Palestine in the Middle East: Opposing neoliberalism and US power

By Adam Hanieh

July 15, 2008 -- Over the last six months, the Palestinian economy has been radically transformed under a new plan drawn up by the Palestinian Authority (PA) called the Palestinian Reform and Development Plan (PRDP). Developed in close collaboration with institutions such as the World Bank and the British Department for International Development (DFID), the PRDP is currently being implemented in the West Bank where the Abu Mazen-led PA has effective control. It embraces the fundamental precepts of neoliberalism: a private sector-driven economic strategy in which the aim is to attract foreign investment and reduce public spending to a minimum.

Understanding the logic of this economic framework is critical to assessing the current juncture of the Palestinian struggle. The neoliberal vision underpinning these policies is a central corollary to the political direction promoted by the Israeli government, the Palestinian Authority and their US and European Union (EU) supporters. The aim is to formalise a truncated network of Palestinian-controlled cantons and associated industrial zones, dependent upon the Israeli occupation, and through which a pool of cheap Palestinian labour is exploited by Israeli, Palestinian and other regional capitalist groups. The evolving institutional framework for the Palestinian economy not only incorporates the Israeli occupation into the way ``development’’ is conceived, but also acts to foster the culpability of Palestinian political and economic elites for how these structures operate.

Such an analysis, however, is only part of the story. The second part of this article argues that these changes in the West Bank and Gaza Strip cannot be fully understood without an appreciation of the regional framework of the Middle East. Over the last two decades, and particularly accelerating under the Bush administration, the US has pursued a policy of integrating its bases of support in the region within a single, neoliberal economic zone tied to the US through a series of bilateral trade agreements. This vision is aimed at promoting the free flow of capital and goods (but not necessarily labour) throughout the Middle East region. The region's markets will be dominated by US imports, while cheap labour, concentrated in economic ``free’’ zones owned by regional and international capital, will manufacture low-cost exports destined for markets in the US, EU, Israel and the Gulf.

A central component of this vision is the normalisation and integration of Israel into the Middle East. The US envisions a Middle East resting upon Israeli capital in the West and Gulf capital in the East, underpinning a low-wage, neoliberal zone that spans the region. What this means is that Israel's historic destruction of Palestinian national rights must be accepted and blessed by all states in the region. In the place of real Palestinian self-determination (first and foremost the right of return of refugees), a nominal artificial state will be established in the dependent islands of territory across the West Bank and Gaza Strip. This goal is an essential pre-requisite of US strategy in the region. Our political activities must be informed by this understanding if we are to successfully build effective solidarity movements to confront and turn back this project.

The Reform and Development Plan

On December 17, 2007, at a one-day conference in Paris, more than 90 international representatives from various countries and donor organisations gathered to pledge their support to the Palestinian Authority government headed by President Mahmoud Abbas (Abu Mazen) and Prime Minister Salam Fayyad. The conference was the largest of its kind since 1996, and was chaired by the French and Norwegian governments, Tony Blair (as representative of the Middle East Quartet) and the European Commission. Following speeches by various EU member states, the Palestinian Authority, the International Monetary Fund and the Israeli government, attendees at the conference pledged more than US$7.7 billion to the PA.

The main impetus for this conference was an attempt to garner financial support for a new PA economic strategy called the Palestinian Reform and Development Plan for 2008-2010 (PRDP). Based upon a detailed series of proposals written by the World Bank and other international financial institutions, the broad outlines of the PRDP were first presented in November 2007. Since that time it has become the guiding framework for economic policy, particularly in the West Bank areas where the Abu Mazen-led PA has effective control.

The first thing to note about the PRDP is that the heavy hand of the World Bank, the International Monetary Fund and other neoliberal institutions such as the British Department for International Development (DFID) can be clearly seen in its policy recommendations and outlook. The argument behind the PRDP is explicitly neoliberal, calling on the PA to undertake a series of fiscal reforms in order to foster an "enabling environment for the private sector" as the "engine of sustainable economic growth". Palestinian grassroots organisations have gone so far as to describe neoliberal financial institutions as "a de facto 'shadow government' in the West Bank, dictating the development programme of the Salam Fayyad government." [1]

What does the PRDP actually mean for Palestinians on the ground? As the name suggests, there are two main policy components to the PRDP: ``reform’’ and ``development’’. The reform component commits the PA to a program of fiscal tightening that exceeds measures imposed by the IMF and World Bank on any other state in the region. There are three key elements to this program.

First, in probably the harshest attack on any public sector in the Middle East in recent history, the PA has committed to cut 21% of the jobs in the public sector workforce by 2010. Nearly 40,000 people will lose their jobs through this mass layoff. [2]

Second, the PA has pledged not to increase any public sector salaries over the next three years. In an environment of very high levels of inflation (11% in the year to March 2008) and rapidly rising food and energy prices, this wage freeze is a recipe for disaster for the average person in the West Bank and Gaza Strip.

Finally, a further key component of the PRDP is the requirement that citizens present a ``certificate of payment’’ of utility bills in order to receive any municipal or government services. This measure will have a dramatic impact on the poor, as the subsidisation of electricity and water bills (i.e. allowing these services to continue despite the non-payment of bills) was a central means of survival for millions of people in an environment of rapidly spiralling poverty levels. This new measure means that individuals applying for various services -- including requests for ID cards, car licenses, building permits etc. -- will be denied if these debts are outstanding. Public sector employees will have utility debts docked from their salaries.

International financial institutions place such a high priority on the PRDP that virtually all donor support to the Palestinian Authority -- including the $7.7 billion earmarked at the Paris Conference -- is contingent on its implementation. To ensure this compliance, a new bank account called the PRDP Trust Fund has been established through which international support to the PA will flow. This account is headquartered in WashingtonDC and managed by the World Bank. The World Bank has explicitly stated that disbursements through this account are based upon "assessment of the progress of implementation of the PRDP". [3]

A 'Culture of Entitlement'?

To fully comprehend the impact of the PRDP measures they need to be placed in the context of the existing economic situation in the West Bank and Gaza Strip (WB/GS). During the period 1999-2007, Palestinian GDP per capita declined by approximately two-thirds and personal savings were wiped out as a result of Israeli attacks on Palestinian areas. These are the worst levels of poverty ever witnessed: around three-quarters of households in Gaza and well over half in the West Bank now live in poverty. [4]

In addition, over the last 15 years there has been a significant shift in the structure of the Palestinian labour force that further compounds the effect of these policies. Israel has reduced its reliance on Palestinian labour in areas such as construction and agriculture, replacing these workers with migrant labour from regions such as Asia and Eastern Europe. As a result, employment by the PA has become a key means of survival for Palestinians in the WB/GS. Around 20 per cent of Palestinian workers in the West Bank and Gaza Strip are employed by the PA in sectors such as education, health, security and municipal affairs. In an environment of increasingly high dependency ratios (an average of 5.3 people were dependent on each employed person in 2007), nearly 1 million people rely upon wages garnered from public sector employment. [5]

On 5 February 2008, soon after the announcement of the PRDP fiscal measures, public sector workers launched a strike. In addition to protesting the wage cuts and the ``certificate of payment’’, workers called for an increase in the ``travel expenses’’ component of their salaries because of rising costs of travel (a result of Israeli military checkpoints and fuel price increases). [6]

The strike was largely unsuccessful in turning back implementation of the PRDP. One of the main reasons for this is the fact that public sector workers in the West Bank (and their trade union representatives) are traditionally tied to Fatah, the ruling party that dominates the Palestinian Authority and is responsible for the PRDP. Because of this relationship, strikes and other labour actions tend to be curtailed in the name of political expediency. [7] Nevertheless, the strike did indicate the widening chasm between the Palestinian Authority's neoliberal trajectory and its ever-weakening claim to national liberation. One of the starkest indications of this was the language employed by the PA leadership in reference to the PRDP's proposed ``certificate of payment’’. Repeatedly throughout the strike, prominent PA representatives took to condemning public sector workers and the poor for their supposed "culture of non-payment" and "sense of entitlement".

It needs to be clearly understood that the Palestinian population in the WB/GS has no control over basic services such as water, electricity and telephone access. As a result of the system of control established by Israel in these areas, all of these utilities are supplied by Israeli companies through Palestinian interlocutors. The bill a customer receives for electricity may be written in Arabic, but the service is ultimately sourced from an Israeli company (with the exception of a small amount of electricity generated in the Gaza Strip).

Because of this relationship, the PRDP ``certificate of payment’’ essentially means that the PA has taken on the role of debt collector for Israeli companies, choosing to target the poorest layers of the community in order to sustain the structures of occupation. Even worse, the neoliberal language adopted by the PA blames millions of people living under never-before seen conditions of poverty for attempting to find ways to survive.

South African activist Salim Vally has recently noted that neoliberal municipal governments in South Africa use the same language of a "culture of entitlement" to describe the failure of poor township residents to pay new user-fees. Indeed, in a striking confirmation of the similar trends at play in both countries, Vally reveals that a few years ago, officials from the South African Cape Town municipal government awarded a visiting Palestinian delegation (including chief PA negotiator Saeb Erekat) a supply of pre-paid water meters as part of the drive to encourage the imposition of user fees. The PA has pledged to install these types of meters as part of the PRDP. [8]

By gutting 20 per cent of the labour force, imposing a wage freeze as prices skyrocket and compelling the poor to immediately pay millions of dollars in debt, the PRDP will have a savage and unparalleled impact on the population. These neoliberal measures will undoubtedly open significant fissures within the different political forces and social movements over the coming period. But key to any effective response is an understanding that the PRDP is not solely a deliberate attempt to impoverish the population. Rather, it aims at complementing the second component of the PRDP: its particular model of ``development’’.

'Development' and the industrial zone model

Alongside the fiscal measures discussed above, the PRDP promotes a series of development projects that have been heavily backed by the US, EU and the Israeli government. An essential pre-condition of this development model is a large pool of desperate, poverty-stricken Palestinian workers who are willing to accept the jobs envisaged under this type of ``development’’. This is the intersection between the ``reform’’ and ``development’’ components of the PRDP.

The PRDP development model aims at utilising cheap Palestinian labour in industrial zones and parks, located at the edges of the patchwork of Palestinian territories in the West Bank. Under this vision, Israeli, Palestinian and regional capital will cooperate (under the banner of ``peace’’) within these industrial zones to take advantage of very low Palestinian relative wage costs. While some of this production will involve traditional low value-added sectors such as textiles, some zones will focus on complementing high-tech sectors of the Israeli economy where a well-educated Palestinian labour force can offer low-wage alternatives. The goods produced will be exported to the US, the EU and the Gulf states. The Palestinian Authority will play the role of policing the several million-strong reserve army of labour locked behind the walls and checkpoints of the Palestinian territories. In return, the PA leadership will wield the trappings of a state, obtain for itself the privileges to travel and move freely, and earn a stake in the profits that flow from the zones.

The first stage in this scheme focuses on the West Bank where the government of Abu Mazen and Salam Fayyad wields power and is able to implement this vision with the support of the Israel. A series of industrial zones are planned for areas near Jenin, Nablus and Tarqumiya (near Hebron). Although the exact details of these zones have been kept under wraps, institutions involved claim that the initial phase is expected to directly employ around 40,000 workers with a similar number of jobs created ``indirectly’’ outside the zones. [9] If these plans come to fruition they will have a major impact on the structure of Palestinian labour in the West Bank: just under 20% of jobs in the West Bank will be tied in some way to these industrial zones.

Inside these zones, Palestinian and Israeli labour laws, wage levels, environmental regulations or other workplace conditions will not apply. Movement in and out of the areas will be controlled by the Israeli military and Palestinian security forces. Presumably, if Israel's typical pattern of movement control applies, workers will need to pass stringent security checks in order to obtain necessary work permissions. In this way, the ability to work becomes dependent upon complying with Israeli military orders (more than 11,000 Palestinians are currently held as political prisoners for violating these military orders). The main trade union body in the West Bank and Gaza Strip, the Palestinian General Federation of Trade Unions (PGFTU), has not been given the right to represent workers in the industrial zones.

Plans for the Tarqumiya zone would appear to confirm this prognosis. Turkey will be the major partner and financer of factories in the zone and will control internal security. The PA and Israel will control external security from their respective sides. Turkish sources expect around 200 factories to be established in the zone, employing around 10,000 Palestinians. Turkish business representatives explicitly note that in a global environment of low-cost Chinese goods, zones such as Tarqumiya will assist the relocation of Turkish industry across the region to take advantage of cheap labour. They also intend that the goods produced in the zone would be exported to the US, EU and the Gulf states. [10]

In addition to the exploitation of cheap labour, these zones serve to normalise and legitimatise the existing structures of the occupation. A clear example of this is shown by the case of the Jenin Industrial Estate (JIE). The land for the JIE has twice been confiscated from Palestinian farmers: in 1998 when the PA first mooted the idea for the industrial zone, and then once again in 2003, when the Israeli military confiscated the land as part of construction for the Apartheid Wall ``buffer zone’’.[11] Indeed, in a striking example of how this model of development is integrated with the structures of the occupation, the wall will form the northern border of the JIE.

The centrality of the industrial zone ``development’’ model to the US, Israel and the PA was confirmed at the end of March 2008 during a visit of US Secretary of State Condoleezza Rice to the region. On 30 March, at a meeting convened between Rice, Israel’s Defence Minister Ehud Barak and PA Prime Minister Salam Fayyad in Jerusalem, the establishment of industrial zones was a major topic of discussion. At the meeting, Israel agreed to facilitate the establishment of Tarqumiya and presented it as a ``confidence building’’ measure. The Tarqumiya project has also been heavily promoted by Quartet Representative Tony Blair as one of the four so-called ``Quick Impact’’ projects tied to the implementation of the PRDP.

The May 'Palestine Investment Conference'

As the March meeting between Rice, Barak and Fayyad indicated, the construction of zones such as Tarqumiya and the JIE is a high priority of current political negotiations. Another component of the tripartite meeting was a discussion of how Israel would help to facilitate a ``Palestine Investment Conference’’, convened in Bethlehem from May 21 to 23. This conference unquestionably confirmed the neoliberal trajectory of the Palestinian Authority and the integration of the Israeli military occupation into its development model.

More than 1000 delegates attended the conference, including all of the key figures in the Palestinian Authority (Abu Mazen, Salam Fayyad and other key ministers were present).[12] It brought together the wealthiest Palestinian capitalists from outside the country (particularly North America and Europe), as well as regional Arab capital from Jordan, the Gulf and elsewhere. The conference was sponsored by the main Palestinian business groups active in the West Bank and Gaza (including the Arab Bank, Bank of Palestine, Paltel, Consolidated Contractors Company, Arab Palestinian Investment Company); large foreign capital (CISCO, Intel, Coca-Cola, Marriott Hotels, Booz Allen Hamilton); and US and European governmental organisations (USAID, DFID and the French Development Agency).

The main aim of the conference was to showcase the neoliberal attacks on the public sector implemented by the PA under the PRDP, holding these up as ``good for business’’ and an attractive reason to invest in Palestinian areas. In addition to the industrial zones discussed above, several projects were promoted throughout the conference that aimed at bringing together Arab and Israeli capital in joint investments. Israeli businesspeople were encouraged to attend, although this fact was not widely publicised due to the opposition of the Palestinian public to these types of joint projects.

One of the projects highlighted during the conference was the ``Corridor for Peace and Prosperity’’ (CPP), which aims to create an agroindustrial zone in the fertile areas of the JordanValley. For centuries the JordanValley has been a key agricultural area for Palestinian farmers in the West Bank. But following the occupation of the area in 1967, the Israeli military proceeded to evict many of these farmers, confiscate land and establish Israeli settlements (first as military-agricultural settlements and then as Israeli agribusiness and civilian settlements). By controlling water, access routes and other resources, the land essentially became an Israeli military zone although scattered Palestinian villages remained in the area.

The CPP aims to establish a free trade agricultural zone in the area that will turn the small-scale Palestinian farmers into day labourers and subcontractors to large agroindustry controlled by Israeli and regional capital.[13] In other words, not only does the CPP consent to the occupation and expropriation of land that has taken place over the last 40 years in the Jordan Valley, it actually aims to integrate this occupation into the project itself. The agricultural produce grown as part of the CPP will do nothing to alleviate concerns of food security in the area: the produce is intended for export to Israel and the Gulf states.

One final indication of the relationship between the structures of occupation and the neoliberal development model was the support given by the Israeli military to the conference itself. While everyday residents of Bethlehem are unable to move without elaborate security procedures, special coloured ID cards and dedicated checkpoints, conference attendees entered the country and were granted the right to travel without harassment or any security checks at Israeli borders. Despite the fact that more than 200 Palestinians in the Gaza Strip have died in the last year due to the Israeli-imposed siege and inability to travel for urgent medical treatment, Israeli authorities permitted Gaza businessmen to attend the conference. A sign erected by the Israeli military at the entrance to Bethlehem welcomed people to the conference. The sign was written in Arabic, Hebrew and English and was emblazoned with the logos of the Israeli military occupation.

It should be stressed that the conference did not pass without strong opposition from grassroots forces within the West Bank and Gaza Strip. A statement put out by the Boycott, Divestment and Sanctions National Committee, and endorsed by a wide array of political forces, stated:

``Economic and social development in Palestine is crucial, and it is imperative that we should take should steps to improve the current economic and political situation. However, despite the ongoing national and international conferences designed to bring together the national efforts and resources; and despite the support of international solidarity, we believe that the economic conference that will be held in Bethlehem over the next few days, with the attendance of official and non-official Israeli representatives, has a serious political implications that cannot be ignored... The proposed projects take as their starting point Israeli participation in decision-making, and Israeli control over their legal status ... [they] are designed to meet the economic demands of the Israeli administration, not those of the Palestinian people... These are not the development projects we want or need. What we require is a national Palestinian conference with Arab and international support for strengthening Palestinian steadfastness and as a step toward ending the dependency on the occupation and its economy." [14]

In sum, the PRDP fiscal measures and their allied development projects will in no way contribute to ending the Israeli occupation of the West Bank and Gaza Strip. In reality, these measures will only act to strengthen that occupation by conferring it the supposed legitimacy and blessing of the Palestinian Authority leadership. The vast majority of the population in these areas will find their living conditions worsen as a direct result of these plans. But while the PRDP and events such as the Investment Conference stand as a damning indictment of the trajectory of the Palestinian Authority, the forces driving this type of neoliberal vision do not simply result from corruption, infighting or mistaken strategic choices. Rather, they are embedded within the overall US-led economic reconfiguration of the Middle East.

US reconfiguration of the Middle East

In the late 1960s, with the definitive collapse of British and French colonialism in the Middle East, the US rose to become the dominant imperial power within the region. Because of the presence of oil, the Middle East became critically important to the overall construction of US hegemony in the global order. Control of the region's resources functioned simultaneously to secure a vital commodity, provide a source of profits, and as a cudgel with which to influence rival powers within the global marketplace. In the last 30 years, the region -- particularly the states of the Gulf Cooperation Council (GCC) -- has taken on an increasingly important role as a source of flows of surplus capital -- and hence overall power -- within the global financial order.

US policy towards the region is driven by these factors. Because the Middle East is a vital nexus of overall US power in the global economy, it needs to develop a political framework that will sustain and maintain its influence in the region. This political framework (otherwise known as US ``foreign policy’’) is worked out through the daily debates, struggles and experiences of US capital and its representatives in governments, boardrooms and think tanks. Despite the real and important differences that continually arise, a broad consensus has emerged throughout the last four decades over how to exert and maintain influence in the region. This consensus rests upon three key pillars.

Three pillars

First, like elsewhere around the world, the US relies upon corrupt governments and narrow elites that are dependent upon it for military and economic survival. We can see this most clearly in the case of Jordan and Egypt -- two key US allies in the region. These governments cooperate closely with the US in matters of regional security and economic ties as well as the global ``war on terror’’. They have extensive networks of secret police and their prisons are filled with individuals who have been tortured in close cooperation with the CIA and other bodies. Their economies are wide open to foreign investment and neoliberalism has held sway for years.

Second, in addition to these client regimes, the US power rests upon the countries brought together through the regional integration project -- the Gulf Cooperation Council. The GCC was established in 1981 between Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates. As a regional integration project, the GCC resembles the European Union, aiming to create a single economic zone covering the six member states with uniform laws, economic policies, a common central bank and single currency by 2010. The GCC countries are particularly dependable allies of the US. Their heavy reliance on migrant workers means that they differ from states such as Iraq, Iran, Egypt and others where strong indigenous working-class movements present a potential threat. The GCC is also a key outpost for the US military in the region. In 2003, the US military moved its Centcom forward headquarters, the unified commander centre for operations in 27 countries, to Qatar. By 2005, according to a US congressional report, more than 100,000 US military personnel were located in Gulf states (not including the approximately 150,000 in Iraq or security personnel operating under private firms).

Most importantly, the third key prop to US power in the region is the Israeli state. Since the 1967 war, Israel has played a key role in defending US interests in the region. It is the weapon that the US uses when it wants to crush popular movements but is unable to invade directly. There are many examples of this -- beginning in 1967 and continuing throughout the 1970s, Israeli military attacks and assassinations crippled leftwing and Arab nationalist movements throughout the region that were threatening client regimes. During the 1980s, Israel was used to crush Palestinian and progressive forces in Lebanon.

Israel has promoted US foreign policy objectives across the globe. It was a key political, military and economic supporter of apartheid South Africa and in the peak years of boycott and sanctions was the conduit for South African goods into Europe (one of the reasons for Israel's central position in the world diamond trade). In Latin and Central America, Israeli weapons and training were used to arm and equip the military dictatorships of the region during the 1980s.

Since the early 1990s, within the context of a generally more favourable global geopolitical environment, the US has attempted to reshape the relationship between these three pillars of support in order to better consolidate its power and influence. The underlying goal of this policy is to tie these three pillars together in a single neoliberal economic zone (dubbed the ``New Middle East’’ by Condoleezza Rice in 2006). It is very important to understand this strategy: it is key to the regional environment in which the politics of the region is unfolding today, as well as the specific forces driving economic plans such as the PRDP.

The `New Middle East’ and MEFTA

The central thrust of the ``New Middle East’’ strategy is the deepening of neoliberal economic policies -- such as privatisation, free trade agreements, cutting-back of public sectors, opening to foreign investment, removal of state subsidies and so on -- throughout all states in the region. Over the last decade, cajoled by international financial institutions such as the World Bank and IMF and supported by regional bodies such as the Arab Monetary Fund and the Arab Business Council, virtually all governments in the region have embraced these policies.

The neoliberal turn is indicated by the rapid wave of privatisation across the Middle East: factories, airlines, postal services, hospitals, banks, electricity and water plants have been transferred into private hands. Most importantly, from the perspective of US and other foreign capital, the opening of the region's oil and gas fields (and the downstream sectors of petrochemical industry) promises a generational reversal in ownership structures. The most dramatic example of this is found of course in Iraq, where the government recently agreed to the return of the four largest Western oil companies (the same four companies which controlled Iraqi oil from the 1920s until nationalisation in 1972). Despite the uniqueness of the Iraqi occupation this is not an isolated example, elsewhere in the Gulf foreign oil companies are also winning access to oil and gas resources that have been off-limits for decades. In 2003, for example, foreign oil companies were given access to explore for gas in Saudi Arabia for the first time in three decades.

Neoliberal policies have also meant the removal of subsidies on basic items such as food, fuel, electricity and water, and rent. This is often mandated by the World Bank and IMF in return for loans and other aid. As early as 1991, a World Bank loan to Jordan was conditional on the doubling of the price of electricity and an increase in the price of water by 140 per cent. And this year in Egypt, where 22 per cent of the population lives below the poverty line of $1 dollar a day, and with food prices having more than doubled over the past year, the government lifted subsidies on fuel prices leading to a more than 40 per cent increase overnight.

The most far-reaching aspect of neoliberalism in the region, however, is the implementation of bilateral Free Trade Agreements (FTAs). The US has signed FTAs with individual countries including Bahrain, Oman, Egypt, Jordan, Israel and Morocco. These FTAs commit the countries in question to open their markets to US companies and prevent them from controlling import policies (such as privileging local companies or hindering the flow of foreign capital into the region). In doing so, they inevitably mean the destruction of local industries and, most importantly, the inability of countries to extend state services and public spending designed to help the poor (as this would be considered ``discriminatory’’).

There is an additional development of FTAs in the region that is essential to understand: the Middle East Free Trade Area (MEFTA). Announced by the US in mid-2003, the goal of MEFTA is a single, free trade area across the Middle East by 2013. The logic behind MEFTA is explicitly neoliberal: maximum wealth, happiness and prosperity will be achieved by removing all barriers to exports and capital flows into and within the region, treating foreign capital on par with domestic capital, adopting widespread privatisation programs, allowing foreign ownership, and reducing state expenditure on social services.

In June 2003, then US Trade Representative Robert Zoellick gave a speech to the World Economic Forum in Jordan where he clearly outlined these principles as the basis of the MEFTA plan. Zoellick's speech blamed poverty, unemployment and terrorism on Arab ``autarky’’ and ``failed socialist’’ models. He argued that if economies liberalised and opened to foreign capital within a regional trading bloc then these problems would be solved. According to Zoellick, the goal of the US "is to assist nations that are ready to embrace economic liberty and the rule of law, integrate into the global trading system, and bring their economies into the modern era".

The US strategy was to negotiate individually with ``friendly’’ countries in the region using a graduated six-step process eventually leading to a full-fledged FTA between the US and the country in question. These individual FTAs would then be linked over time until the entire Middle East came under US trading influence. In essence, the logic driving MEFTA is an economic free trade zone across the whole region, anchored by Israeli capital in the west and Gulf capital in the east, and each tied in turn to the US economy in the advanced capitalist core. This is what Condoleezza Rice means by the ``New Middle East’’.

Normalisation with Israel

Paramount to achieving this vision is the economic and political integration of Israel into the region. It is very important to understand this point: ``normalisation’’ (as it is called by the Palestinian and Arab left) is the sine qua non of MEFTA and the neoliberal vision for the region. A rejection of normalisation has long formed a dividing line between progressive forces in the region and those governments and leaders willing to collaborate with Israel and US imperialism. The basic contention behind the rejection is that Israel should not be considered a ``normal’’ country in the region as long as it refuses to recognise the explicitly colonial nature of Zionism and denies the right of Palestinians to return and self-determination.

The US insistence on economic and political normalisation of Arab state relations with Israel is nothing new. The linkage of this objective with neoliberal policies, however, came to the surface during the 1990s with the Oslo Accords. As Oslo unfolded, the US and other world powers sponsored a series of four consecutive summits, known as the Middle East and North Africa (MENA) Economic Summits, first held in Morocco in 1994. The Jordanian government was not shy about promoting MENA's goal of normalisation, with its foreign ministry openly noting that the summits are "intended to create economic interdependencies between Arab states and Israel, promote personal contacts between the two sides and foster trade, investment and development".

Following the onset of the Palestinian uprising in late 2000 and the apparent breakdown of negotiations between Israel and the PA, discussion of a trend toward normalisation of relations with Israel may appear mistaken. Yet away from the public spotlight, the economic and political ties between Israel and Arab governments continue to deepen. One example of the essential link between neoliberalism and normalisation are the bilateral FTA agreements. Each of the agreements between the US and countries in the region contains a clause that commits the country in question to normalisation with Israel, and forbidding any boycott of trade relations.

Perhaps the most revealing confirmation of the way in which normalisation has become integrated into the neoliberal project is the establishment of the so-called Qualified Industrial Zones (QIZ) in Jordan and Egypt. These zones came about as a result of economic agreements between the US, Israel, Jordan and Egypt. Their establishment contained the extraordinary provision that goods produced in these industrial areas can gain duty-free status to the US provided that a certain proportion of inputs are Israeli.

Most of these QIZs contain textile factories that act as subcontractors for large US capital such as Wal-Mart, and GAP and other clothing chains. The factories themselves are owned by regional and international capital, predominantly from the United Arab Emirates, Israel, China, Taiwan and South Korea. Although it is difficult to accurately determine the size of the QIZ workforce, it is estimated that in Jordan they hold more than 40,000 workers, most of whom are migrant labourers from Bangladesh, Sri Lanka and other South Asian countries. The conditions in which they work are horrific and rarely tackled by Arab leftists and trade unions. No labour laws apply and workers are prevented from joining unions. Pay is as low as 2 cents an hour, with 72-hour shifts reported. Workers are regularly beaten, sexually assaulted and forced to live in extremely overcrowded and filthy conditions. They must pay their own way to reach the Middle East and their passports are confiscated from them on arrival.

These QIZs have come to dominate bilateral trade between the US and Jordan (and to a lesser extent, Egypt). By 2007, the US government was reporting that exports from the thirteen QIZs established in Jordan accounted for an astonishing 70 per cent of total Jordanian exports to the US. Egypt launched its first QIZ in 2004 and now has four of these areas. By 2006, the proportion of Egyptian exports to the US produced in QIZs had reached 26 per cent of total exports.

These zones are constructed to weld Israeli and Arab capital together, integrating them with the US market and the American empire, in the joint exploitation of cheap labour. No clearer depiction can be found for how the US envisions the New Middle East.

Destroying popular unity

A corollary of this US-inspired vision of a single neoliberal economic zone linking Israeli and Middle East capital is the sustained attempts to fracture and break apart the forms of political unity and social resistance, both national and regional, that stand opposed to this outcome. US foreign policy in the Middle East, it needs to be stressed, is preoccupied with isolating and then breaking any forces that stand opposed to its vision.

For this reason, US military intervention in the region must be understood as a necessary complement to neoliberal ``peace’’. With the US occupation in Iraq, and the threats and attempts to destabilise and attack Iran, Syria and Lebanon, the US supports and cultivates those social forces that it hopes will act as subserviently towards its interests in the region, and pursue normalisation with Israel, as have the Jordanian and Egyptian governments. The most important factor in US policy is to limit capacities for countries in the region to exert independent control over economic or foreign policy. In this sense, regardless of the regimes in place (and we should not forget that countries like Iran and Syria have their own dungeons filled with political prisoners), the national interests of these countries inevitably clash with the forms of rule that the US attempts to impose on the region.

In the case of Palestine, this fracturing of national unity of the resistance is pivotal to the success of the neoliberal project in the region. Because of the intimate relationship between normalisation with Israel, and the US vision for a single neoliberal economic zone stretching across the Middle East, the Palestinian struggle holds a central position within the broader regional anti-imperialist struggle. The fact that, sixty years on, Palestinians have refused to accept their expulsion in 1947-1948 and continue to demand the right to return and live on their land, is a potent threat not just to the racist character of the Israeli state but also to the nature of US power in the region. This is why it is impossible for any progressive movement to develop in the region that is not centrally concerned and linked with the Palestinian struggle. All popular struggles across the region are soon intertwined with the question of Palestine.

This also means that successful regional struggles against the imposition of neoliberalism act to strengthen the Palestinian struggle. Recent strikes and worker demonstrations in the Egyptian town of Mahalla are one example of this. Mahalla is home to the largest textile factory in the Middle East (with a labour force of 27,000 workers) and is also the location of one of Egypt’s QIZs. For two years, these workers have been at the centre of one of the largest strike waves in the Middle East, culminating most recently in an attempted strike on 6 April 2008 that was met with bloody repression by the Egyptian government. During these actions, demonstrating workers carried placards denouncing Egyptian President Hosni Mubarak's close links to the IMF, the US government, and the process of normalisation with Israel. These strikes thus need to be understood not only in their narrow economic sense of improving wages and conditions in Egyptian factories, but also through the way that they inevitably confront the nature of the Egyptian regime and its role in the configuration of US power in the Middle East.

This is the same context in which the PRDP and the actions of the Palestinian Authority must be situated. Since the beginning of the Israeli occupation of the West Bank and Gaza Strip in 1967, Israel has aimed at truncating the Palestinian population in those areas into isolated population centres divided from one another by Israeli settlements, bypass roads and military installations. These pockets of territory -- aptly described as bantustans by many analysts in reference to the black ``homelands’’ developed under apartheid South Africa -- would be given the trappings of autonomy. But in reality they would be nothing more than open-air prisons. In place of direct Israeli military rule over the Palestinian population in these areas, a quiescent Palestinian leadership would mediate Israeli control. As with all prisons, real control would remain with those who hold the keys: i.e. the Israeli occupying forces that continue to regulate the entrance of all goods, people and services.


The Oslo process was designed to formalise the establishment of these Palestinian bantustans and to confer the blessing of the ``international community’’ on a subservient PA. Although this intention was disrupted by the beginning of the popular Palestinian uprising in September 2000, it is painfully obvious to anyone who cares to look at a map of the West Bank and Gaza Strip that these bantustans have taken on a very real existence with the final contours of the Apartheid Wall encircling villages and towns in the West Bank. An elaborate scheme of checkpoints, ID cards and permits completely regulates entrance in and out of these areas of people and goods.

We can see the reality of this system of control in the case of Gaza, which can perhaps best be understood as a test case for the West Bank. Because the Hamas-led government in the Gaza Strip has not accepted the vision of bantustanisation or normalisation, Israel has chosen to simply lock 1.5 million people within an open-air prison and attempt to starve them into submission. The Palestinian Authority, despite some lip service to the unity of the West Bank and Gaza Strip, has generally acquiesced to this siege. Indeed, in a striking example of how the PA leadership has effortlessly come to adopt the language of Israel, a key PRDP document states that blame for the siege on Gaza should be laid at the feet of Hamas, ignoring the fact that Israel's closure of the Gaza Strip and separation from the West Bank is not a new phenomenon, but has been evolving since 1989 as part of a clear strategy to fracture territory.

Palestinian and other regional capitals are fully integrated into this project through joint economic schemes such as the industrial zones outlined above. These forces directly benefit from the bantustan arrangements and will be granted some controlled economic spaces in which to accumulate. As the Palestine Investment Conference attests, they will not be subject to the same restrictions on their movement as the average Palestinian. Blessed with the appellation ``peace’’ by the ``international community’’, this solution will be heralded as the ``Palestinian state’’.

In reality, the truncated patchwork of territories and industrial zones has nothing to do with national self-determination. Within this evolving map, the West Bank becomes the gateway for Israel into the broader Middle East hinterland. The massive highways running east-west across the West Bank, and that connect Israeli cities on the Mediterranean with settlements in the Jordan Valley, are clearly designed for much more than local traffic: they are intended to function as conduits for trade between Israel and the Gulf (through Jordan and the West Bank). The success of MEFTA, and the parallel normalisation of Israel into a neoliberal Middle East, is predicated on the successful completion of this process.


Activists and supporters of the Palestinian struggle spend much time documenting and conveying to a broader audience the horrific conditions faced by the Palestinian population in the West Bank and Gaza Strip. The litany of abuses faced by the people of Gaza under the siege, the ongoing construction of settlements and the Apartheid Wall in the West Bank, the ways in which movement and daily life are regulated by Israeli military orders, and the ever-growing levels of poverty are all meticulously catalogued.

These facts are essential to explaining the depth and scope of Israeli control over Palestine. For those who have not had the opportunity of living under or witnessing these conditions first-hand, the routinisation of misery that is the reality of everyday life in Palestine needs to be conveyed.

Yet, it is necessary to understand that an appeal for solidarity based on these ever-present human rights abuses does not go far enough. Palestinians are not victims but a people in struggle. This struggle goes beyond the borders of the West Bank and Gaza Strip: it is a central component of a broader regional fight. It is impossible to understand events in any country of the Middle East today without situating the national context within the single, coherent and unified offensive that the US and other imperialist states are waging against the peoples of the region. It is not merely the depth of suffering or length of exile that makes the Palestinian struggle an imperative of international solidarity in the current period. It is also the central location of the struggle within the broader context of global resistance to imperialism and neoliberalism.

At the heart of this regional framework is the intrinsic relationship between the development of neoliberal capitalism in the Middle East and normalisation of relations with Israel. All of the efforts of the US and their client regimes in the region are aimed at promoting these inter-related themes. It is not accidental that the key discussions at the regional meetings convened between Rice, representatives of the Quartet and other international figures revolve around ways of encouraging joint projects between Israeli and regional capital, including Palestinian capitalists. This is why the bilateral US FTA agreements centrally insist upon normalisation with Israel, and why such an enormous effort has been extended in schemes such as the Qualified Industrial Zones.

Boycott, divestment and sanctions

Solidarity activists can play a key role in rejecting and preventing this process of normalisation. While this has long been a demand of the Palestinian and Arab left, the call has gained a renewed urgency following Bush's announcement of the MEFTA plan in 2003. In 2005, Palestinian grassroots organisations called for a global movement of boycott, divestment and sanctions (BDS) against the Israeli state in the manner of the campaign against South African apartheid. Since that time, student groups, municipalities, artists and labour unions around the world have passed BDS resolutions in support of the 2005 call.

This movement is critical to the overall struggle in the region. International solidarity is not a question of charity or helping out the ``misfortunate’’. It is fundamentally a question of siding with and supporting people in struggle. The BDS call reinforces and strengthens those regional forces that refuse to normalise with occupation and apartheid in Palestine. It is aimed at severing the international support -- ideological, economic and military -- that enables the Israeli form of apartheid to continue.

The effort to de-legitimise and turn back normalisation with the Israeli state is, moreover, not just an act of solidarity with the Palestinian struggle. It is also an indispensable element in supporting other peoples of the region, whether in the struggle against the US-led occupation of Iraq, attempts to prevent military action against Iran, or numerous other popular movements across the Middle East. But most fundamentally -- because of the region's central role in underpinning global US hegemony -- what happens in the Middle East has implications for all. Confronting the neoliberal policies of immiseration and ``race-to-the-bottom’’ competition that have brought such catastrophe to the vast majority of the world's people depends critically on our future success.

[Adam Hanieh is a doctoral candidate in political science at York University, Toronto. His research looks at the political economy of Middle East and the Gulf Cooperation Council. This article first appeared in The Bullet, no. 125, July 15, 2008, the e-bulletin of the Socialist Project (Canada).]


1. Stop the Wall, "National BDS Steering Committee: Bethlehem investment conference: development or normalisation," at

2. The PA attempts to obfuscate this mass layoff by claiming that those losing their jobs were not ``legally appointed’’. Regardless of the hiring procedures, this will have an enormous impact on those relying upon this employment for survival. See Palestinian National Authority, Building a Palestinian State: Towards peace and prosperity, p.14,

3. World Bank, Trust Fund Details - as of June 2008,

4. Karen Laub, "IMF: Palestinian Reform Plan Doable", Associated Press, December 11, 2007.

5. Statistics on labour force and dependency ratios available from Palestinian Central Bureau of Statistics, at

6. Amira Hass, "Democratic Suspicion", Haaretz, 6 February 2008.

7. A similar dynamic was revealed during the last significant strike over 10 years ago, when Palestinian teachers sought to win higher wage levels. This 1997 strike was initiated and led by a grassroots committee of teachers who bypassed the traditional union structures allied to Fatah. It was met with severe repression that saw dozens of teachers arrested by the Palestinian Authority. Industrial action by teachers continued off and on until 2000, when the onset of the Palestinian uprising ended organising attempts in the name of "national unity".

8. Salim Vally, "From South Africa to Palestine: Lessons for the New Anti-Apartheid Movement," Left Turn Magazine,

9. See the Palestinian Industrial Estates and Free Zones Authority,

10. Guven Sak, "The Challenge of Developing the Private Sector in the Middle East," The Economic Policy Research Foundation of Turkey, May 2, 2008.

11. Stop the Wall, "Development or normalisation? A critique of West Bank development approaches and projects", at

12. See the conference website at for the conference attendees, press coverage, and presentations.

13. See "Development or normalisation?", op cit, for a full critique of this project.

14. Stop the Wall, "National BDS Steering Committee: Bethlehem investment conference: development or normalisation",