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THE PALESTINIAN CAPITALISTS THAT HAVE GONE TOO FAR


By Tariq Dana
January 2014

Overview
While most Palestinians living under Israeli occupation are struggling to survive, a powerful group of Palestinian capitalists is thriving and growing in political, economic and social influence. he cost, all too often, is their engagement in economic normali!ation pro"ects. In other words, they deal with the Israelis as though they were a #normal$ %usiness partner rather than an occupying power that has ruthlessly violated Palestinian rights for over &' years. In this policy %rief, (l)*ha%a+a Policy ,em%er ari- .ana sheds light on the ways in which these Palestinian capitalists e/ercise political influence and social control and gives e/amples of the economic normali!ation pro"ects in which they have engaged.

A Snapshot of Palestinian Capital


he presence of Palestinian %usinessmen in the political sphere predates the esta%lishment of the Palestine 0i%eration 1rgani!ation 2P013. (fter the P014s foundation, Palestinian capitalists played a variety of roles in the national li%eration movement. *ome P01 factions, particularly 5atah, saw the Palestinian capitalist class as a #national %ourgeoisie$ and as such an indispensa%le part of the anti) colonial struggle and dealt with it accordingly. (t the time, Palestinian capitalists4 engagement with the P01 included funding, occupying leading P01 positions, and political mediation. 5or e/ample, Palestinian %usinessmen mediated %etween the P01 leadership and the Jordanian regime during 6lac+ *eptem%er and %etween the P01 leadership and the (merican administration during the 1780s. ,any were also philanthropists who supported charita%le, educational and socio)economic pro"ects. ( landmar+ in this regard was the esta%lishment of the Welfare (ssociation in 1789, a much)needed %oost to the Palestinian national pro"ect in the educational and socio)economic spheres after the %ul+ of Palestinian guerrillas were e/pelled from their %ase in 0e%anon during the 1782 Israeli invasion launched %y the late prime minister (riel *haron. *ince 1slo, and particularly in recent years, the influence of Palestinian capitalists in the occupied territory has %een rising in an unprecedented manner. hey can %e divided into three main groups:
1 The Palestinian Capitalists That Have Gone Too Far

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www.al-shabaka.org #;eturnee$ capitalists, comprised of a Palestinian %ourgeoisie that had emerged in the (ra% countries, particularly the <ulf states, as well as in =orth (merica and >urope. ,any of these %usinessmen had strong ties to the nascent Palestinian (uthority. 0ocal capitalists, comprised of two main su%groups: large landowners who historically en"oyed considera%le political and social influence over traditional social structures? and local interlocutors who accumulated wealth as su%contractors for Israeli companies after the 17&@ occupation. he nouveau riche, who ac-uired wealth in more recent times and who particularly %enefited from the 1slo process in various ways as will %e discussed further down.

Influencin the Policy Process


0i+e other Palestinians, %usinessmen have struggled with statelessness and sought the security that a state would provide, where their companies and profits would %e %etter protected from regional insta%ility and threats. hus, many of them supported the 1slo accords as a +ey step towards esta%lishing a Palestinian state, some even imagining that 1slo4s #peace dividends$ would transform the West 6an+ and <a!a into the *ingapore of the ,iddle >ast. >arly signs of capitalist influence on the nascent Palestinian (uthority 2P(3 can %e seen in (rticle 21 of the Palestinian %asic law, which specifies that #the economic system in Palestine shall %e %ased on the principles of a free market economy$ 2author4s italics.3 Parado/ically, even the Anited *tates, the glo%al driver of free mar+et capitalism, has a constitution that is fle/i%le enough to allow for different responses to specific economic circumstances. he open espousal of neoli%eralism %y the P( has helped to create an institutional framewor+ that ena%les economic interest groups to manipulate policies in the service of private ends. =eoli%eralism com%ined with political authoritarianism and corruption reinforced and consolidated what can %e descri%ed as the P(4s crony capitalism. 5rom the earliest days, the P(4s cronyism was e/pressed in special relations %etween powerful %usinesspeople and the P( political and security elite. his system naturally had adverse effects on the economy: 6y favoring privileged political and economic groups it systemically impeded mar+et competitiveness and e/cluded the ma"ority of the people4s access to meaningful economic opportunity.1 Indeed, the a%ility of capitalists to e/ert influence over government policies was further strengthened and politicians further enriched. .uring the 1770s, the special relationship %etween certain Palestinian capitalists and ruling political circles within the P( led to the centrali!ation of political and economic power in the hands of a few individuals who rapidly managed to transform the national pro"ect into a game of interest politics. his was especially the case with regard to the P( elite4s political and security collusion with .iaspora conglomerates in managing large)scale pu%lic)private monopolies. ,onopolies protected %y the P(
*ee for e/ample: ,ushta- Busain Chan, <eorge <iacaman and Inge (mundsen 2eds.3 *tate 5ormation in Palestine: Dia%ility and <overnance during a *ocial ransformation, 22004, ;outledge Political >conomy of the ,iddle >ast and =orth (frica3.
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www.al-shabaka.org involved over 2' +ey imported commodities, including flour, sugar, oil, fro!en meats, cigarettes, live animals, cement, aggregate, steel, wood, to%acco, and petroleum. hese monopolies were not only an early sign of P( corruption %ut also the most o%vious e/pression of the emergent political)economic alliance that found in the P( an effective political mechanism for achieving private economic interests. 5urthermore, monopolies were also selectively granted to those Palestinian political)economic actors that en"oyed special pro/imity to Israeli companies. (s a conse-uence, monopolies have had a devastating impact on the Palestinian economy and small) %usinesses, and, conversely, %enefited the Israeli economy. ( num%er of former Israeli political and military officials %ecame, after their retirement, %usiness partners of some Palestinian capitalists and P( political elites. In return, Israel offered the Palestinian %usinessmen and politicians special privileges such as access to permits, more freedom of movement and trade and the DIP pass status. With the appointment of the former Prime ,inister *alam 5ayyad and the government programs he introduced since 2008, the capitalists4 influence over the political esta%lishment increased. 6usinessmen and pro)capitalist technocrats often occupied +ey ministerial positions in 5ayyad4s governments. he #reform$ of the %an+ing sector that too+ place under 5ayyad4s governance is an important aspect of rising capitalist political influence. hese reforms made it possi%le for the government to contract long) term loans that amounted to some E4.2 %illion in 2019 according to a recent estimate: hat is as much as '0F of the <.P, with annual interest running at E200 million. 5or an economy largely dependent on international aid this high level of pu%lic)sector inde%tedness is alarming indeed. he ways in which the money was spent and how the P( will pay off its de%ts remains a mystery. 5urthermore, the high level of pu%lic de%t ena%les capitalists to pressure the P( to ad"ust its policies in conformity with the interests of large private firms %y threatening to withdraw some investments or to hold %ac+ others, as (laa artir noted in a recent study. =eedless to say, the people pay the cost, e.g. when the P( raised income ta/ and cut e/penditure in early 2012. hese Palestinian capitalists4 role has even %ecome prominent in the international political sphere. hey put their weight %ehind A* *ecretary of *tate John Cerry4s efforts to drive through a peace settlement with their "oint Palestinian)Israeli 6rea+ing the Impasse plan despite the dire impact this would have on Palestinian rights. ,oreover, the plan was reportedly prepared without the participation of either Palestinian civil society or the P( itself. his suggests that local Palestinian crony capitalists have %ecome the primary recipient of international #peace$ initiatives. It is difficult to %elieve that any peace plan they manage would contri%ute to the Palestinian -uestion for self)determination, freedom, and "ustice. ;ather, it is more li+ely to %e "ust another lucrative opportunity for those %enefiting from the ongoing status -uo.

Social Control throu h Debt an! Other "eans


(s in other parts of the world, the development of the neoli%eral system has %een underpinned %y various mechanisms of social control to normali!e the occupation and pacify and de)radicali!e groups
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www.al-shabaka.org see+ing to resist it using different means.2 *ocial control practices in Palestine have a particularly destructive impact %ecause they tie into the set of colonial controls engineered %y the occupation. Grony capitalists have attempted to practice social control %y recruiting civil society to serve their o%"ectives, wor+ing alongside ma"or international donors. 1ne way is through the esta%lishment of large =<1s that tend to penetrate the social fa%ric %y promoting certain values designed %y international financial institutions and development agencies to sustain the neoli%eral system. hese =<1s4 values are e/pected to tric+le down to other indigenous civil society organi!ations via capacity %uilding and other pro"ects. (nother aspect of social control is the facilitation of private lending, which encouraged a culture of consumption and pushed many people into the de%t trap. (ccording to the Palestine ,onetary 5und, individual loans shot up to a%out a %illion A.*. dollars in 2019 from a%out E474 million in 2007. It is estimated that @'F of pu%lic sector employees 274,000 out of 1'9,0003 are in de%t. he personal de%t is primarily used to finance consumption 2including mortgages, cars, marriage costs, and electric goods3 and is rarely invested in productive activities. his state of personal inde%tedness has ma"or social ramifications %ecause it promotes a sense of individualism and drives personal private concerns, systemically pushing people to a%andon crucial national issues. It fosters political apathy and undermines critical thin+ing and action against the very oppressive nature of the system. Het another method of social control is the e/ploitation of wor+ers that occurs in factories owned %y some local capitalists, where wor+ers are paid much less than the government4s recently announced minimum wage of 1,4'0 =I* 2E9@@3 for the private sector. #(lthough wor+ers protested the P( declared minimum wage %ecause it does not guarantee the minimum standards of living, many of us are still wor+ing under humiliating conditions, where our salaries are even less than 1000 =I*. 6ut despite that, we have to accept this, otherwise we will %e thrown into the streets$ 2author4s interview.3 his e/ploitation and control of Palestinian la%or force is e/acer%ated %y the lac+ of effective la%or unions, which have %een dramatically wea+ened %y %oth the P( and capitalists ali+e. here are fears that the system of wor+ers4 e/ploitation and control will %e e/panded and institutionali!ed through industrial !ones that are intended to integrate Palestinian)Israeli)regional capital to e/ploit the pool of Palestinian cheap la%or. (ccording to (dam Banieh, the industrial !ones will not apply Palestinian or Israeli la%or laws, wage levels and other wor+place conditions, while the right to unioni!e will %e prohi%ited.

#or$ali%in the Occupation the &cono$ic 'ay


>conomic normali!ation is institutionali!ed in a wide range of "oint activities such as "oint industrial !ones, Israeli)Palestinian %usiness forums, Palestinian investments in Israel and its settlements, and "oint management of water resources. his is the highest level of normali!ation activity in the history of the Palestinian struggle for national li%eration 2see the academic and cultural pages of the %oycott,
5or further reading on the mechanisms of social control in capitalism and neoli%eralism see, for e/ample: .avid et!laff, .ivide and con-uer: popular culture and social control in late capitalism, ,edia Gulture *ociety( 1771( vol. 19 no. 1 7)99? *tephen <ill, <lo%alisation, ,ar+et Givilisation, and .isciplinary =eoli%eralism, ,illennium ) Journal of International *tudies, .ecem%er 177' vol. 24 no. 977)429.
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www.al-shabaka.org divestment and sanctions 26.*3 movement for a definition of normali!ation.39 <roups wor+ing for Palestinian human rights and self)determination have openly denounced some of the Palestinian crony capitalists. he capitalists counter %y claiming that they are simply see+ing to serve the Palestinian economy and people4s steadfastness. In fact, Palestinian)Israeli "oint pro"ects represent the ugliest face of normali!ation %ecause of their scale and si!e and, most importantly, %ecause they help the occupying power to profit and to further infiltrate its structures into the occupied territory. ( few e/amples of large normali!ation pro"ects are listed %elow.4 )awabi his planned city is one of the largest private investments in the West 6an+ and one of the most controversial large)scale pro"ects. Whether it is %y accepting and planting some 9,000 trees donated in 2007 %y the Jewish =ational 5und 2which were later uprooted due to criticism3 or %y contracting over 10 Israeli companies as suppliers, ;awa%i e/emplifies the way in which profits for private corporations and economic normali!ation are propagated under the %anner of a #national pro"ect.$ The In!ustrial *ones he industrial !ones in the occupied territory are driven %y the same logic of the Iualifying Industrial Jone 2IIJ3 in Jordan and >gypt. hey give life to *himon Peres4 am%ition of a #=ew ,iddle >ast$ where Israel is seen as the hegemonic economic center of the region. Industrial !ones are also highly pro%lematic %ecause they integrate Palestinian)Israeli)regional capital into a remorseless machine to e/ploit cheap la%or K Palestinian as well as foreign imported la%or. >ven as they %enefit a few local %usiness elites, they advance the Israeli matri/ of control and perpetuate its occupation. Palestinian invest$ents in Israel an! the settle$ents (ccording to one study, Palestinian capital is %eing invested in Israel and its illegal settlements at far higher rates than in the West 6an+ ) %etween E2.' %illion and E'.8 %illion versus only E1.' %illion. he Palestinian ,inistry of >conomy has accused the study of lac+ing accuracy and o%"ectivity while some economists have said it suffers from serious methodological pro%lems. Het its main message remains noteworthy. ( staff mem%er at the ,inistry of the >conomy said: #,any Palestinian %usinessmen are investing in industrial settlements such as 6ar+an, ,aLale (dumim and other agro)industrial par+s in the Jordan Dalley.$ 2author4s interview.3 (nother investigative study found that many Palestinian companies are involved in products laundering in the Jordan Dalley. hey fraudulently %rand settlers4 agricultural products as #products of Palestine$ and then e/port these to international mar+ets thus evading the %oycott campaigns in some >uropean countries. Contractin Israeli Security Co$panies
3

( +ey paragraph is: # he participation in any pro"ect, initiative or activity, in Palestine or internationally, that aims 2implicitly or e/plicitly3 to %ring together Palestinians 2andMor (ra%s3 and Israelis 2people or institutions3 without placing as its goal resistance to and e/posure of the Israeli occupation and all forms of discrimination and oppression against the Palestinian people.$ 4 5or further reading see, for e/ample, Chalil =a+hleh, Globalized Palestine: The National Sell-Out of a Homeland, he ;ed *ea Press, Inc.? 1st ed., 2011.
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www.al-shabaka.org ( recent report reveals that some Palestinian companies 2;amallah ,Nvenpic+ hotel, the 6an+ of Jordan, Jordan (hli 6an+, Gairo (mman 6an+, Pal)*afe3 are listed as clients of =etacs 0td. his Israeli security company is owned %y reserve ,a"or)<eneral .anny ;othschild, who commanded Israeli occupation forces in the West 6an+ and *outhern 0e%anon and wor+ed in military intelligence. Palestinian-Israeli Partnership in Tech +entures *everal Palestinian entrepreneurs are colla%orating and partnering with Israeli high)tech corporations. he case of the ;amallah)%ased *(.(;( venture is "ust one e/ample. It was cofounded %y *aed =ashef and Hadin Caufmann and is managed %y a team of Israeli and Palestinian e/perts in technological innovation and Internet services. 5or%es maga!ine ran a lengthy report highlighting the role of the Israeli Gisco *ystems in %ringing together high)tech Israeli e/perts and Palestinian entrepreneurs to help transform the Palestinian economy along the lines of Israel4s successful #*tartup =ation.$ he report also reveals that several Palestinian youth in the field of high)tech are %eing invited to meet and wor+ with their Israeli counterparts in the %ac+ room, which is # "ust one of do!ens of %usiness)driven dialogues -uietly ) in many cases secretly ) proliferating across the Boly 0and.$

'hat "ust Be Done,


he political and social influence of Palestinian crony capitalists and their ongoing economic normali!ation of Israel4s occupation should alarm all those concerned a%out the future of the Palestinian cause. In chasing after profits without regard to Palestinian fundamental rights and national aspirations, these capitalists have gone too far. heir mechanisms of social and political control, and their flagrant complicity in normali!ation pro"ects are a structural o%stacle to the anti)colonial struggle and undermine the Palestinian -uest for "ustice. *everal steps can and must %e ta+en, including: 0ocal %usinessmen and investors must resist Israeli attempts to involve Palestinian capital in normali!ation pro"ects. =o interaction %etween Palestinian capital and Israeli %usinesses could ever serve Palestinian national development and steadfastness. If it is not to %e seen to %e complicit, the P( must design and implement regulations that direct the way that Palestinian capital is %eing invested and it must rigorously monitor this process to ensure that it serves Palestinian national goals. >ffective mechanisms for pu%lic accounta%ility are needed that encompass diverse social sectors and authentic civil society actors. Givil society and academic institutions are playing an important role through the studies they have conducted and %y drawing attention to the issue. Bowever, more must %e done to hold those Palestinian capitalists that have strayed to account, as the 6.* movement has done on occasion. *ustained campaigns are needed to ma+e their position untena%le. Investment and %usiness development must ta+e into account Palestinian human rights and dignity and gradually reduce the levels of dependency on international aid and on the Israeli economy, creating the %asic conditions for different forms of struggle and steadfastness. ,ore specifically, there a need to develop a model of development %ased on the concept of resistance economy %ased on self)reliance, self)sufficiency, a "ust redistri%ution of the national
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The Palestinian Capitalists That Have Gone Too Far

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www.al-shabaka.org wealth, and a %ureaucracy that serves a democratic people)driven political, economic, social and development agenda. he change that is needed re-uires a ma"or restructuring of the overall political framewor+. ,ore than anything else, the Palestinians need a leadership that is dedicated to resisting the occupation and wor+ing for Palestinian self)determination, li%eration, "ustice and e-uality.

his policy %rief is availa%le in (ra%ic at: http:MM%it.lyMplGptl

ari- .ana is assistant professor of political science at Be%ron Aniversity. Be received his Ph... from the *cuola *uperiore *ant4(nna, Italy, where his focus was on the transformation of Palestinian civil society from mass)%ased movements to neoli%eral)oriented =<1s. .uring this period, he was Ph. visiting fellow at *chool of 1riental and (frican *tudies 2*1(*3. Be has wor+ed with many Palestinian and international =<1s and A= agencies in the occupied Palestinian territory, (frica and >urope. Bis research interests include civil society, =<1s and social movements, neoli%eralism, and glo%ali!ation and state)%uilding with a particular focus on Palestine.

(l)*ha%a+a, he Palestinian Policy =etwor+ is an independent, non)partisan, and non)profit organi!ation whose mission is to educate and foster pu%lic de%ate on Palestinian human rights and self)determination within the framewor+ of international law. (l)*ha%a+a policy %riefs may %e reproduced with due attri%ution to (l)*ha%a+a, he Palestinian Policy =etwor+. 5or more information visit www.al)sha%a+a.org or contact us %y email: contactOal)sha%a+a.org.

The Palestinian Capitalists That Have Gone Too Far

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