Economic Disparities Between Palestine and Israel: The Impact of Historical and Geopolitical Factors

The economic disparities between Palestine and Israel, both created from the division of Palestine by Britain after World War II, have been shaped by a complex interplay of historical, political, and geopolitical factors. This article explores the key factors that have contributed to these disparities, focusing on the roles of foreign aid, reparations, and occupation.

Foreign Aid and Reparations

During the early phases of the establishment of the State of Israel, foreign aid and reparations played a crucial role in shaping its economic landscape. The influx of Jewish settlers into Palestine, many of them illegally, created a domestic market and a rich pool of skilled labor. This influx was supported by foreign loans and direct transfers from Jewish communities. However, the most significant source of foreign currency was the reparations agreement signed with West Germany in 1952, which provided a massive infusion of funds into Israel’s economy. These funds, amounting to approximately 850 million US dollars, were channeled into state coffers until 1964 and financed the lion's share of Israeli imports from 1953 to 1965, primarily German goods.

The German reparations agreement not only injected much-needed foreign currency but also facilitated continued large-scale government investment in agriculture and manufacturing through joint ventures, subsidies, loans, and grants to private investors. In addition, billions in military and economic aid from the United States also played a significant role in the country's development. This aid, coupled with the influx of skilled workers and financial support, laid the groundwork for Israel's economic growth and stability.

Occupation and Resource Exploitation

The occupation of the Palestinian territories by Israel, which began in 1967, has cast a long shadow over the economic prospects of the Palestinian people. The occupation not only suppressed the development aspirations of the Palestinians but also involved systematic campaigns to extract and exploit natural resources. According to a report, Israeli settlers exported agricultural products worth 285 million annually, while Palestinians exported just 19 million of agricultural products. Terrorist settlers targeted fruit and olive trees, some of which were older than Israel itself. Settlers burned down standing crops belonging to the villagers, often in full view of the Israeli army, and Palestinian farmers were forced to acquire permits from the Israeli army.

The Israeli military authorities consolidated complete power over all water resources and water-related infrastructure in the Occupied Palestinian Territories (OPT). To this day, Israel continues to control and restrict Palestinian access to water, a fundamental resource for agriculture and the agro-industry. When neighboring countries are denied access to these vital resources, it severely undermines their economic stability. Often, settlers deliberately contaminated wells used by Palestinians by dumping hazardous materials.

Post-World War II Influence and US Support

The Middle East, with its oil reserves and strategic waterways such as the Suez Canal, has been a key battleground for superpower hegemonic influence. Following the decline of European powers and the rise of the United States as the primary Western power broker, the US saw Israel as a strategic ally in its pursuit of oil. Israel became the largest cumulative recipient of US foreign aid in the post-World War II era. In 2016, then-President Barack Obama signed a defense agreement with Israel, providing 38 billion US dollars in military support over a decade, including funding for the Iron Dome missile defense system. The US continues to pump 3.8 billion annually in military aid into Israel and uses its UN veto to allow Israel to perpetuate the persecution of the Palestinian people.

The ongoing occupation and the use of military and economic aid have served to exacerbate the economic disparities between Palestine and Israel. While Israel enjoys substantial financial, military, and strategic support, the Palestinian territories continue to face significant challenges in terms of economic development, resource access, and human rights.

Conclusion

The economic disparities between Palestine and Israel stem from a combination of historical, political, and geopolitical factors. From the influx of foreign aid and reparations to the systematic exploitation of natural resources and enduring occupation, these factors have significantly shaped the economic landscapes of both regions. Understanding these disparities is crucial for addressing the complexities of the region and promoting a path towards more equitable development.