The Costs of Occupation

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1.6 million Israelis live below the poverty line.

The Israeli left often talks of the moral cost of the ongoing Israeli occupation of Palestinian land. The argument put forward is that, given the discrimination and persecution that Jews have suffered over millennia, they cannot now play the role of the persecutor by confining Palestinians to ghettos and, in so doing, violate the principles of their Jewish faith as well as their history.

Compelling as this argument is, morality holds little traction in the rough and tumble world of politics. In the world of politics, Prime Minister Netanyahu can ignore the Road Map and the demands from Washington that all settlement activity cease as he desperately hangs on to his right-wing coalition (and his own position) by continuing to meet the escalating demands of the Israeli settlers.

However, there are indications that the economic, as opposed to moral, costs of the occupation may increasingly occupy centre-stage, and that this might well compel Israel to make the compromises necessary for a durable peace with the Palestinians. Consider the following:

  • Israeli national GDP fell 3.6 percent in the first quarter of 2009.
  • Israeli exports fell 6.4 percent and trade and service income fell by 8.4 percent compared with 2008.
  • Unemployment is expected to reach 10 percent by the end of this year.
  • Tourism dropped by 24.7 percent from January to August 2009.

    In this harsh fiscal climate, the economic costs of the occupation are increasingly becoming prohibitive. Israel currently spends $9.3 billion per annum on the occupation. Moreover, according to Peter Small, the cost of the occupation of Palestinian Territories and East Jerusalem is expected to reach 50 percent of the total state budget by 2030!

    Clearly this is unsustainable.

    There are other social costs related to the occupation that are eroding the Israeli welfare state. While settlers enjoy a subsidized standard of living, other Israelis are paying for it in various forms: from a delay in promised minimum wage payments to a cut in welfare payments of child benefits. This, in turn, is causing resentment towards the settlers from the rest of Israeli society.

    These social tensions might well be played out politically, where settler-supporting political parties start losing progressively larger numbers of votes outside of their core constituency. This, in turn, would work to strengthen those political parties to the left of the spectrum who are willing to make the necessary compromises to ensure the promised two-state solution, as captured in the Road Map.

    Given the spiralling economic costs of the occupation, Israel is increasingly being faced with a stark choice – maintain the occupation which is bleeding the state dry, or create an economically sustainable state more or less on the 1967 borders. That the latter is the morally correct choice is an added bonus.

    The views reflected in this paper are those of the author and do not necessarily reflect the views of IIIS. The International Institute of Islamic Studies (IIIS) aims to provide insight and solutions to issues associated with the Islamic world.