget 79 The Lessons of the Lebanon War 82 The Police Budget 83 Special Expenditures: The Separation Fence 85 What the Occupation Did to the I.D.F. 86 Chapter Eight: The Human Cost 91 Human Loss 91 Compensation for Property Loss 96 Chapter Nine: The Economic Cost 97 Are the Palestinian Territories Really Marginal to the Israeli Economy? 97 From the First to the Second Intifada 97 The One-Sided Dividends of Peace 99 Massacre, Suicide Bombings, a Slowdown in Immigration and Growth 100 The Israeli Economy in the Era of the Palestinian Uprisings: Key Indicators 102 Gross Domestic Product 102 GDP Per Capita 104 Economic Growth in Israel and Around the World 107 Domestic Investment 107 Foreign Investment in Israel 108 Tourism 109 Unemployment 110 Summary 112 Chapter Ten: The Fiscal Cost 113 Reduction in Tax Revenues 113 Growing Budget Deficit 114 Increase in National Debt 114 The "Financial Crisis" 116 A Policy of Inflexible Fiscal Restraint Accompanied b y Tax Cuts 116 And to Cap It Off, Tax Breaks for the Wealthy 117 American Loan Guarantees 119 Chapter Eleven: The Social Cost 121 Were the Budget Cuts Spurred by the Intifada or by Ideology? 122 Altering the Balance Between Defense and Social Service Outlays 123 The Budget Cuts and Social Polarization 126 Diminishing Social Services 126 Holes in the Social Safety Set 131 Unemployment Compensation 132 Child Allowances 133 Income Support Benefits 134 A Reduction in Payments by the National Insurance Institute 134 Pension Fund Privatization 134 An Increase in Poverty 136 Chapter Twelve: Summary 139 List of Tables 144 References 145 The Burden of Occupation, 2008 The Adva Center, POB 36529, Tel Aviv 5 Introduction The 1967 War gave Israel undisputed control over all land within the boundaries of pre-1948 British Mandatory Palestine and over a large segment of the Palestinian people. Israel was in an ideal position to implement the very same solution to the Palestine problem that the UN had mandated and that Israel had embraced only twenty years earlier, in 1947 – a division of the land between the two peoples. Instead, Israel opted to take advantage of the new circumstances in order to become the main arbiter within the territory of pre-1948 Palestine - which meant in practice also being the main arbiter of the fate of the Palestinian people. It is only fair to say, of course, that in 1967 there was no cohesive Palestinian side ready to take command and ready to sign an agreement with Israel. In fact, there was no established Palestinian sovereign body, the Palestinians having been under Ottoman rule up to 1918, then under British mandatory rule, and after 1948, under Jordanian and Egyptian rule (the West Bank and the Gaza Strip, respectively). And the Palestine Liberation Organization, which in time would become he recognized leader of the Palestinian national movement, was still in its infancy. Still, Israel could have returned the newly acquired territories to Jordan (the West Bank) and Egypt (The Gaza Strip). Alternatively, it could have held them in trust until a fair arrangement could be negotiated with the Palestinians. Instead, Israel proceeded to detach the West Bank from Jordan, and the Gaza Strip from Egypt, and to submit the Palestinians to control mechanisms that would allow it to make sure that any future Palestinian state or autonomous region would not threaten Israel’s supremacy in the area lying between the Mediterranean and the Jordan River. To generals like Moshe Dayan and Yigal Alon, who had been senior commanders in the I.D.F. in the war of 1948, and who by 1967 had become senior political leaders, the result of the Six Day War represented due rectification of what they considered the major strategic mistake made by David Ben Gurion. Back in 1948, Ben Gurion had decided to honor his secret understanding with Jordan’s King Abdullah, whereby the areas that later become known as the West Bank would go to Jordan (Shlaim, 1988). Israeli policy concerning the Palestinian territories conquered in 1967 has often been characterized as “perplexed” or “indecisive” (Pedatzur, 1996); thus the new Israeli dominion has been tagged “The Accidental Empire” (Gorenberg, 2006). However, as political scientists learned long ago, in politics, a non-decision is also a decision (Bachrach & Baratz, 1963). In this case, decisions were made that slowly but systematically eroded the status of the Palestinian territories as “administered” territories: East Jerusalem was annexed to Israel as early as June 11, 1967; the Jordan River was declared “Israel’s security border”; the Alon Plan pinpointed strategic areas for the establishment of Israeli settlements; the pre-1948 Jewish settlements of the Gush Etzion area were resettled; a new road from Tel Aviv to Jerusalem was paved, encroaching upon the Latrun enclave; beginning in 1977, settlements were set up in the heart of Palestinian-populated areas; and soon afterwards a campaign was mounted to declare large sections of “Judea and Samaria” – formerly the West Bank - “state lands,” thus legitimizing Jewish settlement on them. The first Intifada was the first massive challenge thrown up by the Palestinians to Israeli control. Eventually it led to the convening of the 1991 Madrid conference, and later on to the signing of the 1993 Oslo accords. Yet the Oslo accords and the establishment of the autonomous Palestinian Authority did not change the pattern of control: Israeli governments used the transition period between Oslo and the final status negotiations to hastily expand The Burden of Occupation, 2008 The Adva Center, POB 36529, Tel Aviv 6 existing settlements, resulting in a doubling of their populations; to pave bypass roads that bi- sected areas due to be transferred to Palestinian control; to erect hundreds of road barriers; and to deploy I.D.F. troops within those parts of the Palestinian territories that both sides had agreed would remain under full Israeli control during the transition period (Areas C) (Rabinowitz, Haaretz, April 16, 2004). The first edition of The Cost of Occupation was published in 2004, at a time when Israel was still licking the wounds of the second Intifada, the Al-Aqsa Intifada. That Intifada, which had broken out in September 2000, brought on the most violent confrontation between Palestinians and Israelis seen since 1948. More than 2000 Palestinians and more than 550 Israelis were killed, and many thousands were injured. The Intifada put a stop, if not an end, to the Oslo accords reached in 1993 between Israeli and Palestinian representatives: Israeli forces now reoccupied all of the West Bank, including those areas that had been assigned in 1993 to the full responsibility of the Palestinian Authority; Israeli forces also destroyed much of the Palestinian security infrastructure.
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