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The Palestinian capitalists that have gone too far

By Tariq Dana

A Snapshot of Palestinian capital

The presence of Palestinian businesspeople in the political sphere predates the establishment of the Palestine Liberation Organization (PLO). After the PLO’s foundation, Palestinian capitalists played a variety of roles in the national liberation movement. Some PLO factions, particularly Fatah, saw the Palestinian capitalist class as a ‘national bourgeoisie’ and, as such, an indispensable part of the anti-colonial struggle and dealt with it accordingly.

At the time, Palestinian capitalists’ engagement with the PLO included funding, occupying leading PLO positions, and political mediation. For example, Palestinian businesspeople mediated between the PLO leadership and the Jordanian regime during Black September and between the PLO leadership and the American administration during the 1980s. Many were also philanthropists who supported charitable, educational and socio-economic projects. A landmark in this regard was the 1983 establishment of the Welfare Association, a much-needed boost to the Palestinian national project in the educational and socio-economic spheres after the bulk of Palestinian guerrillas were expelled from their base in Lebanon during the 1982 Israeli invasion launched by the late Israeli prime minister Ariel Sharon.

Since the signing of the Oslo accords, and particularly in recent years, the influence of Palestinian capitalists in the occupied territory has been rising in an unprecedented manner. They can be divided into three main groups:

  • ‘Returnee’ capitalists, comprised of a Palestinian bourgeoisie that had emerged in Arab countries, particularly Gulf states, as well as in North America and Europe. Many had strong ties to the nascent Palestinian Authority.
  • Local capitalists, comprised of two main subgroups: large landowners who historically enjoyed considerable political and social influence over traditional social structures, and local interlocutors who accumulated wealth as subcontractors for Israeli companies after the 1967 occupation.
  • The nouveau riche, who acquired wealth more recently, and who benefited from the Oslo process in various ways.
  • Local businesspeople and investors must resist Israeli attempts to involve Palestinian capital in normalisation projects. No interaction between Palestinian capital and Israeli businesses could ever serve Palestinian national development and steadfastness.
  • If it is not to be seen to be complicit, the PA must design and implement regulations that direct the way that Palestinian capital is being invested, and it must rigorously monitor this process to ensure that it serves Palestinian national goals. Effective mechanisms for public accountability are needed that encompass diverse social sectors and authentic civil society actors.
  • Civil society and academic institutions are playing an important role through the studies they have conducted, and by drawing attention to the issue. However, more must be done to hold those straying Palestinian capitalists to account, as the BDS movement has done on occasion. Sustained campaigns are needed to make their positions untenable.
  • Investment and business development must take into account Palestinian human rights and dignity, and gradually reduce the levels of dependency on international aid and on the Israeli economy, creating the basic conditions for different forms of struggle and steadfastness. More specifically, there is a need to develop a model of development based on the concept of a resistance economybased on self-reliance, self-sufficiency, a just redistribution of the national wealth, and a bureaucracy that serves a democratic people-driven political, economic, social and development agenda.

Influencing the policy process

Like other Palestinians, businesspeople have struggled with statelessnessand sought the security that a state would provide, where their companies and profits would be better protected from regional instability and threats. Thus, many supported the Oslo accords as a key step towards establishing a Palestinian state, some even imagining that Oslo’s ‘peace dividends’ would transform the West Bank and Gaza into the ‘Singapore of the Middle East’.

Early signs of capitalist influence on the nascent Palestinian Authority (PA) can be seen in Article 21of the Palestinian basic law, which specifies that ‘the economic system in Palestine shall be based on the principles of a free market economy’ (my emphasis). The open espousal of neoliberalism by the PA has helped to create an institutional framework that enables economic interest groups to manipulate policies in the service of private objectives.

Neoliberalism combined with political authoritarianism and corruption reinforced and consolidated the PA’s crony capitalism. From the earliest days, this was expressed in special relations between powerful businesspeople and the PA political and security elite. The system naturally had adverse effects on the economy: by favouring privileged political and economic groups, it systemically impeded market competitiveness and excluded access to the majority of the people to meaningful economic opportunity.[i] Indeed, the ability of capitalists to exert influence over government policies was further strengthened and politicians further enriched.

During the 1990s, the special relationship between certain Palestinian capitalists and ruling political circles within the PA led to the centralisation of political and economic power in the hands of a few individuals who managed to rapifly transform the national project into a game of interest politics. This was especially the case with regard to the PA elite’s political and security collusion with Palestinian diaspora conglomerates in managing large-scale public-private monopolies. Monopolies protected by the PA involved over twenty-five key imported commodities, including flour, sugar, oil, frozen meats, cigarettes, live animals, cement, aggregate, steel, wood, tobacco, and petroleum.

These monopolies were not only an early sign of PA corruption, but also the most obvious expression of the emergent political-economic alliance that found in the PA an effective political mechanism for achieving private economic interests. Furthermore, monopolies were selectively granted to those political-economic actors that enjoyed special proximity to Israeli companies. As a consequence, monopolies have had a devastating impact on the Palestinian economy and small businesses, and, conversely, benefited the Israeli economy. A number of former Israeli political and military officials became, after their retirement, business partners of some Palestinian capitalists and PA political elites. In return, Israel offered the Palestinian businesspeople and politicians special privileges, such as access to permits, more freedom of movement and trade and the VIP pass status.

With the appointment of Salam Fayyad as prime minister in 2007, and government programmes he introduced since 2008, capitalists’ influence over the political establishment increased. Businesspeople and pro-capitalist technocrats often occupied key ministerial positions in Fayyad’s cabinets.

The ‘reform’ of the banking sector under Fayyad’s governance is an important aspect of rising capitalist political influence. These ‘reforms’ made it possible for the government to contract long-term loans that amounted to $4.2 billion in 2013, according to a recent estimate. That amount is as much as fisty per cent of the GDP, with annual interest running at $200 million. For an economy largely dependent on international aid, this high level of public sector indebtedness is alarming. How the money was spent and how the PA will pay off its debts remains a mystery.

The high level of public debt enables capitalists to pressure the PA to adjust its policies in conformity with the interests of large private firms, by threatening to withdraw some investments or to hold back others, as Alaa Tartir noted recently. Ultimately, the people pay the cost, for example, in early 2012, when the PA raised income tax and cut expenditure.

The role of these Palestinian capitalists became prominent in the international political sphere. They put their weight behind efforts of US secretary of state, John Kerry, to drive through a settlement with their joint Palestinian-Israeli ‘Breaking the Impasse’ plan, despite the dire impact this would have on Palestinian rights. Moreover, the plan was reportedly prepared without the participationof either Palestinian civil society or the PA itself.

This suggests that local Palestinian crony capitalists have become the primary recipients of international ‘peace’ initiatives. It is difficult to believe that any peace plan they manage would contribute to Palestinian self-determination, freedom, and justice. Rather, it is more likely to be another lucrative opportunity for those benefiting from the status quo.

Social control through debt, NGOs and other means

As in other parts of the world, the development of the neoliberal system has been underpinned by various mechanisms of social control to normalise the occupation and pacify and deradicalise groups seeking to resist it using different means.[ii] Social control practices in Palestine have a particularly destructive impact because they tie into the set of colonial controls engineered by the occupation.

Crony capitalists have attempted to practise social control by recruiting civil societyto serve their objectives, working alongside major international donors. One way is through the establishment of large NGOs that tend to penetrate the social fabric by promoting certain values designed by international financial institutions and development agencies to sustain the neoliberal system. These values are expected to trickle down to other indigenous civil society organisations via capacity building and other projects.

The facilitation of private lending is another aspect of social control, encouraging a culture of consumption and pushing many people into the debt trap. According to the Palestine Monetary Fund, individual loans shot up to about a billion US dollars in 2013 from $494 million in 2009. It is estimated that seventy-five per cent of public sectoremployees (94 000 out of 153 000) are indebted. Personal debt is primarily used to finance consumption (including mortgages, cars, marriage costs, and electrical goods), and is rarely invested in productive activities. This state of personal indebtedness has major social ramifications, promoting a sense of individualism and driving private concerns, systemically pushing people to abandon crucial national issues. It fosters political apathy, and undermines critical thinking and action against the oppressive nature of the system.

Yet another method of social control is the exploitation of workers that occurs in factories owned by some local capitalists, with workers being paid much lessthan the government’s recently announced minimum wageof 1 450 NIS ($377) for the private sector. ‘Although workers protested the PA-declared minimum wage because it does not guarantee minimum standards of living, many of us are still working under humiliating conditions, where our salaries are even less than 1 000 NIS. But despite that, we have to accept this, otherwise we will be thrown into the streets,’ one worker told me. This exploitation and control of Palestinian labour is exacerbated by the lack of effective labour unions, which have been dramatically weakened by both the PA and capitalists.

There are fears that the system of workers’ exploitation and control will be expanded and institutionalised through industrial zones that are intended to integrate Palestinian-Israeli-regional capital to exploit the pool of Palestinian cheap labour. According to Adam Hanieh, industrial zones will not apply Palestinian or Israeli labour laws, wage levels and other workplace conditions, while the right to unionise will be prohibited.

Normalising the occupation the economic way

Economic normalisation is institutionalised in a range of joint activities, such as joint industrial zones, Israeli-Palestinian business forums, Palestinian investments in Israel and its settlements, and joint management of water resources. This is the highest level of normalisation activity in the history of the Palestinian struggle for national liberation (see the academic and cultural pagesof the boycott, divestment and sanctions (BDS) movement for a definition of normalisation).[iii]

Groups working for Palestinian human rights and self-determination have openly denouncedsome Palestinian crony capitalists. The latter counter by claiming that they are seeking to serve the Palestinian economy and people’s steadfastness. In fact, Palestinian-Israeli joint projects represent the ugliest face of normalisation because of their scale and size and, most importantly, because they help the occupying power to profit and further infiltrate its structures into the occupied territory. A few examples of large normalisation projects are listed below.[iv]

Rawabi

This planned cityis one of the largest private investments in the West Bank, and one of the most controversial large-scale projects. Whether it is by accepting and planting some 3 000 trees donated in 2009 by the Jewish National Fund(which were later uprooted after criticism) or by contracting over ten Israeli companiesas suppliers, Rawabi exemplifies the way in which profits for private corporations and economic normalisation are propagated under the banner of a ‘national project’.

Industrial zones

Industrial zones in the occupied territory are driven by the same logic of the Qualifying Industrial Zone (QIZ)in Jordan and Egypt. They give life to Shimon Peres’s ambition of a ‘New Middle East’ where Israel is seen as the hegemonic economic centre of the region. Industrial zones are also highly problematic because they integrate Palestinian-Israeli-regional capital into a remorseless machine to exploit cheap labour – Palestinian as well as foreign imported labour. Even as they benefit a few local business elites, they advance the Israeli matrix of control and perpetuate its occupation.

Palestinian investments in Israel and the settlements

According to one study, Palestinian capital is being invested in Israel and its illegal settlements at far higher rates than in the West Bank – between $2.5 billion and $5.8 billion versus only $1.5 billion. The Palestinian Ministry of Economy has accused the study of lacking accuracy and objectivity, while some economists said it suffers from serious methodological problems. Yet its main message remains noteworthy. A staff member at the Ministry of the Economy told me: ‘Many Palestinian businessmen are investing in industrial settlements such as Barkan, Ma’ale Adumim and other agro-industrial parks in the Jordan Valley.’

Another study found that many Palestinian companies were involved in products’ launderingin the Jordan Valley. They fraudulently brand settlers’ agricultural products as ‘products of Palestine’ and then export these to international markets, thus evading boycott campaigns in some European countries.

Contracting Israeli security companies

A recent report revealedthat some Palestinian companies (Ramallah Mövenpick Hotel, Bank of Jordan, Jordan Ahli Bank, Cairo Amman Bank, Pal-Safe) are listed as clients of Netacs Ltd, an Israeli security company owned by reserve Major-General Danny Rothschild, who commanded Israeli occupation forces in the West Bank and Southern Lebanon and worked in military intelligence.

Palestinian-Israeli partnership in technological ventures

Several Palestinian entrepreneurs are collaborating and partnering with Israeli high-tech corporations. The case of the Ramallah-based SADARAventure is just one example. It was co-founded by Saed Nashef and Yadin Kaufmann, and is managed by a team of Israeli and Palestinian experts in technological innovation and internet services. Forbes magazine ran lengthy a reporthighlighting the role of the Israeli Cisco Systems in bringing together high-tech Israeli experts and Palestinian entrepreneurs to help transform the Palestinian economy along the lines of Israel’s successful ‘startup nation’. The report also reveals that several Palestinian youth in the field of high-tech are being invited to meet and work with their Israeli counterparts in the back room, which is ‘just one of dozens of business-driven dialogues quietly – in many cases secretly – proliferating across the Holy Land’.

What Must Be Done?

The political and social influence of Palestinian crony capitalists and their ongoing economic normalisation of Israel’s occupation should alarm all those concerned about the future of the Palestinian cause. In chasing after profits, without regard to Palestinian fundamental rights and national aspirations, these capitalists have gone too far. Their mechanisms of social and political control, and their flagrant complicity in normalisation projects are a structural obstacle to the anti-colonial struggle and undermine the Palestinian quest for justice. Several steps can and must be taken, including:

The change that is needed requires a major restructuring of the overall political framework. More than anything else, Palestinians need a leadership that is dedicated to resisting the occupation and working for Palestinian self-determination, liberation, justice and equality.

Endnotes


[i]See, for example: Mushtaq Husain Khan, George Giacaman and Inge Amundsen (eds.) (2004) State Formation in Palestine: Viability and Governance during a Social Transformation, (Routledge Political Economy of the Middle East and North Africa).

[ii]  For further reading on the mechanisms of social control in capitalism and neoliberalism, see, for example: David Tetzlaff (1991), Divide and conquer: popular culture and social control in late capitalism, Media Culture Society, Vol. 13 No. 19-33; Stephen Gill (1995), Globalisation, Market Civilisation, and Disciplinary Neoliberalism, Millennium – Journal of International Studies, December, Vol. 24 No. 399-423.

[iii] A key paragraph is: ‘The participation in any project, initiative or activity, in Palestine or internationally, that aims (implicitly or explicitly) to bring together Palestinians (and/or Arabs) and Israelis (people or institutions) without placing as its goal resistance to and exposure of the Israeli occupation and all forms of discrimination and oppression against the Palestinian people.’

[iv] For further reading see, for example, Khalil Nakhleh (2011), Globalized Palestine: The National Sell-Out of a Homeland, The Red Sea Press, Inc.

 * Tariq Dana is assistant professor of political science at Hebron University. His research has focused on the transformation of Palestinian civil society from mass-based movements to neoliberal-oriented NGOs.

Last modified on Wednesday, 18 February 2015 13:04