Tale of two economies

Editorial

On Sunday, the World Bank handed over $64 million to the Palestinian Authority in the West Bank to help it prepare for statehood. Is this déjà vu? Or is it the opposite: the historical amnesia of a world that ploughed billions of dollars into the Palestinian Authority and received in return only more violence, more extreme politics and more intransigent leadership.

CAMERA, the Committee for Accuracy in Middle East Reporting in America, has researched the results of foreign aid to the Palestinian Authority and found both an increase in violence and a decline in economic viability directly correlated to the amount of foreign aid pouring into the area. In other words, foreign aid did not help the situation of Palestinians; it simply funded more violence.

Under Yasser Arafat – and during what observers believed was a "peace process" from 1993 to 2000 – the Palestinian Authority squandered at least $5 billion in foreign aid, using it to buy weapons, buy off warlords and keep Arafat's wife more than comfortable in a Paris apartment, while Palestinians remained undereducated, unemployed and without hope of long-term economic advancement. The financial and human costs of this diversion of humanitarian funding are incalculable. The lost opportunities are irreplaceable. So are the lives lost to terrorism paid for by aid money from Canada, the United States, the European Union and elsewhere.

Israeli writer Ben-Dror Yemini has observed: "Huge sums of money given to the Palestinians went down the drain, and opportunities to win independence and prosperity were rejected in favor of the supreme objective: wiping Israel off the map."

This is not news to most of us. While the world may still blame Israel for the economic and social condition of the Palestinians, the facts have been evident for years: Palestinians are in the plight they are in today because of Palestinians. And because of the Arab world more broadly, which has used Israel as a scapegoat and the Palestinians as a bludgeon. Keeping Palestinians poor, stateless and enraged does Israel no good; this, instead, appears to be a deliberate strategy of the Arab world.

What is interesting is the contrast of this catastrophic situation with the economic miracle we continue to see in Israel.

In a new book, former Bush administration senior strategist Dan Senor and Jerusalem Post writer Saul Singer analyze how a hostile environment, the constant threat of annihilation and isolation from the outside world have helped make Israel an entrepreneurial hothouse.

"There are more Israeli companies on NASDAQ than any other foreign country in the world, more global venture capital on a per-capita basis going into Israel than any other country," Senor told the Financial Post last week. "On an absolute basis, Israel attracts as much venture capital as the United Kingdom."

In fact, Israel has more companies listed on the venture capital market NASDAQ than all of Europe, Korea, Japan, Singapore, China and India combined.

The Israeli response to challenges is distinctive from that of the United States, the erstwhile entrepreneurial model, Senor argued.

"They take challenges and don't just try to figure out how to muddle through a problem, but [to find] a transformative solution for the world," he said. "Our point is that not only does Israel have adverse circumstances, but they have an outlook on life and an ethos that includes a motivation to take problems and turn them into advantages."

Although Israel has been forced to create and maintain a powerful – and expensive – military, the country has leveraged this necessity into an advantage, Senor added.

"Everybody in the Israeli business world is literate about a military resumé," Senor said. "They know how to look at what someone has done on the battlefield and say how that applies in a business context. Some of this experience is incredibly entrepreneurial and improvisational and lends itself to leading a business enterprise."

To suggest that its neighbors should take a hint from the Israelis and resolve their social and political problems with an innovative capitalistic response might misguidedly be seen as imperialist, colonialist and the full litany of epithets to which Israel is subjected.

But as we see new mountains of Western money being dumped into the black hole of the Palestinian Authority and we await the foreseeable correlation of increased violence, it is worth reflecting on the different courses of history taken by Israelis and Palestinians. Both began with nothing but barren desert, scant resources and an opportunity to make something from nothing.

Israelis made the region's most powerful, innovative and healthy economy. The Palestinians, who could have benefited from this economic miracle, even if they didn't create one of their own, have instead done little but nurture an angry sense of disenfranchisement and resentment. And a new epoch of wasted aid and envy-fuelled perpetual violence seems set to begin.

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