Into the fray: The Bahrain Conference – Failure Foretold.

The endeavor to resolve the Israeli-Palestinian conflict by economic means not only shows a grave defect in understanding its underlying causes, but inverts the causal relationship that generates & sustains it.

The road to hell is paved with good intentions – An aphorism thought to have originated with Saint Bernard of Clairvaux (c. 1150).
Jared Kushner and Jason Greenblatt. credit: Israel National News

When senior representatives of the Trump administration, Jared Kushner and Jason Greenblatt woke up this morning in Israel (May 30, 2019), it was to a totally different political reality to that which they expected to encounter only a few days previously.

New elections instead of new government.

Indeed, instead of having to present what is being billed as the “Deal of the Century” for the innovative resolution of the seemingly intractable conflict between Jews and Arabs over control of the Holy Land, to a newly installed government, supported by a firm majority of 65 Knesset members, they are faced with political pandemonium, and new elections in little more than three months’ time.

It is yet too early to determine how the sudden uncertainty, into which the Israeli political system has been plunged, will affect the timetable for the public launch of the “Deal of the Century”, currently scheduled for a June 25-26 conference in the Persian Gulf state of Bahrain.  There is, however, every reason to believe that the political developments in Israel will impede, rather than expedite, its unveiling.  After all, the whole point of selecting June for the Bahrain conference was the hope that a newly elected Israeli government would be in office, with the legitimate authority to make the necessary decisions regarding the purportedly historic proposal.

Slim chances of success.

However, the delay in moving forward with the “Deal of the Century” may well be a fortuitous turn of events.  For, if the rumors that have recently appeared in the media are indeed correct, the chances of its success—or even the chance that there will be a realistic attempt to implement it—are slim indeed.

The major reason for this gloomy prognosis is, of course, the obdurate apriori rejection by the Palestinian Authority of any initiative from the Trump administration – irrespective of its substantive content – including “the Deal”.

However, Palestinian rejectionism aside, there are other valid reasons for scepticism.

For, at least in the manner in which it is portrayed in the media, there appear to be substantial structural flaws in “the Deal”, which expose a fundamental misunderstanding not only of the essence of the conflict, but also the basic methodology required for its resolution.

According to statements from the Trump administration, “the Deal” will focus on the formulation of an ambitious economic program for the development of the areas currently under the administration of the Palestinian Authority, but will avoid dealing with the political aspects of the conflict.

And therein lies its greatest defect!

Political economy 101.

After all, virtually any basic 101 course in Political Economy begins with an explanation of why all functioning economic systems require a functioning political system for its existence – i.e. a system of governance that can determine, regulate and protect the property rights of buyers and sellers in the market place.  Indeed, without such determination, regulation and protection, market transactions would be meaningless – and hence there would be little, indeed, no point in concluding them.

Thus, without specifying who will have sovereign authority to establish the system of laws that stipulate and regulate the legal environment in which the economic enterprises, which the Bahrain conference is supposed to promote, are to function, there is no way to assess their commercial feasibility.

The same is true for the legal regime, under which the array of infrastructures required to provide essential services to these envisaged enterprises, is to operate—such as production and conveyance of electric power, supply of water, sewage treatment, and pollution disposal to name but a few.

Similar questions arise as to taxation – efficacy of tax collection and pervasion of tax evasion – labor laws and welfare payments for workers.

Sovereignty issue unavoidable.

All these elements have a crucial impact on the profitability – indeed, the very viability – of the economic vision the Trump administration reportedly intends to present at the conference.  Indeed, given the abysmal record – to understate the case – of the Palestinian administration (whether in Gaza or Judaea-Samaria) in managing its economic affairs, it is difficult to be optimistic about the future of the economic venture to be presented in Bahrain.

Clearly, the reliability of the infrastructure services, the prevalence of corruption, the cost and productivity of labor will all be radically impacted by the identity of the sovereign, under whose authority the envisioned economic initiative will be built and run.  Consequently, no sound, well-informed economic decision can be made without this knowledge.

But the dispute over sovereignty is a quintessential political issue, at the very heart of the conflict and any attempt to skirt or by-pass it is doomed to failure.

Inverting causality.

Moreover, the endeavor to resolve the Israeli-Palestinian conflict by means of economic development and financial aid shows not only a grave lacuna in the comprehension of its underlying causes, but in fact inverts the causal relationship that generates and perpetuates it.

After all, the reason for Arab hostility in general, and of the Palestinian-Arabs in particular, is not rooted in economic deprivation.  (Indeed, the Palestinian-Arabs have been the recipients of the most generous per capita aid on the planet.)  Quite the opposite!  The economic deprivation of the Palestinian-Arabs is, in great measure, the result of their anti-Israel hostility, which creates hugely wasteful allocation of resources, grave distortion in their use and facilitates the continued rule of a despotic regime, whose continued hold on the reins of power depends on sustaining the animosity towards the Jewish state.

Accordingly, focusing on the economic aspects alone will not contribute one iota to resolving the conflict or to reducing the Palestinian – Arabs’ enmity against Israel.

At the very most it will transform them from being hostile and poor to being… hostile and affluent. What could possibly go wrong?

Martin Sherman is the founder and executive director of the Israel Institute for Strategic Studies.

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