Jared Kushner has dubbed his “Peace To Prosperity” plan, announced in Manama this week, as “the opportunity of the century”; analysts in the Arab World largely disagree. In one round-up of Arab opinions on the plan, it was slated as “an historic injustice,” “a major setback for the whole region,” and maybe most cuttingly as “the brainchild of real estate brokers, not politicians.”
The mostly negative response to “Peace To Prosperity” stems from two main objections: the first is that the announcement of economic plans without political conditions is meaningless. The second is that the attempt to frontload economic promises is a blatant attempt to bribe Palestinians with economic stimulus in return for accepting statelessness.
Both objections are hard to counter. On the latter point, the Washington Post, among others, claims that the political section of the Kushner Plan—which has yet to be revealed—will not provide Palestinians with a path to statehood, effectively ruling out a two-state solution. Meanwhile, well-documented attempts to suppress Arab political participation in Israel suggest that a one-state solution is further away than ever. The only path between these two possibilities is indefinite statelessness for Palestinians, with the economic package a supposed “sweetener” for that bitter pill.
It is also hard to disagree with the argument that economics cannot be separated from politics. For example, one of the key economic pledges contained in the plan is the construction of a highway connecting Gaza to the West Bank. This is an old idea, a version was even included in the UN’s original 1948 partition plan. More recently, in 2005, the same idea was put forward by the Rand Corporation, the influential US policy consultancy. The reason it has never happened is that no Israeli government since 1948 has been willing to allow it. A political decision has been made, on the Israeli side, to prevent such a connection.
An even more striking example concerns water. Here the Kushner plan talks about investing in wastewater treatment plants and boosting water supply infrastructure—purely economic projects. But again, the root issue is political. Since 1967 Israel has treated the water of the Palestinian Territories as a “national security issue,” in which Israeli interest lies in monopolizing control over water. As a result, Palestinians are denied an equitable share of groundwater, and have almost no access to river water. As in the case of the highway to Gaza, the problem is not so much a lack of funding, as a lack of political sovereignty.
But what if the plan were somehow accepted? Gaza and the West Bank currently receive $2-2.5 billion per year in development aid from OECD countries. Under Kushner’s plan, theoretically this flow of aid would more than triple, with around $50 billion being disbursed over a decade. The Gaza to West Bank Highway would be constructed, along with two new powerplants, a $900 million upgrade of border crossings and a natural gas field off the coast of Gaza.
The fact that they have never happened in the Palestinian Territories is the direct result of Israeli occupation.
These schemes are not irrational. In economic terms they are seen as “low hanging fruit”—labor-intensive infrastructure projects that characterize the high-growth “easy stage” of economic development, a stage that much of the Arab world enjoyed through the booming 1960s. The fact that they have never happened in the Palestinian Territories is the direct result of Israeli occupation; note that even chronically mismanaged Egypt next door has adequate highways and reliable electricity. If the investments were to materialize, and in the context of a stable political settlement, then the rewards would be immense.
However, even in this rosy scenario, the stated macroeconomic goals of “Peace To Prosperity” probably would not be met. In order to double Palestinian GDP within a decade the Palestinian economy would have to grow at about 7% on average a year for ten years, making the Palestinian Territories one of the fastest growing economies on earth, consistently, for a decade; a highly improbable scenario.
Furthermore, there is a debate to be had as to whether such economic growth would ever be possible, even briefly, in the context of indefinite statelessness. Because it represents a constant negotiation of sovereignty and subordination, statelessness is defined by uncertainty. The current fiscal crisis of the Palestinian Authority, caused by Israel simply withholding tax receipts, is a prime example.
In order to achieve consistent economic growth, economic policy must be consistent, and this is not possible without a sovereign government to provide a stable administration. Put simply, investors would not really know which government would be regulating them, or what rules they would have to follow, or how much money the government would be able to spend.
The major problem of the Kushner Plan is the trade-off of accepting statelessness in return for economic growth.
This perhaps is the major problem of the Kushner Plan: the trade-off of accepting statelessness in return for economic growth, which is almost certainly a false proposition. By giving up sovereignty, a nation also gives up its ability to govern and control its own economy. Without self-government, consistent economic growth is unattainable.