The Oslo agreements were supposed to build mutual trust between Israelis and Arabs by Israel surrendering strategic territorial assets in return for Palestinian acceptance of Israel’s right to exist. But only promoting an ephemeral “trust” between politicians cannot attain peace. For peace to take hold and last, it must bring about a real improvement in people’s lives.

Oslo failed to do this. In fact, it worsened the Palestinians’ economic plight.

Instead of establishing a rule of law and facilitating economic development, Arafat and his Authority had Palestinian schools and media inculcate hate for Jews, and promote the hope that Israel could be eliminated by Jihad. They have openly encouraged, or winked at, repeated terror attacks on Israel, followed by closures that forced the 100,000 Palestinians earning their living in Israel ($1 billion out of the $5 billion Palestinian GNP) to remain idle.

Little of the many billions in foreign aid received by the Palestinian Authority reached the needy or resulted in fruitful investments. Much of it financed Arafat’s bloated bureaucracy and 40,000-strong army, plus seven security services. A lot was diverted, according to Palestinian parliamentary sources, to the private bank accounts (even in Israeli banks!) of Arafat’s fat cats. The major construction in Gaza was not of homes for destitute refugees, but of two or three million-dollar villas for Arafat’s lieutenants. The Authority and its security services rule by terror, extortion, kidnapping and torture. They frightened away many of the foreign Palestinian businessmen once keen to establish a thriving Palestinian economy. You will not learn all this by watching the BBC.

Israeli governments too have done little to help Palestinian economy. Shimon Peres, who raises millions in order to promote economic prosperity for peace, continued, when Prime Minister, to put unnecessary hindrances in the way of the free flow of goods and services. His government harassed Arab entrepreneurs as it did Jewish entrepreneurs, only worse. Instead of opening Israeli markets to those products in which the Palestinians have relative advantage, agricultural produce, building materials, clothing and footwear, Israeli governments continued to protect Israeli monopolies and interests. Peres believe in grandiose projects that could, incidentally, benefit his supporters among the Israeli oligarchy. He had little interest in small steps, like the streamlining of security checks, that could immediately ease the life of Arab workers, farmers and small businessmen. Nor did Peres object when Israeli monopolies signed agreements with the Palestinian security services (brokered, for the right cut, by a former Israeli secret service boss) that forced Palestinians to buy expensive basic commodities such as cement, flour, petrol and appliances from Israeli monopolies.

Since Oslo, Palestinian Arab’s standard of living has been reduced by almost half. Unemployment has skyrocketed. It reaches 40% in places especially among the young. This is why there is always a large supply of idle youths ready to riot, with the inciters on the Authority’s payroll, by far the largest “employer” in Palestine.

Economic misery is behind much of the anger, then, among the Palestinians, and Arafat knows how to skillfully divert it against Israel.

Can economics rescue peace, still? Yes; even after all the terrible pain. A silenced majority among the Palestinians wants first to provide bread for their children; witness the fact that most East Jerusalem Arabs resist the proposed takeover by the Palestinian Authority of their neighborhoods, because under Israeli rule they enjoy economic prosperity.

Economic advancement is the only hope to really mitigate the conflict and make it manageable. This may be why Arafat so resists it, and this may be the reason why all peace-seekers, and especially the US, should suspend the failed political track, and piece together, instead, some kind of a temporary truce. Then they must put all their efforts into rapid economic development that will create a civil society more amenable to peace. Donor countries can withhold aid until Arafat agrees to establishes a framework of law and permit economic development. For its part, Israel too can do much more, by liberalizing its own economy and opening it up to real free trade with the Palestinians.

Economic development is not as glamorous as political activism and “popular revolts”, and it does not satisfy the media’s addiction to blood and gore, and to the simplistic morality play drama of good and bad guys. But it was economic cooperation and development, not politics or war that brought peace to Europe. It could do the same for the Middle East.

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