An Economic Blow to Palestinians

Five weeks of conflict between Israel and the Palestinians has not only wiped out the seven years of political gains achieved during the Mideast peace process, it is also causing increasingly severe economic effects. For Israel, with a gross domestic product nearing $100 billion, the problem so far remains manageable. For the Palestinians, with a GDP 1/20th that size, it threatens devastation.

Directly or indirectly, about a third of the Palestinians in the West Bank and Gaza Strip work for Israeli employers or rely on Israeli consumers to buy their agricultural and other products. Overall, an estimated 50% of the Palestinian economy is tied to Israel. Before the latest disturbances, 120,000 or more Palestinians went to jobs each day in Israel. The fighting has sealed the borders and cut off this income.

Israel is being pinched especially in the area of tourism; one projection puts the potential loss from canceled tourist visits and delayed construction at $750 million. But the Palestinians have suffered far more. The border closings have choked off virtually all of their exports to Israel--their biggest customer--and through Israeli ports to other countries.

There were hopes that the tight links between the two economies would help keep radicalism under control. Those hopes have been dashed, and the self-destruction may only be beginning. Israeli Prime Minister Ehud Barak has ordered a study on the feasibility of physically separating Israelis and Palestinians by erecting walls and barriers and cutting many of the economic links forged over the last three decades. This plan probably will not be considered unless Palestinian leader Yasser Arafat goes ahead with his stated intention to unilaterally declare Palestinian independence around Nov. 15. If that happens, and if Israel responds by imposing separation, the political and economic consequences would be catastrophic.

The mutual anger and hatred of the moment rule out any early move to political moderation. But the emotions of their peoples must not blind responsible leaders to the consequences of a severe economic disruption that threatens to become infinitely worse. The overt struggle may be over land, sovereignty and national pride. But for the Palestinians especially, none of these will count for much if normal economic life isn’t restored.