The Political Economy of Israel’s Occupation: Book Review

The existing literature on the Israeli occupation is highly compartmentalized.  Most works on the subject are written from a political or sociological standpoint. There are also some that focus on the so-called “economics of the occupation.” The Political Economy of Israel’s Occupation: Repression Beyond Exploitation, a newly released book by Shir Hever of the Alternative Information Center, differs from both genres: it sees the occupation not from a narrow perspective of a particular discipline, but from the broader vista of political economy.

Contrary to popular conception, political economy is not a simple juxtaposition or “linking” of politics and economics. Instead of forcefully marrying static economic modeling with the proprietary categories of politics, The Political Economy of Israel’s Occupation tries to develop its own encompassing framework. It offers analytical terms that are neither “economic” nor “political”; it engages in empirical analysis of the concrete reality; and it provides insights that are both contemporary and historical. The task is highly demanding, if only because there is no paradigm or dogma to rely on; but the results, often new and original, justify the effort.

The author of this innovative volume is a leading expert on the subject. In his capacity as head of political-economy research at the AIC, he has skillfully combined his intimate knowledge of economics, his impressive research abilities and his political activism to investigate almost every aspect of the occupation – in both Israel and the Occupied Palestinian Territory (OPT). The present book is a brilliant synthesis of this research.

The political economy of the occupation is not an easy subject to study. Judging by the dry tables produced by academics and public statisticians, the OPT appears as a self-contained entity, a geographic unit delineated by its own demographic, economic and political parameters. But this appearance is highly misleading. Subjugated to the direct and indirect controls of the occupation, these territories cannot be examined independently of Israel – just as Israel cannot be studied in isolation from the territories it dominates and oppresses. And, indeed, Hever’s book shows the deadly embrace of the two societies: the Israelis have been strangling the Palestinians for decades; but, as often happen to long-term occupiers, their control of others ended up transforming and undermining their own society.

The book comprises two parts – empirical-historical and theoretical. The first part examines key aspects of the occupation, including foreign aid, stagflation and the costs to both sides. The author revisits, organizes and classifies the basic facts, goes through the different research methods and looks at various theories and explanations. He also takes the extra step of peering beyond the aggregate front window and tries to answer the question that so few bother to ask: who gains from the occupation?

Foreign aid played a key role in the early development of Israel: it helped overcome the initial dearth of foreign reserves, it set in motion the government-directed growth process, and it bolstered the country’s war economy. The impact of such aid on the Palestinian territories has been very different: instead of liberating the population, says Hever, it made it dependent; and that dependency, by hindering development, helped propagate the occupation. Tragically, the Palestinians cannot afford to loose their foreign monetary shackles: without them, they face the prospect of mass hunger and social disintegration.

The contrasted relationship between the two societies is further illustrated by the evolution of inflation. In Israel, as elsewhere in the world, inflation has been decelerating for more than twenty years now, and recently it even flipped, at least on occasion, into deflation. Not so in the OPT, where inflation persists. The conventional explanation of inflation, popular among ivory-tower economists, finance ministry official and central bankers, is that prices rise together with booming income and expanding demand. But this explanation cannot be applies to the OPT, and for a very simple reason: prices there rise while personal income stagnates and purchasing power declines. According to Hever, inflation in the OPT has become an instrument of the occupation: on the one hand, it enables leading Israeli corporations, key Palestinian groups and various Oslo profiteers to extract fat profit margins; on the other hand, it raises the cost of living, thus keeping the population impoverished and production and exchange stagnant.

One of the key foci of the “peace literature,” particularly since the Oslo Accord, is the “cost of the occupation” for Israel. The book summarizes the literature on this subject, bringing together the various findings of mainstream Israeli academics and official institutions, as well as those of radical research groups affiliated with the Palestinians. Having dissected the many numbers with the vigil of an expert accountant, Hever draws the capitalist “bottom line”: for the past forty years (i.e., skipping the Ottoman, British and Hashemite periods) the cumulative cost of the occupation, net of the direct income it generated, comes to a staggering $100 billion (in 2007 prices). This cost is because the Israeli oppression provoked unprecedented Palestinian resistance. Not bad for an occupation that calls itself “humane.”

This figure comprises direct and indirect items, both material and metaphysical. It includes items such as military activities, the construction of barriers, fences and walls, public relation campaigns to justify the occupation and, of course, the crown jewel of the Zionist project: the settlements. Initially, the cost of these activities was relatively small. But as the Palestinians intensified their resistance and the Israeli stepped up their oppression, the tally grew steeper, reaching, according to Hever, an annual average of $7 billion.

In addition to these calculations, the book goes on to examine the ways in which the occupation altered the structure of Israel and undermined the health of its society. It tells a story of accelerating privatization, deteriorating public services, rising inequalities, centralizing ownership, declining democracy and a fracturing social fabric.

What, then, is the logic of the occupation? If Israel is indeed the open neo-liberal society that the dominant ideology tirelessly advocates, why does it act so “irrationally”? Why does a population of “rational utility maximizers” “choose” to maintain an occupation whose “costs” so obviously outstrips its “benefits”?

The second part of the book tries to answer this question. The author examines a variety of explanations and theories – some that deal specifically with the Israeli-Palestinian case and others that provide a broad political-economic framework within which this case be analyzed. Taken on their own, all of these theories – be they neoclassical, neo-Marxist or institutional – are found lacking. In their stead, Hever offers a synthesis: a political economy that combines Marxian theories of exploitation and dependency, Veblen’s theories of conspicuous consumption and sabotage, Bordieu’s theories of habitus and social capital, and Sen’s theory of entitlement. This synthesis shows that, contrary to the legend perpetuated by generations of local academics, Israel is hardly a “special case”: as an oppressive occupier, it merely follows the path trotted by many a predecessor and for much the same reasons.

The Political Economy of Israel’s Occupation is a must-read for anyone concerned with the Israeli-Palestinian conflict. It is not only an excellent summary of a highly complex subject, but also an original and unique contribution that deserves high praise and close attention.

The Political Economy of Israel’s Occupation: Repression Beyond Exploitation may be ordered from Pluto Press here.

If you are located in Palestine/Israel, please contact Shir Hever (shir (at) alt-info.org) about the possibility of purchasing the book locally.

Dr. Shimshon Bichler teaches political economy at various colleges throughout Israel, and is a board member of the Alternative Information Center (AIC). Professor Jonathan Nitzan teaches Political Economy at York University in Toronto, Canada. An archive of their writings may be found here.