Raja Khalidi: The credit bubble driving development in the West Bank is not sustainable
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I’m Paul Jay in Baltimore.
We’re continuing our discussion about whither the Middle East, particularly Palestine, and what kind of economies are going to be built there.
Now joining us from Geneva is Raja Khalidi. He’s spent most of his professional career with the UN Conference on Trade and Development, UNCTAD, where he’s currently chief, Office of the Director, Division on Globalization and Development Strategies. He speaks here on his own behalfâ€”his opinions are not necessarily those of UNCTAD.
Thanks for joining us again, Raja.
RAJA KHALIDI, SENIOR ECONOMIST, UNCTAD, GENEVA: Nice to be back.
JAY: So let’s pick up the conversation. The forces at play in Palestine are a reflection of the same kind of struggle going on throughout the Middle East, but it has its own specific form. Back in the day of Yasser Arafat, certainly in the early days, there was a kind of more socialistic vision, you could say, for Palestine. It was the idea that, you know, not simply building a capitalist Palestine was the objective; it was independence plus a certain amount of social agenda. What’s the nature of that struggle now?
KHALIDI: Well, it’s a great, you know, issue, becauseâ€”you know, for me to say something about, because, you know, one of the first studies I did as an economist was back in 1980, ’81, ’82, when I participated in a UN study on Palestinian economic institutions in Lebanon. That’s when the PLO, of course, was at its apex, and it had a whole infrastructure, in factâ€”economic, social, consumer cooperatives [incompr.] production, factories, farms, employment, vast employment sort of network, trade union federations, etc.
So, you know, I think, if anything, the PLO, the Palestinians were never closer to having a state with an active public sector than they were, unfortunately, in another country, in Lebanon in the early 1980s. Then, you know, in many ways it’s something that I think even Arafat after ’94 was dreaming of, that he could have that sort of control of the economy whenâ€”you know, that he assumed administration of under the Oslo Accords in 1993.
However, the PLO was quickly trapped into several things. Globalization, you know, it was on theâ€”the wave was definitely still building. The neoliberal policies that we’ve now come to question and calls neoliberal policies in those days were, you know, probably looked at very differently, had an extraordinary reach and influence among policymakers.
The other thing is that the onlyâ€”you know, the United Nations was involved in the reconstruction, etc., after ’94, assisting the Palestinian Authority to become a government or prepare to become a state. But, you know, the main drivers of the process, of course, were the IMF and the World Bank. And, you know, we know what sort of light-touch regulation, you know, private sector determined, market-based economy they advocated thenâ€”and less so, perhaps, now, but certainly then. And this was part of the terms of the deal, quite simply. You know.
The deal was that you get administration of the West Bank and Gaza,very small parts of the West Bank and Gaza, but much of the population, Palestinian population in return, and some limited, you know, playing with tax regimes and certain aspects of trade, banking, various other things that had been exclusively within the hands of the occupation authority until then, in return for buying into the Israeli economy, i.e. you become part of that economy, effectively, through a customs union, which is the Paris Protocol, and you attach yourself to its fortunes as a people, as an occupied territory, supposedly, in an interim period that was supposed to leadâ€”.
Of course, after five years of Oslo we were supposed to have achieved Palestinian independence in 1999, 2000. That was the implicit, if not some explicit understandings, at least on the part of the PLO, certainly not on the part of a lot of other people. So what happened was that they basically said, look, guys, you know, let’s cut our losses, let’s do, you know, what isâ€”not cut our losses; let’s do what is expected of us; you know, let’s play the good soldier; and we don’t know, we’ve never run a state before; let’s take the advice of these people and do what they say. And so that was the beginning of the process of liberalization, if you wish.
But it was liberal to begin with. There hasn’tâ€”I mean, what we’ve had since then, especially under the most recent Palestinian government since 2005, under Prime Minister Fayyad, is a much more elaborate version, a much more drawn-out and, you know, more pervasive version of the same policies that really were bought into by the PLO in the ’90s. I would add, thoughâ€”and I think this is importantâ€”is that this wasâ€”again, you know, they were very conscious of the need to build a state and the need to build a strong public role in that state. But I think they really were quite naive about, you know, whetherâ€”the extent to which it would be possible. And the early visions, you know, of the ’94-’95 were very much those of an economy, market economy, open economy, but one where you have a very strong, an assertive role of government, because you’re talking about an economy which is supposedly recovering after occupation and war. It’s an economy which needs, you know, protection, it needs rebuilding, it needs, you know, agriculture, it has to be protected, you have to build your infant industries, all of those things.
I think they really believe, to a certain extent, that they can do some of those things, i.e. carryâ€”the baggage of the revolutionary period they brought with them when they arrived back in Palestine, they thought they could actually, you know, wear some of that stuff in the new circumstances. But it turned out they couldn’t.
And once once that was the deal, I think, you know, with someone like Prime Minister Fayyad, who comes from the IMF and the World Bank in government, you know, his being there has helped them solve, you know, to be honest, a lot of their financial problems. But it’s been at theâ€”I mean, you know, it’s kept the PA in business, let’s say, as the employer of last resort for the last two or three years, but it’s been at, I think, a terrible cost to the economy.
Now, the cost to the economy is aboutâ€”is not only the most, you know, sort of extreme episodes we’ve had of structural adjustment and attempts to further privatize, perhaps, what remains of some public utilities or public services or public assets, which has been continued in the last couple of years, but you have a lack of any senseâ€”Palestinian policymakers do not seem to have the sense that they can change things by changing their policies. They see themselves as locked in by Oslo, which is a broader agreement. It’s not just an economic agreement. It’s a political agreementâ€”which has failed, of course, [because] there’s no process anymore, and it’s a security agreement which has been successful.
So, you know, the economic part of it is only part of it, is only one part of a broader sort of deal that if they’re going to start changing it, even if they believe they shouldâ€”and I think that, you know, the protest of this last year in February against the income tax law, which were protests led both by middle income and lower income, but also the business sector because ofâ€”I think some of the provisions were ill-considered; and then further protest, much more widespread, in September about the cost of living, about inflation, about the energy prices and fuel prices, all of which are to do with this relationship with the Israeli economy.
JAY: The other thing in Palestine which doesn’t get talked about very much in the West bank, and also in Gazaâ€”when I was in Ramallah, I was absolutely blown away by the number of gorgeous condos and big villas and many members, leading members of the PA living in these and Fatah living in these great big houses. But also there’s a whole class of millionaires in Gaza and the West Bank, and they have quite entrenched interests. And I would assume some of them are actually doing okay under the status quo.
KHALIDI: Yeah, sure. There’s been an extraordinaryâ€”these last few years have been an extraordinary opportunity for, you know, what I would call, so to speak, the cowardly capital, in reference to the previousâ€”reference to the courageous capital (I’ve used this term in some work I’ve done), a lot of hot money that came in, quick bucks, you know, be it in the startups, you know, restaurants and retail trade and various services.
But in real estate you have some major investments made by big capitalists, Palestinian, particularly, but with certain Arab partners. I mean, you have different forms of excessive consumption or capitalist aggrandizement, let’s say. The excessive consumption comes because you have 150,000 salaried PA employees whose salaries are used to deduct for bank loans, car loans, consumption loans, which has fueled the credit bubble, and in particular in the West Bank in the last couple of years a private credit bubble.
And then you have a class of entrepreneurs who I think, you know, one should not put down, because they’ve survived against all odds, they’ve built up, you know, accumulated their capital gradually and, I think, more or less fairly, if one can use that term, and have struggled to survive and are good examples of, you know, what one could call national capital.
And then you haveâ€”I won’t say vulture capital, but we have a class of Palestinian investors who it’s not so much because they’re making money; it’s more to do with the sort of values that their moneymaking are bringing into the country. I mean, if you drive down those same roads that you mentioned, you’ll see big public signs, for example, exhorting, you know, taxpayers to pay theirâ€”or “citizens”, quote-unquote, to pay their, you know, utility bills on time, exhorting good governance, a whole set of neoliberal slogans which have creeped into discourse and are veryâ€”.
You know, they had the first Palestinian real estate conference. Now, this first Palestinian real estate conference is doneâ€”was supposedly an academic, you would assume, policymaking conference. It was underwritten by this real estate development company called Rawabi, which is building this model city outside of Ramallah, etc., etc. You know. So there’s, one would say, even conflicts of interest. So there’s a whole culture that’s been coming in with a lot of this capital, which I think is notâ€”I don’t want to say it’s alien to Palestinian society, but it’s not really what Palestine needs.
JAY: Now, let me ask you a question to wind things up. When I was in the West Bank and I met with a lot of activists and other people, there’s a real debate going on about what’s next for the Palestinian movement, you know, mass civil disobedience, is it really two states or one state that people should be fighting for. But in terms of a vision, a different kind of vision for the economy, how things are owned and how things are distributed, what do you think people might be asking, demanding, wanting? I mean, what is the alternative for Palestine?
KHALIDI: The last few years, especially, of relative security and the good life, in the West Bank especially, have, you know, made people very wedded to what they have. And that’s reasonable, I think, for a people that have been, you know, under war, occupation, etc., for so many years. And we should not begrudge them that, and I don’t, to be honest.
On the other hand, I think Palestinians are as thirsty for national liberation, independence, some form of real independence, freedom, simply freedom, and dignity as they are for the good life. And I think that as long as it’s unresolved and as long as you continue to have an aggressive colonialâ€”settler colonial regime under which you’re living, you know, however good the life is and however much the, you know, Palestinians try to just put up with it and not somehow rebel, it’s justâ€”I don’t see any history to tell us that that’s what’s going to happen.
And the region, I think, is another reason to expect that this is not sustainable, namely, that, you know, the policies that in Arab countries, and many postcolonial countries around the world, in fact, came these neoliberal policies, liberalization, privatization, etc., that came as a result of the failure of some previous postcolonial socialist experiments, the, you know, central planning, etc. All of these governments who have now reachedâ€”or these regimes (it’s broader than the governments) have reached, I think, the logical sort of conclusion of the failure of many of these policies.
Oddly enough, in the Palestinian context,these same policies have been applied in a colonial situation, which ultimately, as they fail around the regionâ€”and I think they’re failing also; we’ve seen signs of their own internal failure in the narrow Palestinian contextâ€”as they fail, then, you know, the people who, however much they might be wedded to the benefits of some of those policies or some of the benefits of those policies, you know, they’re going to startâ€”there’s an identification process between the two. So as people will again reconsider whether they’re willing to live indefinitely under military occupation in the West Bank, under siege in Gaza, under segregation in Jerusalem, as they reconsider that over the coming years or months, I think they’ll realize that, you know, in rejecting that sort of a continued indignity and lack of freedom, that the policies that they’ve become accustomed to also should be reconsidered.
And I think we saw that again in the demonstrations of September. We saw, you know, explicit publicâ€”you know, and this was not just some left-wing activist, active, like, left-wing group. This was widely based popular demands for the abrogation of the Paris Protocol, the economic agreement, because people understood the link between their misery and a certain specific agreement and accord. And I think that shows an awareness of howâ€”you know, and the Palestinians, ifâ€”you know, all of the Arab people, given the amount of political change they’ve witnessed over 50 (whatever it is) years, but especially the Palestinians, you know, they’re very aware and they’re very responsible. They don’tâ€”I don’t think they’reâ€”you know, they’ve learned some things, some lessons from their experience, and I don’t think they will embark easily on another intifada. And I would be the last to predict it around the corner, as manyâ€”you know, if you look at the headlines these days, you’ll see it every other week.
But on the other hand, I don’t see this as a sustainable economic project, I don’t see it as a sustainable human project. I mean, you know, as you said, one state, two states, three states, we don’t know. Ultimately the UN’sâ€”you know, has described this as a one-state reality, regardless of whether, you know, [incompr.] the right solution [unintel.] there’s still a possibility for a two-state solution, or whether inevitably the one-state reality will impose a one-state solution.
JAY: I know we’re going to get email about this. When you say “good life,” what are you talking about? You’re talking about somewhat better economic conditions in the West Bank. You’re not talking about good life in Gaza, right?
KHALIDI: No, I was talking specifically about the West Bank, mainly about its cities. And when I talked about the private credit boom or bubble, it’s very much in those areas. Gaza’s a very different situation, certainly.
JAY: Okay. Thanks very much for joining us. This is just the first in a series of interviews we’re going to do with Raja. So if you have questions or comments, please write in, and I think he’ll come back and respond to them. Thanks for joining us again, Raja.
KHALIDI: Thank you very much.
JAY: And thank you for joining us on The Real News Network.