The rise and decline of Palestinian economic thought and practice in the age of national liberation

I.    The Road from Beirut to Jerusalem passes through Washington On the eve of the dismemberment of the Palestinian Liberation Organization (PLO) military apparatus and its related civil and political infrastructure in Lebanon in 1982, even friendly Lebanese critics of its performance in Lebanon were not far off the mark

Raja Al-Khalidi

Palestinian Economic Development Expert

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I.    The Road from Beirut to Jerusalem passes through Washington

On the eve of the dismemberment of the Palestinian Liberation Organization (PLO) military apparatus and its related civil and political infrastructure in Lebanon in 1982, even friendly Lebanese critics of its performance in Lebanon were not far off the mark in describing it as a “state within a state”.  Until its evacuation to all corners of the Arab world as a result of the Israeli invasion of Lebanon, the PLO administration had effectively shared sovereignty with the Lebanese State over a large swathe of the country for most of the preceding decade and had developed state-like institutions. Not surprisingly, it was tempted to pretensions to “national” state-building goals even in the exile of the refugee camps of Lebanon.  Since it entered Lebanon in the early 1970s fleeing the “Black September” it had faced in Jordan, the PLO had established a massive military-security and political presence throughout the camps and in much of the south, east and north of the country. Alongside that, an elaborate system of civilian social services (health, educational and welfare), community and party popular mobilization, trade unions and industrial production and marketing enterprises had taken root in Lebanon by 1982. The PLO, especially its leading Fatah faction, also channeled hundreds of millions of dollars of Arab official aid and taxes collected on its behalf from Palestinian working in the Gulf states, while also operating a clandestine financial network to fund the armed struggle in Lebanon and globally.
Despite the military and political defeat ultimately endured by the Palestinian national movement in Lebanon, this broader institutional landscape seemed for a moment to manifest the PLO’s “viability” as a forerunner of the national state project in a future liberated Palestine that was still a twinkle in Palestinian planners’ eyes. The most prominent Palestinian industrial institution in Lebanon by then was Fatah’s Samed Institution, established to produce for both the PLO and the broader Palestinian market. In the vision of PLO Chairman Yasser Arafat at the time:
“Samed embodies aspirations that go beyond the original goals set for it, and it is a school for fighter-workers, a structure for training the children of martyrs, an industrial base to employ them, together constituting the core of the independent Palestinian economy and of a Palestinian public sector liberated of bureaucracy and infused with the determination and spirit of revolution.”
And yet within a little more than a decade the PLO had signed off in Paris on an economic policy package within a limited self-government deal with Israel that aborted the plans and possibilities for an independent Palestinian economy and enshrined a “free market” economy designed in line with the spirit of globalization and trade liberalism. Over thirty years have passed since the so-called “Fakhani Republic” was relegated to just one more chapter of a long Lebanese civil conflict and of the wandering in exile of the Palestinian resistance movement. The heralded Palestinian “public sector” has been reduced to a $1.5 billion corporate investment fund with minimal public oversight and some leftover assets on international financial markets. The top-heavy Palestinian self-government bureaucracy is limited to the management of a handful of resource and commercial rents that its soft-touch regulatory role permits. Meanwhile, the spirit of revolution is hard to discern in the restaurants and leisure spots of the de-facto capital of Ramallah or in the burgeoning gated communities of its increasingly gentrified surroundings.
When and why did the Palestinian revolution abandon its national liberation economic development programme? What went wrong, or perhaps, what went right? Was its liberationist path subverted by the forces of neo-liberal capitalism in a bogus “money-for-land and peace” deal instead of the “land-for-peace” formula that supposedly underpinned the Oslo agreements with Israel? Or, as so many of its predecessors in the Global South, did the PLO simply succumb to the same pitfalls of nationalism that Frantz Fanon warned against in post-colonial countries? Yet, why did it accept to do so within the framework of prolonged occupation and colonial rule? 
The trajectory of “national economic thought and practice” is a part of Palestinian revolutionary history that has yet to be researched or revealed and one that this paper can only conceptualise and scratch the surface of in an effort to pose the relevant questions. The most telling archives and documents that chart the shifts in Palestinian economic thought and policies before and after Beirut (1982), between Madrid and Oslo/Paris (1994), during the Arafat Palestinian Authority (PA) regime in the occupied territories and also since 2005, will most likely remain inaccessible to researchers and historians for years to come (Wikileaks notwithstanding), if they even still exist. 
Similarly, little has been written about how Palestinian capital survived the 1948 Nakba and reformed in the Gulf and Arab States in the exile of the 1950s and 1960s in the wider context of Pan-Arabism, and then re-emerged as an ally of the Palestinian revolution and more recently as a partner (if not leader) in Palestinian economic development. Class formation is also an important dimension of the broader context that shaped PLO economic ideology and practice and, some would argue, the determining factor in the decline of the economics of national liberation and the rise of the fundamentals of the market more recently. Indeed, much critical comment in the past years, including by myself, has focused on the trade-off implicit under recent PA policy (if not since Oslo) between the two NLs (national liberation and neo-liberalism). 
On the other hand, apologists for PA economic policy assert that it is in line with economic orthodoxy as espoused by the Washington Consensus, is not inconsistent with achieving Palestinian national goals, and anyhow is the only option permitted under the economic framework in place for the past twenty years. Many of those liberal Palestinian patriots who matured after Oslo know or care little about the origins of Palestinian economic nationalism. Others who accompanied the PLO from Beirut to Ramallah had by the 1990s (especially following the fall of the Soviet bloc) largely abandoned the concept of a leading public sector and acquiesced in the pact with neoliberalism, perhaps without even realizing it. Most contemporary Palestinian economists would scoff at the very idea of a “history of Palestinian economic thought”. All that they see in the rudimentary manifestations of statehood and economic activities in Lebanon and in the pre-Oslo period is mediocre and inefficient management of a liberation movement that lost its way to Palestine in the bars and beach clubs of Beirut and Tunis. Hence, many today may not appreciate just how much the content and thrust of Palestinian economic practice (if not thought) has shifted away from safeguarding and promoting the commonwealth towards emphasizing individual enrichment and the “quality of life”. 
Yet, the PLO and its economic policies continue to derive their legitimacy above all from claiming the mantle of representation of the Palestinian people’s legitimate national rights and of leadership towards liberation. While it has tried to assume some of the responsibilities of statehood in the self-government areas of the occupied territories, admittedly it has not delivered on its promise of national self-determination or otherwise close that unfinished chapter of Palestinian history. So a better understanding of what the Palestinian “public sector” once was, or aspired to be, is not only of historical interest. It is also instructive in assessing if, and how, a “role of the state in development” might yet be reasserted in Palestine even in a context of unabated capitalist accumulation and an unresolved struggle for decolonization.

II.    Palestinian economic thought from Samed to Sumoud to Salam

Several distinct phases may be delineated in the evolution of the concept of a Palestinian “public sector” with a distinct economic and social identity as well as in the performance of the Palestinian leadership in nurturing those functions. 

The lure of Arab Socialism in the 1960s

In the period after 1948 and at least until the beginning of the armed resistance movement in 1965, Palestinian intellectual and economic elites (in exile especially) began to re-emerge or build themselves from scratch in the wake of the nakba and shock of exile. Many were drawn to different strands of pan-Arab nationalism (or communism) and Palestinian national liberation thought as such was still unpopular. For those Palestinians in exile who aspired and organized for return and liberation, the developmental state models proclaimed by the different champions of “Arab socialism” seemed politically viable and socially just in the post-colonial Arab context and in the parallel experiences of many countries in the developing world. The pre-eminent Palestinian economist of that generation, Yusef Abdallah Sayigh, emphasized the potential for such a role for the newly independent states in one of his earliest contributions to Arab economic thought published in 1961, pointedly entitled “Bread with Dignity”. 
For others simply trying to reconstruct their livelihoods in exile through integrating into Hashemite Jordan or working in the Arab Gulf States, the fruits of capitalism were perhaps something of an antidote to the pain and the alienation of the loss of a homeland. No wonder that the most influential (and widely mistrusted if not misunderstood) Palestinian capitalists of today, the Masris, Shomans, Khourys, Sabbaghs and Aqqads, view their own investments in Palestine through the lens  of “return” and “homeland” as much as through that of profit and loss.

Financing the revolution in the 1970s

After the emergence of the armed resistance movement based in Jordan and Syria and later in Lebanon, funding and financial management of its military and political wings became a major undertaking for Fatah and PLO factions (not a subject of this essay, nor one about which much publicly available information exists).  The 1970s witnessed the first social, industrial and employment generation projects managed and funded by Fatah, beginning in Jordan. These were needed mainly in order to discharge the rapidly growing social responsibilities assumed by a political leadership which sought to mobilize and organize the resources of the Palestinian people everywhere in its struggle with Israel after the Karameh battle in Jordan of 1968. The Fatah Institution of Social Affairs (ISA) assumed a growing role in providing social security payments to martyrs’ and prisoners’ surviving family members (which continue until today) and later on began to provide educational, health services and other services for martyrs’ children. Indeed, it was probably the first PLO “institution” thus named.
After the PLO was uprooted from the camps of Jordan only to re-embed itself in those of Lebanon, social welfare functions were supplemented by economic activities. These focused on securing more cost-effective, self-reliant forms of supply for the PLO administration, vocational training and jobs for the camp workforce and financing for some of its other activities. Samed was the most notable venture in this respect (see section iii below). With the mobilization of mass organisations, such as Workers, Students, Writers, Engineers, Doctors and Women’s (and many other) Unions, additional forms of socio-economic concern and initiative were promoted, such as consumer and production cooperatives and camp self-reliance home-production projects (embroidery, handicrafts, food processing), not to mention cultural, educational and social service provision.  PLO Research, Planning and Information Centres in Beirut enriched the statist institutional landscape by publishing books, technical/academic journals and advocacy material, covering all imaginable facets of Palestinian social, political and economic conditions inside and outside Palestine.
Supporting steadfastness (sumoud) in the occupied territory in the 1980s
Once it was cast out after 1982 into the Arab wilderness even further from the Palestinian people’s villages, towns and refugee camps than before, the PLO economic enterprise had to be re-invented. This was called for both for operational (funding) reasons as well as because of the physical detachment of the PLO leadership and military forces from its mass base for the first time in its twenty years of existence. This shift accompanied the political re-positioning of Palestinian political and diplomatic focus from the camps of the shatat to the occupied territories, as well as within Israel, while Palestinian military operations against Israel from outside and inside Palestine soon resumed, exposing all PLO activities to continuous Israeli retaliation and deterrence measures. 
Nevertheless, well before the eruption of the first Intifada, the PLO had designed it first “Programme to Support the Steadfastness (Sumoud)” of the Palestinian people inside the occupied territory. This shift of attention from the Palestinian communities in Syria, Lebanon and Jordan which the PLO could no longer interact with, to the Palestinian people inside the occupied territory and Israel was first and foremost a strategic political reorientation. But it also gave the PLO a chance to translate its national economic vision from the experimental and ad-hoc conditions that shaped it in Beirut into more concrete programmes/projects (if not policies) targeting vital social and economic needs of the Palestinians living under occupation. This Programme (drawn up largely by Fatah economists and planners) was endorsed at the 1978 Baghdad “Steadfastness and Resistance” Arab Summit and (partially) funded in the following years by the Arab States. A Jordanian Palestinian Jordanian Committee (JPJC) was established that channeled almost $500 million of Arab funds (less than half of that pledged) over a ten year period to a wide range of housing, agricultural, industrial, research, cultural, educational and health projects throughout the occupied territories, mainly in the form of soft loans. This provided an important lifeline to many communities while also serving as a patronage tool for both the Jordanian and PLO interests that the JPJC reflected. 
The JPJC witnessed the first ever organized, systematic and professionally guided “development aid” provided to the Palestinian people. Unlike today’s international aid flows, 80% of which are transfer payments to help cover salaries and budget deficits, all of the JPJC funding was earmarked for concrete projects and programmes, institution building and development in the very broad sense of the term. Meanwhile in the same period, the first Palestinian grass roots development thinking and programmes in the occupied territories were launched, with a landmark (1982) “Conference on Steadfastness for Development”, and a series of economic and social studies providing another indication of how the post-Beirut era of Palestinian national struggle was increasingly focused on preserving the land, people and resources of Palestine through non-military means, indeed through an unprecedented mass mobilization of people under the banner of development and “sumoud”. 
The Madrid/Paris/Ramallah trajectory of Palestinian economics in the glow of globalization after the 1990s
Even as a much-weakened, exiled PLO continued to resist in the wake of its isolation following the 1991 Gulf War, the ensuing Madrid Peace Conference set in motion political negotiations that continue into their third decade. This drawn out “process” in itself implies a trade-off between pursuing national liberation through resistance or through cooperation, the disastrous results of which are witnessed today more than ever. But this inherent constraint does not seem adequate to explain the dramatic policy plunge and reversal that the PLO undertook when it signed on the dotted line of the “Protocol on Economic Relations” with Israel in Paris in 1994, annexed to the Oslo accords. 
Even as PLO negotiators were quietly being drawn into a secret deal with Israel in Oslo in 1993, one of the very same officials (Ahmad Qurie - Abu Alaa’, who not coincidentally was also the Director General of both Samed and the PLO Economic Department) was putting the finishing touches in Tunis to the monumental PLO achievement led by Yusef Sayigh and a team of Palestinian experts, begun in 1991. The “Programme for the Development of the Palestinian National Economy 1994-2000” (the first so-called “PDP”) was fully in line with the heterodox, public goods, social justice brand of economics that was Sayigh’s trademark. It was intellectually consistent with the tradition of “economic nationalism” of the PLO and reflective of the actual conditions and requirements for establishing a Palestinian economy that was geared to ending occupation and dependency rather than accommodating to it. The PDP at once harked back and projected forward to a different era, but at a moment that the forces of global economic liberalization were being unleashed and market fundamentalism had begun to enjoy its heyday. 
In the tradition of the era, the first intifada had witnessed a series of Palestinian grass roots and centrally supported economic self-reliance initiatives, including boycotting jobs in Israel and Israeli goods, a commercial strike, a tax-revolt, large-scale return to agriculture and the emergence of so-called “household economy”. But these were difficult for Palestinians to sustain economically and even if the Israel economy felt a pinch, Palestinian social fabric could not withstand relentless retaliation and collective punishment, nor could political organization turn this into a viable long term strategy, especially after the Gulf War and the first Israeli punitive “closures”. Meanwhile, PLO leaders were increasingly open to any formula that would return them to Palestine and that might achieve what they believed would be a short transition to independence. Even the PDP was modified at the last moment to include a “transitional period” of self-government without altering its core principles, goals or institutions. So, in retrospect it is not difficult to see why the PDP, which represented the culmination of the thinking of an earlier generation, didn’t stand a chance once the World Bank arrived on the scene in 1993. 
The full story of how and why the PLO bought into neoliberalism then is not one that can be pursued here in enough depth and anyhow needs fresh research to understand the calculations that were made at the time. Certainly the discrete shift in those few years from “steadfastness for development” of the PDP to “development for peace” (the theme of the first World Bank studies on the subject in 1993) sums up the sort of decisions that were being made at the time.
There has been some recent debate amongst Palestinians as to whether so-called (Salam) “Fayyadism” in its economic dimension is only a higher stage of “Arafatism”, insofar as the latter had approved all the economic arrangements with Israel that the former simply took to their logical conclusions. After all, the Fatah economic project was never socialist, indeed Samed aspired to operate according to market criteria, and while the PDP might have been a sound national development programme, it was certainly not a central planning or especially radical document. The PA under Fayyad may have witnessed a greater degree of centralization and clarity of financial functions under the Minister of Finance/Prime Minister (instead of the PLO Chairman), largely at the behest of donors and the IMF. But the core economic philosophy and policies of the PA under the Paris Protocol have been constant for the past 20 years, even if shifting gradually more to the right in the past 5-7 years.
More pertinent perhaps is to consider the limited options that the nationalist leadership (and an exhausted resistance movement) had in the early 1990s. These constraints were obvious both in terms of the ability to resist the terms of a dictated “peace settlement” and the capacity to manage the lives of some 3 million Palestinians with only a somewhat patchy record of rough and ready institution building in exile. And, the opportunity that Oslo offered to expatriate Palestinian capital to link up again with the PLO, except this time inside Palestine in a shared economic and investment programme, meant that the PLO could only bend with the prevailing wind, not to mention heed the cresting wave of  globalization and the growing influence of the international financial institutions.

III.    Was there ever a Palestinian public sector?

I have always found it amusing when official Palestinian and international development discourse refers to the “leading role of the private sector” in Palestine. This pre-supposes the existence (or, in the eyes of some, the threat) of a “public sector” of the economy in the conventional sense of the word, whereby the state owns and operates economic, commercial or utility enterprises. But the Palestinian economy is and always has been fully a private sector economy, so really the term is a something of a canard. The 1990s did witness much rent-seeking and some attempts to manage these through public monopolies and commercial ventures in what Mushtaq Khan has analysed as Arafat’s rational strategies to counter Israel “asymmetric containment”. Yet the PLO entered the scene after 1993 bankrupt and effectively dependent on the potentials of limited rent management and some public revenue from trade and taxation intermediated with Israel, as well as the kindness of donors since the second intifada again brought the PLO to its knees. Indeed the first IMF order of the day in 2001 was to establish new mechanisms for cutting off the remaining sources of off-the-books income that Arafat had managed to maintain even in the confines of the Oslo framework and to privatize the remaining economic assets and rents managed by the PLO.
So looking for a Palestinian public sector in the post Oslo period is probably a futile exercise. But to what extent was the pre-1982 goal of a “national economy” and a “public sector liberated of bureaucracy” simply reflective of some blurry patriotic vision of the future, as articulated in that period by Khalil Al Wazir:  “The significance of what Samed does is in the productive operations that it undertakes that help to preserve our people’s productive skills and in training more of them in modern production techniques. The Palestine that we dream of will depend on the resources of its people and their ability to rebuild it.” Or perhaps such rhetoric was more about the nature of the economic project at hand in the circumstances of Beirut, when the national liberation trajectory that the PLO had embarked upon was still predominant and the lure of power, money and the good life had yet to entrap ageing, tiring and failing PLO leaders and cadres? 
With all its limited but increasingly forgotten achievements and all its oft-cited failings in economic institution building Lebanon and elsewhere, through the first intifada and until Oslo the PLO had remained faithful to the national liberation model of a leading public sector and social/economic policies that catered to the broad masses of the Palestinian people. Sceptics today might argue that adhering to that economic vision was superficial and more about political survival in those circumstances than ideological or intellectual sophistication, especially since it was so abruptly abandoned in the 1990s. 
Regardless of the internal and external factors that contributed to the rapid decline of developmental public sector ideology, especially with the PLO financial bankruptcy imposed by Arab states following the first Gulf War and the final collapse of the Soviet socialist system, the record of PLO social-economic institution building in the fleeting moment of “sovereignty” it enjoyed in Beirut until 1982 deserves historical recognition for what it was and for the traditions it embodied. That epoch also embodies the substance (but perhaps not the form) of an alternative to today’s self-government model emanating from Ramallah, whereby public authorities take the lead in sovereign institution building alongside a national liberation struggle, and not instead of it.
From the vantage point of Ramallah and recalling the path taken for the thirty years since Beirut, and most critically those since Oslo, what should Palestinian policy makers and PLO leaders conclude about the sort of “state” that the Palestinian people deserve after so many years of revolutionary struggle, social transformation and institution building (and rebuilding and rebuilding…)?  
It would be naïve to expect after so much attrition of the very concept of a Palestinian public sector, that any reversal in PA economic policy can be countenanced by the PLO and Fateh leadership, at least within the prevailing balance of economic and political forces in Palestine. This is not only because of how neoliberal economic thought and values have become acceptable, indeed desirable, to ruling elites and even the broader middle-class constituency of the PA. Nor is it simply because of the extent to which capital investment has been committed to the PA project in its current form. More importantly, a nationalist economic and social agenda presupposes a national liberation movement and struggle, something that to all intents and purposes remains suspended in an infinite “peace process”.  And there is no real constituency in the Palestinian political and capitalist leadership today for Arafat’s fantastical independent Palestinian economy and a Palestinian public sector liberated of bureaucracy and infused with the determination and spirit of revolution.  
The identity of an alternative to the continued decline of Palestinian liberationist economic thought and practice may be found not only in some of the earlier stages of Palestinian economic history and practice as outlined here. There are also still some signs of life in the economics of sumoud tradition that was once the only Palestinian narrative, especially in grass-roots experiences on the ground in Palestine. While even the recent PLO announcement of the planned establishment of a “national” oil and gas company is metaphorically in tune with that tradition, it remains to be seen whether the more muscular “guardian of public goods” posture recently adopted by the PLO investment arm, the Palestine Investment Fund (PIF), amounts to more than grandstanding. 
More indicative of a lingering Palestinian “spirit of revolution” are today’s numerous examples of “economic resistance” and sumoud of Palestinian communities in Area C of the West Bank, the persistence of a distinct Palestinian economy in besieged east Jerusalem, the survival of a largely rural, peasant and refugee society throughout Palestine, and other dimensions of the endurance of a greater Palestinian public development good despite the inexorable advance of liberal capitalism under occupation. These disparate phenomena have yet to emerge in a coherent manner that strengthen the argument for a developmental Palestinian state, and the need to leverage the inevitably influential role (and potential) of Palestinian private and public capital in this regard cannot be dismissed as naïve belief in the “progressive wing of the national bourgeoisie”. To the extent that the flame of national liberation is able to re-ignite a coherent Palestinian national movement, so would the opportunities increase for rebuilding a Palestinian public sector and learning from the lessons of Fanon and Arafat. 

Translated by Assafir - Arabi


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