A review of Toufic Haddad, Palestine LTD. Neoliberalism and Nationalism in the Occupied Territories (London: I.B. Taurus, 2016), 368pp.
Toufic Haddad begins his sharply critical examination of the international donor and financial community’s role in the Occupied Palestinian Territories (OPT) since the 1993 Oslo peace accords between Israel and the Palestine Liberation Organization (PLO) by citing Anne Le More’s curt description of how it all works: “the US decides, the World Bank leads, the EU pays, and the UN feeds.”[1]
In Palestine LTD. Haddad adds to this list the missing role of the Palestinian National Authority (PNA)—the post-Oslo Palestinian governing body tasked with implementing the donor’s agenda—and examines the intertwined political and economic logics of the international donor community’s interventions in the OPT in the name of peace-making from 1993 to 2013. Haddad’s research draws upon a mountain of documents from the PNA, major donor countries and their development agencies and international financial institutions (IFIs) who were deeply involved in the OPT. He also draws upon formerly classified documents (mainly from USAID), the WikiLeaks cables related to Palestine/Israel, the document leak of the “Palestine Papers,” as well as over 90 interviews with relevant stakeholders.
The picture that emerges from Haddad’s political economy magnifying glass is one of international donors and financial institutions actively attempting to construct, legitimate and internalize a new political, economic and social reality within Palestinian society that would enable the perpetuation of Israeli domination over Palestinians under the guise of peacebuilding and economic development. This critical evaluation applies as much to the “politics-first” camp of donors who “saw free market economics as subordinate to vital political imperatives” such as the United States, Great Britain, Germany and the Netherlands as to the “development-first” donor camp of Belgium, France, Sweden and Ireland among others. Haddad’s notion of Palestine LTD. refers to the double-fact that international donors and financial institutions have effectively transformed Palestine into a limited shareholder company controlled by international, regional, and local investors while Palestine is confined to a limited geographic contiguity with severely limited authority under the PNA.
Toufic Haddad is a social scientist who focuses on the political economy of development and conflict in the Middle East, and Israel-Palestine in particular, and worked as a journalist and editor in the OPT for several decades. We can situate his book within two strands of critical literature about the Palestinian experience since the 1993 Oslo peace Accords. First, it builds upon and deepens previous work that critically examines the political economy of aid, including Roy’s The Gaza Strip (1995) and De-development Revisited (1999); Le More’s Killing with Kindness (2005); Taghdisi-Rad’s The Political Economy of Aid in Palestine (2011) and Tartir’s The Role of International Aid in Development (2011). Second, his analysis contributes to another strand which rejects a romanticized recollection of Palestinian history, including Sayigh’s critical assessment of the Palestinian national movement, Armed Struggle and the Search for State (2000), and Hanieh’s critical assessment of capital accumulation that ensued with the so-called peace process, The Internationalisation of Gulf capital and Palestinian Class Formation (2011).
Haddad contributes an important addition to this literature and constructs a much-needed honest, and at sometimes scathing, audit of international donor intervention in the OPT. Indeed, Haddad forthrightly argues that “a case can be made directly implicating Western donors in undemocratic, illiberal policies that sustain de-development, lead to inequality and fragmentation, and allow for a decades-old settler-colonial occupation to manage its contradictions as Israel’s larger geopolitical and ideological agendas are advanced” (279).
Palestine LTD. thus opens up a critical window on the largely unrecognized role of international donors and financial institutions in shaping the contours of political, economic and social life in the OPT since 1993, helping us understand how Western donors operated and also how their policies enabled and obscured Israel’s deepening grip on the OPT, despite the limited autonomy granted to the PNA. By focusing on how neoliberal approaches to peacemaking and state-building are devised and implemented, Haddad shows us that the OPT was not only a laboratory for Israeli military experimentation but also a laboratory of neoliberal experimentation on a subject population in order to uphold local and global hierarchies.
Neoliberal Peace-Building
Palestine LTD. examines the birth of the Oslo process and then divides the complex dynamics among all actors from 1993 to 2013 into two main periods characterized by different donor interests and preferred outcomes. The “peace-building” period took place during the initial years of the Oslo process while the second “state-building” period emerged in the late 1990s, lasting through the violence of the Second Intifada (2000-2005) until 2013. Despite having nominally different goals, both periods were premised on the theory of a liberal peace which posits that “conflicts could be defused by encouraging the liberalization of the political and economic structures of post-conflict societies” (25). Both were centered around the notion of distributing a “peace dividend” to the chosen “winners.” What differentiates these two periods are who the donors decided to be the winners (i.e. who will gain the peace dividend) and what level of autonomy these winners would be allowed.
In the peace-building phase immediately after Israel and the PLO signed the Oslo Accords, the international donors chose the newly established PNA and particularly Yasser Arafat—the chairman of the Palestinian Liberation Organization (PLO) and the first president of the Palestinian Authority (1996–2004)—as the winners and gave them a degree of autonomy regarding their discretionary spending. Both the international community and Israel believed that allowing Arafat (and his Fatah nationalist party) to maintain the clientelist system through which he ran Palestinian affairs prior to Oslo served their interests in having a pliable and effective partner. The former US ambassador to Israel Martin Indyk, in his renowned indelicate style, stated that “Arafat’s job is to clean up Gaza. It’s going to be a difficult job. He needs walking-around money” (89). Israel played along, for example, by “collecting and then depositing PNA fuel revenues in a Tel Aviv bank account only accessible to Arafat and his trusted financial investor, Mohammed Rashid (aka. Khalid Islam)” (90).
At this stage of peacebuilding, international donors also favored allowing Palestinian civil society and the private sector an indirect slice of the donor pie as a way to mobilize support for the Oslo process. This largesse included Leftist parties such as the PFLP whose “secular, liberal discourse and reputation as efficient grassroots activists […] made them candidates for ‘professionalizing’ their activities” (199). The encouragement of political actors becoming NGOs beholden to foreign donors—often referred to as NGOization— played an important role in pacifying objections to the Oslo process and diluting the strong heritage of voluntary work in Palestinian society. The private sector was also intertwined in this cluttered arena of peace dividend-sharing. Donors supported “self-organizing” bodies of the private sector with very little real impact but in some instances these bodies would directly and indirectly serve the neoliberal agenda of Western donors.
One example of how private bodies advanced the donor’s particular peacebuilding agenda and its favored winners, was the role of the Private Sector Coordination Council (PSCC) in promoting a “lucrative” private pension fund scheme that enriched a group of winners “in a context that lacked democratic regulatory oversight” (144). The donor community “felt comfortable using aid in a grey zone,” and was, in fact, encouraging PNA officials and private sector members to take advantage of the PNA’s own rent-allotment opportunities for personal enrichment: “Thus a private sector interest group (PSCC) set up by international donors aid (World Bank and USAID) advanced a lucrative pension privatization scheme, based on a consultancy report commissioned by an international NGO engaged in venture capitalism (Portland Trust) and written up by a shadowy local consultant firm, with links to senior PNA government officials” (143, emphasis added).
At root, during the peace-building period and the first years of the Second Intifada, donors mobilized aid to make sure the PNA survived. Nigel Roberts, the Director of the World Bank in the OPT (2001-2006) testifies to the “unscientific” manner in which the donor community determined aid levels “[with] aid levels determined to a large extent by guesstimates of what is needed to maintain political momentum or, in recent years, to permit the survival of the of the PA” (115).
Neoliberal State-Building
Starting in the late 1990s, however, pressure on Arafat and the increasingly corrupt system he was controlling mounted, resulting in a push for “full disclosure of PNA’s financial dealings, including its monopolies and involvement in the private sector” (176). In Haddad’s analysis, international donors now sought to “remove the discretionary financial power of the PNA executive, and narrow its policy space” (176). This new emphasis was, in effect, a rare recognition of donor failure: The “peacebuilding” distribution of the peace dividend had not worked and a new “state-building” era was necessary to find a new way forward to keep the new post-Oslo regime in place.
The donor community adopting new post-Washington Consensus and New Institutionalist frameworks which stressed the need for stronger and more transparent political institutions for economic policy success characterized this new era. According to the World Bank, policy reforms in this era were “highly politicized” and aimed to remove “the earlier discretion of expenditure that supported the patronage-based system” (191). In Haddad’s analysis, the donor community was choosing new winners of the peace dividend, only their margin of autonomy would be even smaller.
This period also witnessed a shift (albeit nominal) within the hierarchy of the international donor community. With the failures of the US-dominated Oslo process, and the descent into violence of the Second Intifada after 2000, the development-first donors grew dissatisfied because they believed they were the ones saddled with the “lion’s share of the peace process financial costs, but enjoyed almost no say in its political direction” (220). The result was the establishment of the Middle East Quartet that included the UN, EU, Russia and the US to serve as brokers of Israeli-Palestinian peace and its peace dividend. Despite its involvement in certain initiatives, the director of the World Bank candidly admitted that “The Quartet was a necessary camouflage for US initiatives” (221).
The new policies and reforms that international donors initiated during the state-building period slowly yet steadily stripped away powers from Arafat under the rubric of transparency and institution (state) building. Starting in 2002, the World Bank and the PNA composed a “joint understanding” that committed the PNA to a group of measures including an “austerity budget.” In the same year, the “100-Day Reform Plan” was composed and the Palestine Investment Fund (PIF) was established “to manage all commercial and investment operations of the PNA” (193), putting it under the supervision of the Ministry of Finance (MoF). In 2003 the position of Prime Minister was created, shifting several financial and security powers from the president to the newly established position.
The climax of the institution and state-building period occurred during Salam Fayyad’s reign as prime minister (2007-2012) and the implementation of two plans: The Palestinian Reform and Development Plan (2008-10), and the National Development Plan (2011-2013). The two plans utilized the very few neoliberal policy choices the PNA had control over, particularly fiscal spending. The plans called for slimming down the PNA through “hiring freezes, freezes in public salary increases for three years, retrenching the number of public sector employees” (211). They also targeted the net lending component of the PNA budget which was providing support for utility bills in marginalized areas such as refugee camps. The latter policy was enforced by installing “prepaid utility meters” in all Palestinian households.
The international community welcomed these reforms and dangled the peace dividend in front of the private sector by pushing an agenda centered on trade and direct investment. Those agenda items, however, needed approval from Israel (on borders) and Arab countries who were expected to provide foreign direct investment, both of which were not forthcoming.
While international aid skyrocketed during Fayyad’s time in office, the PNA was unable to attract substantial Foreign Direct Investment (FDI). One of the documents from the Palestine Papers leak is a conversation between Fayyad and then head of the Quartet Tony Blair in which Fayyad, referring to the highly anticipated 2008 Investment Conference, noted that “the conference is more important conceptually than substantively [..] We want to show that despite immense adversity we are throwing a party” (248-249). Similarly, one of the WikiLeaks documents shows “how Western governments wielded behind-the-scenes influence to encourage OPT investments” (250). In one leaked document a US government official tries to convince Kuwaiti officials to announce investments in the conference with the officials expressing skepticism (similar to the efforts by Kushner in the later 2019 Bahrain workshop).
By the time Fayyad was removed from office, this state-building era had failed to produce real impacts on economic growth or unemployment that was not the direct impact of annual heightened aid. Aid started to dwindle after Western donors realized they were paying double what they paid during Arafat’s time, while “politically supporting and financially backing yet another emergent neopatrimonial regime led by Abbas” (227).
The Peculiarities of Palestinian Neoliberalism
Growing scholarly recognition of the rising influence of neoliberal social and economic policies and attitudes in shaping economic and political outcomes in the OPT intensified after Salam Fayyad was appointed as Prime Minister in June 2007. Barring a few seminal contributions, however, most of this new analysis fails to pinpoint the peculiarity of neoliberalism in the Palestinian context; rather, they presume the PNA was an active and able accomplice in the neoliberal agenda.
Haddad shows, by contrast, that the PNA actually had very limited autonomy in implementing donor-driven neoliberal policies. Given its lack of control over natural resources, borders, and most monetary tools, the PNA was not able to utilize eight of the ten Washington Consensus recommendations (a valid illustration of the neoliberal economic model) and was left only with “fiscal policy and public expenditure redirection” as tools it could utilize. But Haddad argues that this lack of tools and autonomy does not mean neoliberalism did not make significant inroads into the OPT. First, the PA used those two tools quite aggressively, especially in the later state-building phase. And more importantly, neoliberalism provided the core framework and ideology of the models of development, peace-building and state-building that were implemented in the OPT during the last 25 years. In fact, Haddad argues, the OPT experienced “more extreme” features of neoliberalism.
Pointing to the particularity of the Palestinian context and subordinated PNA, Haddad argues that if we accept that neoliberalism decenters the state and diminishes the national—as opposed to supranational—forms of government, then one should expect that this process will have even stronger effects on an entity with little autonomy, existing under settler colonial conditions.
Furthermore, neoliberalism operationalizes itself through an ideological separation of the political and economic spheres so that any discussion about relations of political domination and constraint (the architecture of Israel’s elaborate military occupation of Palestinian life and land) are removed from, or even internalized in, proposed policy options. Thus, international donor policies, actions and rhetoric rarely acknowledged Israel’s continuing military control over the OPT—in almost none of the World Bank reports can one find the word “occupation.”
Haddad provides many examples of occupation-circumventing policies that attempt to tackle the symptom rather than the disease. Instead of discussing Palestinian control over their own borders, donors suggested large scanners for trucks as a replacement to the inefficient back-to-back system (in which the cargo is moved from one truck to another). Instead of Palestinians having a say in labor movement, donors supported border industrial estates that utilized Israeli capital and exploited cheap Palestinian labor. But while donors managed to “work around the conflict” and were “unable and unwilling to exert any pressure on the Israeli side” (146), Haddad believes international donors were not, in fact, truly interested in resolving the fundamental issues at the heart of the conflict, but rather through international aid and distribution of the “peace dividend,” they had in fact been “molding the way Palestinians experienced conflict” so that such issues would not need to be addressed.
The goal of the donor community, Haddad argues, was to make this separation mindset (of economic and political) contagious. As a former World Bank Director, Joseph Stiglitz “envisioned a world where the acceptance of IFI policies was not the product of arm-twisting conditionalities of previous eras, but of the conscious embracing of donor recipient governments and society, because those who agree to those policies actually see their interests tied with these kind of linkages” (20). More than ten years later, Salam Fayyad essentially repeats this formula by saying that “the world wants us to have a good public finance system, but is that against our interest? What is wrong with that, let’s do that. I mean, we need to do it […] with every step that we take in the direction of institution building, that’s a step closer to our freedom, to our statehood” (209).
A final aspect that illustrates the unique characteristics of neoliberalism under Palestinian conditions concerns how corruption and rent-seeking behavior can thrive in such circumstances. Following Mushtaq Khan’s critique of neoliberal institution-building, Haddad argues that corruption, clientelism and economic rents in the PNA context “were directly the result of the specific arrangements set up by the Oslo agreement” (161). Haddad describes how a deformed economic transformation emerged as a result of that fact that “PNA rent allocation opportunities go toward rent-seeking opportunities that can exist and remain profitable despite de-development and the lack of sovereignty, and with some of these even having the potential to thrive under continued occupation and even conflict” (173).
At the same time, however, Haddad argues, contra Khan, that in discussing the net social cost vs benefit of rent-seeking behavior, the original not derivative rent should be taken into account. In other words, the costs should also be “calculated from an Israeli and international perspective” which would show that “the cost of providing the original strategic rents to the Arafat-led PNA for its own rent provision schemes significantly reduced the cost Israel had to pay to do the job itself” (164) which means that from an Israeli and international perspective, those rents were “certainly efficiency-enhancing”. Haddad also disagrees with Khan that some rents had a positive developmental character by bringing political stability and attracting “emerging” capitalists. In line with Adam Hanieh, Haddad argues that Palestinian capitalists who control the majority of economic activity in the OPT are in fact expatriate capitalists whose center of economic activity still lays in the GCC countries.
A Necessary Critique
Palestine LTD. is not an introductory text for understanding the Palestine-Israel conflict; it presumes a high level of prior knowledge and theoretical background. It is, however, a necessary text for scholars of the Middle East and recent developments in Palestine, and should be a critical source of historical knowledge and analysis for those in the international community who are involved in the Palestinian issue. Moreover, Haddad shows us that the Palestinian case after Oslo is a major example of how Western donors and financial institutions are shaping their methods and approaches to peace-building, state-building, development and humanitarian aid. By studying how Palestinians have been subject to neoliberal interventions by these actors, one may be able to understand the nature and impact of these policies elsewhere.
What is missing from Palestine LTD. is an accounting of the parallel developments in the Gaza Strip during the same period. While it is true that the international players relevant in the West Bank are different than those in Gaza, and that the neoliberal model imposed by IFIs does not have the same influence, one can still argue that since June 2007 a parallel “resistance dividend” was being distributed by an entirely different set of actors. Clientelism-like relations were also prevalent, especially in security forces personnel. Economic rents equaling hundreds of millions of dollars extracted from the system of tunnels between Gaza and Egypt were also shared between Hamas officials and Hamas-friendly businessmen in Rafah. In addition, both Arab countries and other regional powers such as Turkey and Iran have an ingrained influence on financial and political decision making within Gaza.
Finally, some might fault Haddad for his unrelenting criticism of the Oslo process, the PNA and the role of the international donors and their aid programs, accusing him of a cup half-empty approach, and of ignoring the importance of self-governance, even if limited as a step towards eventual statehood. The unfortunate reality for Palestinians, however, is that the Oslo Accords have proven to be a disastrous failure and have done nothing to slow down Israel’s relentless colonization and subordination of the OPT. The critical work of Haddad, as well as of Sayegh and Hanieh, for example, provides a necessary shock for Palestinians and their leadership to learn from the lessons of the past.
Endnotes
[1] Anne Le More, “Killing with kindness: funding the demise of a Palestinian state,” International Affairs,” 81, 5 (2005), p. 982.
