Category: The Middle East

The Demise of Palestinian Productive Sectors: Internal Trade as a Microcosm of the Impact of Occupation

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The Israeli occupation has consistently inflicted disastrous economic costs on the Palestinians, costs that economists have examined for decades. One dimension that has been missing in these examinations, however, relates to the distortions in the structure of the Palestinian economy, and the detrimental impacts of these distortions. The term economic structure refers to the contribution of different economic sectors, including agriculture, manufacturing, construction, and trade, to the key macroeconomic variables of output (GDP) and employment.聽

Whereas a comprehensive study of these structural distortions is beyond the scope of this blog post, we zoom in on one particular economic sector that has been playing an increasingly dominant role in the Palestinian economy: internal trade.聽Briefly, internal trade refers to the retail and wholesale buying and selling of goods, including trade with Israel. The increased relevance of the contribution of internal trade to total economic activity in Palestine is part of an ongoing聽shift away from productive sectors, such as agriculture and manufacturing, towards services, trade, and construction.

This post argues that the dominance of internal trade at the expense of productive sectors is neither a result of a conscious policy effort by the Palestinian Authority (PA) nor an outcome of 鈥渓aissez faire鈥� market governance. Rather, it is a byproduct of Israeli occupation policies, and a clear consequence of the Palestinian economy鈥檚 dependence on the Israeli economy since 1967. The post argues that internal trade is a microcosm of the Palestinian economy as a whole, highlighting the futility of international and donor support for development under occupation. Rather, what is needed involves empowering independent, transparent, accountable, and collective Palestinian policy-making, a quality of leadership and governance that the Palestinian leadership of the last 25 years cannot lead or carry out.聽

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Book Review of Money, Markets, and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East

Farwa Sial6 Comments

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, Cambridge: Cambridge University Press, 2018. ISBN: 9781108453158 (paper); ISBN: 9781108614443 (ebook)

Adam Hanieh鈥檚 book 鈥楳oney, Markets, and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East鈥� is one of the most important works on contemporary Middle East. The book analyses the specificity of the Gulf Cooperation Council (GCC) as part of global capitalism by focusing on the socio-economic structures of the six Gulf States, the interlinkages between them and other socio-economic and financial relationships with the rest of the world. Joining other scholars, Hanieh draws attention to the fact that scholarship on the Middle East including the GCC has inclined towards an exceptionalism which overwhelmingly focuses on the Middle East as a resource-rich country and a site of various conflicts. This reductive emphasis diminishes the various ways in which the region integrates the contemporary patterns of capital accumulation and historical lineages of familial and monarchic capitalism. As he mentions, even the modern concept of the 鈥楤RICS鈥� excludes the large population of the Middle East. Filling this vacuum, the book focuses on how the GCC absorbs and reproduces contemporary modalities of capital accumulation in diverse sectors including finance, agribusiness, real estate, retail, telecommunications, and urban utilities. The six states of Gulf Cooperation Council (GCC) including Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman, and Bahrain have special linkages with global powers including the US, Israel, China and other Arab states. As important logistics hubs and sites of intermediate supply chains these states also connect with other countries.Read More »

Economic development in Palestine and beyond

Patrick Kaczmarczyk1 Comment

Palestine-blog-image-TSuccessful economic development in Palestine will require an adequate theory of development, industrial policy, and institutional reforms.

Recently, the Palestine Economic Policy Research Institute (MAS) published a聽聽on Palestinian economic development. In this report, co-authored by my colleagues Heiner Flassbeck, Michael Paetz, and I, we explore possible solutions as to how Palestine could sustainably finance its deficits. Now, after the Israeli elections, Jared Kushner, the US President鈥檚 son-in-law and senior advisor, is set to announce the details of the US 聽for the Israeli-Palestinian conflict. Given that the Peace Plan is expected to include a large聽聽to solve the conflict, it will be interesting to see to what extent it addresses the fundamental problems we identified in our research.

Our results suggest, succinctly, that under current conditions of excessive imbalances in the external sector (trade and current account), any issuance of debt securities requires fixing these imbalances first, for which, in turn, strategic public intervention is critical. This finding may come as a surprise to most policymakers, as orthodox economic theory suggests that the most efficient ways for countries to develop is through market led (as opposed to state led) policies. Historical evidence demonstrates that none of the advanced countries followed this path in their own development, yet the idea of 鈥榯he market鈥� as the most efficient development tool is still widespread. Based on this belief, Western institutions wreaked havoc in developing countries during the 1980s and 1990s, and continue to do so (although some institutions, notably the IMF, show significant progress in聽).Read More »