By Adam Hanieh
For several years US and Israeli capitalists have been pursuing a policy of economic liberalisation aimed at further opening the Middle East to Western business.
To further this strategic aim — achieving a complete economic integration with the Arab world, gaining access to Arab markets and ending the 45-year boycott of the Israeli economy by its Arab neighbours — big capital has thrown its weight behind the "peace process". At the same time, both political parties of Israeli capital — Labour and Likud — have pursued mass-scale privatisation and liberalisation of the Israeli economy to attract foreign investment for their economic expansion program.
Egypt and Israel are working together on a joint natural gas pipeline, direct flights and bus routes have begun between Jordan and Israel, military co-operation has begun between Turkey and Israel and a free trade agreement between the two countries is expected to be signed next March. There was a 10% increase in automobile sales in Israel in 1995 due to the relaxing of the Arab boycott policy.
The relaxation of the boycott has so far occurred through the two Middle East and North Africa economic summits held in Morocco and Jordan. The Israeli government plans to present a report to the third MENA summit in Cairo in November which calls for a Middle Eastern "trade and processing hub" based on co-operation between Israel, Egypt, Jordan and the Palestinian Authority. This plan outlines a vision of the Middle East in which Israeli capital dominates surrounding countries which supply raw materials, cheap labour and efficient transport routes.
Israel's vision of economic normalisation is already being implemented on the ground. Leading Israeli fashion designer Castro Model has begun manufacturing in Jordan because of Jordan's low wages ($150 a month compared to $800-900 in Israel). Earlier this year the Israeli textiles company Delta Industries received its first consignment of textiles produced in Jordan.
The Israeli logistics company Maman has completed a cargo terminal on the Sheikh Hussein Bridge, the northern border of Israel crossing the Jordan River. Maman envisages that the terminal will used by Israeli exporters to ship their goods to the Middle East. A predicted $1 million worth of cargo will cross the Sheikh Hussein Bridge in its first year.
Israel itself has a GNP 20% larger than all other Middle Eastern countries combined. Israel's GNP per capita is $18,000, against an average of $11,375 in the Gulf and $734 amongst Israel's poorer neighbours. Open trade has been growing fast over the last few years, particularly with Turkey and Morocco. Trade with Turkey increased by more than 200% between 1992 and 1993.
These figures explain the almost universal support of the Israeli business community for the Madrid and Oslo peace agreements. It is significant that secret negotiations did not begin in Oslo until the PLO treasurer, Abu Ala, had circulated a discussion paper arguing that the economic integration of the occupied territories and Israel would be the underpinning of any peace agreement.
At the time of the agreement, there was much talk of industrial zones, a World Bank brainchild, that would line the Israel/Gaza border and would be fed by cheap Palestinian labour. In mid-February, Palestinian Authority economy, trade and industry minister Ahmed Qrei' announced that work would soon begin on a Gaza Strip "industrial park", to be followed by similar projects in Jenin and Tulkarem in the West Bank. According to the February 23 Palestine Report, the US would pay for the Gaza park, Israel for the Tulkarem park, and Germany for the Jenin park. Other industrial zones are planned for Rafah and Beit Hanoun (in the Gaza Strip) and Hebron, Bethlehem, Qalqilya, and Ramallah.
The August 2 Palestine Report said that, according to Palestinian economist and director of the Mashrq research centre, Dr Adel Samara, there is no room for international standards in these free zones because the Palestinian Authority's priority is promoting the private sector. The "open" economic policies will leave women and children especially vulnerable to exploitation, since they can be hired for lower wages, Samara said. According to the report, Israel welcomes the free industrial zones for several reasons. "First of all, Samara explains, 'Israel has succeeded in integrating the two economies and separating the two societies'. The Palestinian workers will be commuter workers, and will present no great security threat to Israel.
"The industrial zones will also be a gateway between Israel and Arab countries, as they will be able to establish companies in the zones. Palestinian workers will also continue being a 'potential reserve army' for employment — much as they are now for Israel. Much of the rhetoric regarding Palestine becoming the Singapore of the Middle East, he said, only applies in the area of low labor wages and the lack of workers' rights."
The Paris economic protocol signed in 1994 between the PLO and Israel encouraged the development of a complementary but subordinate economy in the occupied territories. Israeli companies would be encouraged to locate assembly plants in the territories to utilise the cheap labour, or to have Palestinian sub-contractors do it for them. The vast Palestinian citrus crops would be exported to Israel, repackaged by Israeli juice companies and sold to Arab countries with Palestinian labels.
These plans were parallelled by shifts within the Israeli domestic economy. The Israeli Labour Party under Yitzhak Rabin and Shimon Peres pursued a drastic program of economic rationalism. They inaugurated plans to privatise the two largest Israeli banks and tendering for a tollway that extends the length of Israel.
On January 1, 1995 they altered the health care system which had previously been controlled by the peak trade union federation, Histadrut, to a system relying on a health tax. The new scheme must operate within budget limits, meaning that the inevitable shortfall is picked up by private health funds.
Ironically, the effect of this economic program helped the victory of Benjamin Netanyahu in the May election. Labour and its centre-left ally Meretz have traditionally relied on the Ashkenazi Jewish community within Israel. Much of this community of white, European Jews who have dominated the middle and upper class in Israel, have benefited from Labour's liberalisation policies. Working-class Mizrahi Jews, originating from Arab, African and Asian countries, and new migrants from eastern Europe, who suffered the most from these policies, swung their support behind Netanyahu, the new party of Russian immigrants Yisrael B'Aliya, the Mizrahi-Orthodox Shas, and the conservative Israeli parties with demagogic anti-Arab slogans.
However, the election of Netanyahu promised only a faster pace of privatisation and economic deregulation. The contradiction faced by Netanyahu was summed up well by one of Israel's leading business magazines which editorialised after the election: "Israel has a tremendous socioeconomic gap, which Netanyahu's policy is liable to widen even further. Those sectors of the population that have been hurt in the past, and who will go on getting hurt, are those who voted for Netanyahu."
Netanyahu's economic course has proven this statement correct. The electricity market, currently covered by state-owned Israeli Electric Corporation, is likely to be deregulated to allow for private power providers. The Israeli transport minister, Yitzhak Levy, is currently in New York with US$20 billion of infrastructure projects for sale. He is planning to stop in London on his return to examine the privatisation process of British Airways. In early October, the Israeli defence minister said that even the Israeli Defence forces could be privatised!
In July, the cabinet approved budget cuts worth 4.9 billion shekels (around US$1.5 billion) which will be debated in the Knesset on October 29. These cuts include the removal of free child-care for large numbers of Israeli families and the introduction of fees for hospital visits. Senior citizens will lose many benefits and newly discharged soldiers will no longer receive pensions. The Israeli public service, numbered at 600,000, was to be cut by 6% over the next five years — at disproportionate cost to Netanyahu's settler base, which is over-represented on the public payroll.
The Likud plans face widespread opposition on the streets and within the Knesset. A one-hour public sector stoppage on July 1 was followed by a July 17 one-day general strike called by the Histadrut. Since returning from a July visit to the US, where the Congress and business community were impressed at the scale of Netanyahu's cuts to the Israeli budget deficit, he has retreated from some of the announced cuts and the planned privatisation of the larger public companies.
The contradictory relationship between Likud's policies and much of its social base may be Netanyahu's most difficult dilemma. Israeli capital demands both drastic cuts to the living standards of many of his supporters and a profitable "peace with security" in the face of settler bigotry. n