Elias H. Tuma - The Economic Case for Palestine (RLE Economy of Middle East)

ROUTLEDGE LIBRARY EDITIONS: THE ECONOMY OF THE MIDDLE EAST

Volume 10

THE ECONOMIC CASE FOR PALESTINE

First published in 1978

This edition first published in 2015

by Routledge

2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN

and by Routledge

711 Third Avenue, New York, NY 10017

1978 Elias H. Tuma and Haim Darin-Drabkin

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A catalogue record for this book is available from the British Library

ISBN: 978-1-138-78710-0 (Set)

eISBN: 978-1-315-74408-7 (Set)

ISBN: 978-1-138-81006-8 (Volume 10)

eISBN: 978-1-315-74651-7 (Volume 10)

Publishers Note

The publisher has gone to great lengths to ensure the quality of this reprint but points out that some imperfections in the original copies may be apparent.

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This study marks the completion of three years of co-operation between an Israeli Jew and a Palestinian Arab. Our joint effort arose spontaneously, as we discovered that we both search for the same thing, namely peace, security and self-determination for both Jews and the Arabs who claim Palestine as their home. This goal we still share, but we also share a deep interest in approaching the problem in a rational and objective way. We have tried to look at the facts and potentialities and evaluate them dispassionately to the extent possible. We have stayed away from the political issues and from the moral questions of justice, historical claims and where the blame lies. To get to the point, we have assumed hypothetical conditions which seem to us highly probable as bases for a state of Palestine. Should these hypothetical conditions be modified, the conclusions reached will have to be reconsidered, but the framework of the study will continue to serve as a model for reaching new conclusions, and hopefully will lead to other and more specialized studies.

Our thanks to all the people who have been instrumental to bring this study to completion. Special thanks to Anastasios Papathanasis who helped in the research and to Pam Rush who did an excellent job in typing the manuscript.

Much has been written about the Arab-Israeli conflict, the prospects for peace, or war, and the eventual establishment of a Palestinian state, side by side with the state of Israel. The emphasis, however, has been on the political process of such eventualities. Our objective complements these previous efforts. We are concerned with the economic aspects of these various solutions. In particular, we are concerned with the economic feasibility of a state of Palestine: assuming the policy makers have agreed on a solution, will the resulting state of Palestine be economically viable? What minimum conditions must be met for it to survive and prosper? What size population can it support, what boundaries should it have, and what period of time must elapse before the full potential and viability of such a state can be realized?

These are some of the questions we shall address. It is our intention to provide at least a skeletal outline or an economic blueprint for the creation of a state of Palestine west of the Jordan River. Given the prospective, though still undetermined, features of a state of Palestine, we may approach the question by exploring the economic feasibility of small nation-states in general. Against this background we may then be able to assess the feasibility and prospects of an economically viable Palestinian state. This study is based on the following hypotheses:

1. Small states may require economic conditions that are different from those necessary and/or sufficient for the viability of large states. The optimum size of the state is relative in the sense that what is small or large depends on what we compare the given unit with. In this context, the relative minimum size is taken to reflect the ability of the state to depend on its own resources for its economic survival. The ability of the state to secure the necessary inputs and to dispose of its output in a way that contributes to the welfare of its citizens would be fundamental to its size viability. It is true that autarky is hardly ever possible, but relative potential self-sufficiency is basic to economic independence and the ability of an economy to survive under pressure from other nations. A large state would presumably have land, labour and other resources to sustain its production processes. A small state, in contrast, would rarely have an adequate variety and quantity of the various necessary resources to sustain itself, without trading with other nations. Therefore, those states that are not large enough to be relatively self-sufficient must have certain economic or political advantages to offset the size handicap, such as alliances, strategic location, or certain other unique qualities which may be used in a bargaining situation.

2. Self-sufficiency may not be ideal or even desirable in a world of international trade and interdependence. What may be lost because of small size or the inability to be self-sufficient may be compensated for through trade, international co-operation, and a certain degree of planning. A states ability to export would offset shortages in local resources by gaining access to imports. Aid from other countries may be another method, though such a means tends to create instability because of the inherent dependence of such a relationship. Planning, on the other hand, may assure viability by creating a closed economy, by restricting imports to the mere essentials, and by scaling down the expectations of the population and thus creating contentment. In other words, viability becomes a function of expectations which in turn would be tailored to fit the capacity of the economy. As in the case of dependence on alliances, dependence on the manipulation of expectations may be helpful in the short run; in the long run it tends to breed discontent and instability.

3. Economic viability is necessary but not sufficient for national survival: it must be supported by political and social viability. Regardless of the size of the state, economic endowment must be used in harmony with the political institutions on which the state is based. They must also contribute to social harmony within society. In other words, economic viability must be considered within the framework of political and social viability. For example, poorly used resources can hardly sustain viability ; inequality of income and wealth distribution may undermine the contribution of resource endowment to economic viability of the state.1