Pounded by IDF bombs, Gaza’s population is today on the brink of starvation. For decades, Israel has systematically suppressed Palestinians’ independent economic activity — ensuring their dependence on Israel’s own economy.
Palestinian laborers employed by the Israeli army’s Civil Administration lay a road some two years after the Six-Day War, June 10, 1969, near Khan Younis, Gaza Strip. (Moshe Milner / GPO via Getty Images)
This is an abridged translation of an article published at Contretemps.
Much ink has been spilled over Palestine these last three months. Caught between emotional responses and appeals from media and politics, academic researchers have also joined the debate, seeking to shed light on the tragedies and the intricacies of current events. But one area that has been overlooked is economic analysis — or so it would have done, if these analysts really had something to say.
The dominant theories continue to understand the economy only using the grammar of the market, leaving them ill-equipped to think about the conflicts and power relations that develop on this terrain. At most, their aggregated data, and such abstractions as GDP, give us an estimate of the costs of the conflict or of the military occupation. But we are left with far too little understanding of what economic activity and processes are at work in the war and in Palestine generally.
There is an increasingly widespread critique of the economic regime established following the Oslo Accords in 1993 and the neoliberal conceptual model underlying it.
Yet, in the last decade, there have been major disputes among scholars working on Palestine, particularly in relation to the methods and theoretical tools for interpreting this context. This is also true of economic research, where we have seen a revival of political economy — that is, studies not focused on “the market” or growth numbers, but the relations of domination created and embedded in the economy. This shake-up goes hand in hand with an increasingly widespread critique of the economic regime established following the Oslo Accords in 1993 and the neoliberal conceptual model underlying it. This critique echoes both the impasse in the Palestinian national project and the failure of the “two-state solution,” and in turn translates into a search for new analytical frameworks.
Among these, Settler Colonial Studies invites us to tie together the various forms of domination and violence produced in the Zionist movement and Israel’s relations with Palestinian society. This framework has the major advantage of remedying the splintering of Palestinian studies resulting from historical moments of rupture (1948, 1967, 1993) and the geographical fragmentation of the territories concerned (West Bank, Gaza, Israel, Jerusalem). The comparison with other colonial experiences — American, South African, Australian, and Algerian history — is also useful in tempering the exceptional treatment often applied to the Palestinian case. Finally, taking the colonial relationship into account allows us to compensate for an exclusivist Marxist approach that tends to reduce all antagonism to conflict between social classes. Examining the many mechanisms of power operating on the economic terrain should help us to understand the total war that is now taking place.
Eliminating and Replacing
Surely, we can see different economic logics at work in modern Palestinian history. The first is a logic of elimination and replacement, i.e. the typical characteristics of settler colonialism. From the end of the nineteenth century, the Zionist movement started to appropriate land in Palestine to establish a new settler population. This process accelerated with the British occupation of the country in 1917 and the subsequent establishment of the League of Nations “mandate” territory. The conquest of the economy would be a decisive means of strengthening the Jewish demographic presence and ensuring territorial control. It also proved to be a powerful means of destabilizing Palestinian-Arab society.
The conquest of the economy found its most practical expression in the call for “Jewish Land” and the creation of various Zionist funds dedicated to the purchase of land, including the Jewish National Fund. Appropriated on a commercial and private basis, these lands were nevertheless withdrawn from the market and considered the inalienable property of “the Jewish people,” thereby constituting a first step toward the institution of an exclusive political sovereignty. Several dozen Palestinian localities disappeared even before the Nakba as a result of such colonization.
A second watchword was “Jewish Labor,” which consisted of encouraging agricultural cooperatives run by the Zionist movement — and then, by extension, all Jewish or British employers — to prioritize employing Jewish workers. The latter were finding it difficult to get recruited, including by Jewish employers who preferred to use Arab labor that was cheaper and more experienced in working the land. Unemployment became a major challenge, and many settlers ended up returning to Europe.
The establishment of kibbutz settlements in the first half of the twentieth century owed little to the import of socialist ideals and much more to the imperatives of the ongoing colonization.
Thus, contrary to common belief, the establishment of kibbutz settlements in the first half of the twentieth century owed little to the import of socialist ideals and much more to the imperatives of the ongoing colonization. Collective organization and the pooling of resources were primarily a response to the need to lower the cost of Jewish labor to face the competition from Arab labor. In this respect, kibbutzim drew considerable inspiration from Russian artels, i.e. living cooperatives formed between workers originating from the same place to improve their survival chances in a competitive environment. There is no question here of an opposition to capitalism or even a move away from it.
Supported by the Zionist Organization, the kibbutzim made it easier to absorb the settlers while completely excluding Arab workers. It was only later, once the colonial contours of the kibbutz were well defined and its economic efficiency assured, that the myth of self-managed communities responding to a socialist ideal developed. This, in turn, fed the imaginary of new waves of settlers coming from Europe. The fact remains that the kibbutzim always provided a higher-than-average contingent of fighters and commanders in the ranks of Zionist paramilitary organizations throughout the period of the British Mandate.
The Histadrut Jewish trade union, created in 1920, was another major player in this first conquest of the economy. It headed a colossal economic empire made up of agricultural colonies, transport cooperatives, and industrial, commercial, and financial establishments, all of which were used to create exclusively Jewish economic enclaves. The union even went further, recruiting “labor guards” who were sent to work sites and factories to intimidate employers and workers and use threats to demand the sacking of Arab workers and the hiring of Jewish settlers. This conquest of jobs was thus hardly a nonviolent process.
Israel’s chosen policy of economic integration sought to take advantage of the inevitable Palestinian presence while at the same time controlling it.
The slogans of Jewish Land and Jewish Labor continued to prevail after the Nakba, then following the occupation of the West Bank and Gaza Strip, in an Israeli economy mobilized by the settlement process and still structured by the priority granted to the Jewish population. The difference was that the elimination of the indigenous Palestinian population was now supported by a state apparatus and made systematic via a host of policies and laws. Yet the despoliation of land and the segregation of its inhabitants did not rule out a policy of economic integration designed to take advantage of the inevitable Palestinian presence while at the same time serving to control it.
Exploitation Based on Segregation
When Israel laid its hands on the West Bank and Gaza Strip in 1967, its annexationist ambitions were frustrated by the presence of around a million Palestinians, who constituted a demographic, political, and security challenge. The military administration then opted for de facto integration of the newly conquered territories while denying citizenship to their inhabitants. This enabled it to set up a strict system of segregation and hierarchical relations between the two populations. In many regards, the measures employed were similar to those already used since 1948, in Israel itself, to deal with the so-called ’48 Palestinians.
Starkly apparent here is a logic of exploitation, which consisted of taking the best opportunities available by controlling the territories and their inhabitants. In addition to Israel’s grip on natural resources (water, oil, gas, etc.), it implemented a series of policies designed to increase Palestinians’ economic dependence and thus make better use of Palestinian capital, labor, and consumer markets. Until 1993, the Israeli authorities were responsible for granting the permits needed to build a house, drill a well, start a business, leave or enter the country, and import or export goods.
Measures were taken to prevent any Palestinian competition and instead to encourage subcontracting to the benefit of Israeli producers. The growth of certain industries such as cement, textiles, and car repairs was therefore directly linked to the needs of the Israeli economy. Similarly, the produce required by Israel or intended for export to Europe gradually replaced the more diversified crops intended for local and regional markets. In turn, the Palestinian population became heavily dependent on imports from Israel to satisfy its own consumption needs.
This situation did not change fundamentally after the founding of the Palestinian Authority in 1993. The prerogatives it was granted would be constantly challenged on the ground, and the Israeli administration retained control of the commercial, monetary, and financial regimes, as well as the borders and most of the territories themselves. The so-called Area C — directly under Israeli military control and inaccessible to the Palestinian government — still covers 62 percent of the West Bank. From 1972 to 2017, Israel absorbed 79 percent of total Palestinian exports and is the source of 81 percent of its imports.
Israel implemented a series of policies designed to increase Palestinians’ economic dependence and thus make better use of Palestinian capital, labor, and consumer markets.
The employment of workers from the West Bank and Gaza in Israel’s own economy is another aspect of this colonial exploitation. Regulated by the Israeli administration, which issues movement and work permits, the presence of these workers compensates for a shortage of Israeli labor, depending on the conjuncture and the specific sectors of activity concerned (mainly construction, agriculture, and catering). Thus, the Israeli economic recession between 1973 and 1976 had virtually no impact on Israeli unemployment, but did result in a reduction in the number of Palestinian workers from the occupied territories.
Vulnerable, exploitable at will, and sackable at any time, this workforce accounted for an average one-third of the Palestinian working population during the 1970s and 1980s. But the outbreak of the First Intifada and the economic boycotts launched by the Palestinian population at the end of the 1980s prompted the Israeli administration to drastically reduce the presence of these workers. For a time, they were replaced by migrant labor from Asia. But over the last ten years, the employment in Israel of workers from the West Bank had again become a major phenomenon; in the months before October 7, workers from Gaza had also resumed this journey, despite the blockade.
In 2023, 160,000 Palestinians from the West Bank — i.e. 20 percent of the territory’s employed workforce — were working in Israel or in the settlements, in addition to around fifty thousand workers employed without permits. There were also some twenty thousand workers from the Gaza Strip. These workers receive an average salary of between 50 and 75 percent of their Israeli counterparts’ pay. They are also exposed to insecurity, discrimination, and abuse. The number of work-related accidents and deaths on construction sites is considered one of the highest in the world.
Economic Counterinsurgency
While the employment of Palestinian workers is primarily intended to exploit the indigenous workforce, it is also a brilliant way of policing the population. To obtain a work permit in Israel or in the settlements, a Palestinian from the West Bank or Gaza must ensure that their file is approved by the Israeli military administration. They must then refrain from taking part in any trade-union or political activity deemed hostile to the occupation, as must their close relatives. Families, and sometimes entire villages, are thus careful not to be the subject of any “security ban,” to avoid being deprived of an Israeli work permit.
The Palestinians’ dependence on the Israeli economy thus contributes to their political vulnerability. They are especially vulnerable because it is the Israeli administration that regulates access to the occupied territories and even traffic within them. The closure of crossing points and the restriction of traffic are therefore regularly used as a means of punishment in what is openly said to be a means of counterinsurgency. The Palestinian population is rapidly driven to the brink of economic suffocation, or even kept in a state of lasting humanitarian crisis, as illustrated by the case of the Gaza Strip, under blockade since 2007.
The Palestinian Authority is particularly exposed to this kind of punitive practice. Much of its income (67 percent, in 2017) comes from taxes collected by the Israeli administration, particularly on Palestinian imports. However, the latter regularly deducts and suspends these payments by means of explicit blackmail. The Palestinian government’s revenue also depends on international aid, which is no less discretionary and politically conditional. This situation goes a long way to explaining its inability to act outside the boundaries set by Israel and international donors.
In recent years, a growing number of companies in the West Bank have proactively requested integration into the Israeli surveillance system in order to benefit from favorable treatment when exporting their goods.
This political and social engineering that runs through the economy also affects the private sector in various ways. In recent years, a growing number of companies in the West Bank have proactively requested integration into the Israeli surveillance system in order to benefit from favorable treatment when exporting their goods. Under normal circumstances, a shipment is first transported by truck to the nearest Israeli checkpoint. There, it is unloaded to undergo an inspection lasting several hours, before being loaded onto a second truck for transport to its destination, either in Israel or some third country.
Palestinian exporters are thus penalized by high transport costs, not to mention the time lost and the risk of goods being damaged by these burdensome procedures. The number of trucks, and therefore the volume of goods transported, is also severely limited by the daily congestion at checkpoints, which can be compounded by the simple Israeli decision to stop traffic at any time and for any reason. In contrast, the introduction of so-called door-to-door logistics corridors has considerably eased the flow of goods and reduced the cost of commercial freight.
By following a strict protocol drawn up by the Israeli army, companies can bring their cargo to its destination using a single Israeli truck and without being troubled at checkpoints. To this end, they are required to set up an enclosed and secure loading area, equipped with surveillance cameras connected seamlessly to the nearest military checkpoint. They also provide detailed data on their employees, whose files must also be approved by the military administration. Lastly, each truck is fitted with a GPS tracking system to monitor the route taken through the West Bank.
The Palestinian Economy in Total War
The full extent of the radical upheaval currently sweeping through the occupied territories, and through Palestinian economic activity, is surely difficult to grasp. Several Palestinian and international agencies are already trying to account for the material losses of the ongoing war and to assess its impact on Palestinian GDP and unemployment. Any political solution to the conflict, it is said, must necessarily be backed up by an economic plan. With each new war, anticipating the costs of reconstruction and of getting the Palestinian economy back on its feet is a way for the parties involved to quickly react to the emergency.
This is not a confrontation between two sovereign states, and the impoverishment of the Palestinian population and the serious risk of famine are no accident.
Added to the mass destruction caused by the Israeli bombardments is the tightening of the siege on both the Gaza Strip and the West Bank, as well as the revocation of all Israeli work permits and the delay in the transfer of taxes to the Palestinian Authority. The Palestinian research institute MAS refers to a serious economic recession, the effects of which are already being felt during the war and which are likely to continue even afterward. GDP is reported to have fallen by at least 25 percent by the end of 2023, while unemployment could reach 30 percent of the working population in the West Bank and 90 percent in the Gaza Strip.
But this is not a confrontation between two sovereign states, and the impoverishment of the Palestinian population and the serious risk of famine are no accident. Reports published following previous wars confirm the Israeli army’s deliberate intention to attack the material means of subsistence. The same applies to the restrictions imposed on the movement of people and goods, though these latter do not apply to farmers in the West Bank. In fact, their crops are compensating for the interruption of agricultural activity in Israel — and thus contributing to its war effort.
This range of mechanisms at work, and the different logics of power they involve, suggest that the economy is not a collateral victim of the ongoing colonial confrontation. Rather, it is one of the key terrains on which it takes place. The issue, then, is not really the costs of war and reconstruction, or a question of the GDP points that need to be clocked up in order to buy the people’s silence. Rather, the question is how to protect Palestinian society from the dispossession, enrollment, and subjugation taking place on the economic terrain — and defend it from what is more than ever a total war.