‘There is a great deal of ruin in a nation’, wrote Adam Smith in 1782. It is not so easy to destroy one. The World Bank’s latest Economic Monitoring report on the West Bank and Gaza, and in particular the section entitled, The Staggering Cost of Violence and Blockade on Gaza’s Economy and Living Standards, must therefore be reckoned a significant achievement for successive Israeli, US and European governments, which have, through a sustained effort of will, coordination and planning, successfully extinguished the economy of the Gaza Strip, and reduced its population to beggary.
The two decades from 1994 to 2012 saw a protracted hollowing out of Gaza’s economic base. During this period, as comparable economies experienced rapid manufacturing growth, Gaza’s manufacturing sector contracted by as much as 60 percent. It has now ‘all but disappeared’. (pp. 16-17)
Real per capita income fell by a third between 1994 and 2014, entailing ‘a substantial reduction in the standard of living’. (pp. 15-16) Whereas Gaza’s real GDP should have increased by at least 250 percent during this period, it in fact increased by two percent. (p. 15)
Economic prospects dramatically worsened during the second intifada, which saw unemployment skyrocket. (p. 18)
The pressure was ratcheted up further in 2006, when the US, EU and Israel responded to Hamas’s victory in Palestinian elections by subjecting an occupied people already suffering ‘the worst economic depression in modern history‘ to ‘possibly the most rigorous form of international sanctions imposed in modern times‘. International efforts to reverse the vote by sanctions and terror resulted in the Hamas government’s confinement to Gaza, whose fate was sealed with its borders.
Subsequent policy was summarised by an Israeli border officer, who described his mission with respect to Gaza as follows: ‘no development, no prosperity, only humanitarian dependency‘. As senior Israeli advisor Dov Weisglass had already put it: ‘It’s like a meeting with a dietician. We have to make them much thinner, but not enough to die‘.
The 2007 blockade eliminated Gaza’s exports, causing GDP losses of above 50 percent and the poverty rate to soar by 20 percent. (pp. 6, 8)
The noose tightened another notch when the tunnels into Egypt, on which Gaza’s quarantined economy had come to depend, were closed by the new military regime in 2013.
Crisis tipped into catastrophe with last summer’s Israeli assault (Operation Protective Edge), which killed more than 2,200 people and laid waste to Gaza’s civilian infrastructure, damaging or destroying some 13 percent of its housing stock.* This was Israel’s third major attack on the territory in six years. Gaza’s real GDP dropped 15 percent; poverty climbed from 28 to 39 percent, despite 80 percent of the population receiving humanitarian assistance; and unemployment hit 43 percent – the world’s highest.** Youth unemployment, at 60 percent, is now the highest in the region. (pp. 5, 7, 14, 18)
UNRWA has warned that Gaza’s economy is ‘fundamentally unviable under present circumstances‘ and that Gaza may soon become uninhabitable. The World Bank agrees that Gaza’s status quo is ‘unsustainable’:
[The] combination of armed and political conflict and the blockade imposed by Israel in 2007 have had a huge toll on Gaza’s economy. Unemployment and poverty have reached staggering rates and the quality of life for the large majority of Gaza’s citizens is hardly bearable. The feeling of hopelessness is pervasive… (p. 25)
The Bank identifies two factors on which Gaza’s recovery and relief hinge: the extent to which Israel lifts the blockade, and the level of donor-assisted reconstruction.
Which is to say: in the absence of a mass Palestinian movement, coordinated effectively with solidarity groups abroad, Gaza’s survival will depend upon the grace of its torturers.
* The World Bank reports an estimate of 12,000 houses ‘destroyed or damaged’ during Protective Edge. (p. 14) This is significantly lower than the widely used UN estimate of 18,000 houses destroyed or rendered uninhabitable. It is unclear where the Bank gets its figure; its cited source – the Palestinian Authority’s National Early Recovery and Reconstruction Plan– reports 20,000 houses totally destroyed or severely damaged, plus 40,000 partially damaged. (pp. 8, 10, 14)
** Gaza is not a state, but the comparison with states is nonetheless instructive.