The economic and social conditions of Palestinians certainly have a huge bearing on the Israeli-Palestinian (or Israeli-Arab) conflict. The problem is that there are so many truths that anyone can find some facts to support his or her argument about the causes of the conflict and what needs to be done to end it. Here, for example, are a dozen true statements about Palestinian economic conditions and their causes:

1. Palestinian economic conditions are very bad, and have become increasingly dire in comparison to those in Israel.

2. Palestinian economic conditions in 1993 were much better than those in Syria, Lebanon, Egypt, and Jordan, and had improved dramatically since 1967.

3. Israeli actions have greatly damaged or inhibited the Palestinian economy, and therefore are part of the cause of poor conditions there.

4. The Palestinian relationship with Israel is a main cause of Palestinians having better economic conditions than in neighboring Arab nations and in Palestine before 1967, and much greater than in Palestine before Israel’s creation.

5. Some of the Israeli actions that hurt the Palestinian economy (such as unwarranted trade barriers) are the result of Israeli selfishness or animosity toward the Palestinians.

6. Some of the Israeli actions that hurt the Palestinian economy are the result of necessary measures of Israeli self-protection against Palestinian terrorism.

7. Palestinians have received immense amounts of economic assistance—proportionately much larger than the Marshall Plan—from Europeans, from the United States, from Israel, and from Arab countries and charities. (Most of the Arab help, however, has been applied to the Palestinian fight against Israel.)

8. A significant share of Palestinian resources has been used to support terrorism against Israelis.

9. A significant share of Palestinian resources has been diverted to the personal extravagance and foreign bank accounts of politically powerful Palestinians.

10. Israelis, some with strong political connections, are directly responsible for some Palestinian corruption.

11. The corruption of the Palestinian Liberation Organization (PLO) and the Palestinian Authority (PA) decisively inhibit efforts to increase Palestinian productivity and wealth.

12. Violent Palestinian attacks on Israelis, and resulting Israeli measures to prevent attacks, decisively inhibit increased Palestinian productivity and wealth.

A difficult set of issues arises when one tries to relate these economic facts to broader policy questions. For instance, is the major cause of Palestinians’ hatred of Israel Palestinian poverty, or is it Israeli oppression of Palestinians? Some argue that economic issues explain the conflict and hence provide the key to ending it. Others claim that social conditions are more important. Still others contend that the political relationship between Israel and the Palestinians is the crucial matter.

Certainly, it would be much easier to lay out a roadmap to prosperity for the Palestinians than it would be to determine how they could achieve their other goals. One key to their achieving prosperity, for instance, is to stop fighting Israel, but then, they might well ask, how could they obtain independence? Or a state? Or justice? Or the removal of the foreign colonial presence from their homeland? Likewise, many Israelis believe that it would be much easier to reach peace with the Palestinians if the Palestinians experienced better economic conditions and more positive individual relationships with Israel and Israelis. At least such an improvement couldn’t hurt the chances for achieving peace. Therefore, they ask, shouldn’t Israel’s commitment to peace be measured by Israeli actions to improve the Palestinian economy?

Yes and no. Yes, economic improvement for the Palestinians depends on peace. But that means that Palestinian economic improvement will require agreement between Israelis and Palestinians on what caused the violence that began in September 2000. Otherwise, there can be no possibility of treating the underlying conditions that brought on the uprising, and hence no chance of peace, and thus no prospects for Palestinian economic development.

Of course the Palestinians had multiple grievances before the declaration of Intifada, but these were all long-standing. There are two powerful explanations for what caused the renewed violence. One is that Yasser Arafat had in effect been put in a corner: he had to choose either peace or war, and he had no interest in any peace that did not include the destruction of Israel. (Others would reach the same conclusion by arguing that Arafat’s commitment to war had been demonstrated since the Oslo negotiations in 1993, when he relentlessly refused to recognize the legitimacy of Israel’s existence and of any moral basis for peace among Palestinians.)

The other explanation—which does not have to be an alternative—is that the Palestinians went to war because they thought they could win. Their theory of victory was that Israel had become rich and soft and would not keep fighting to defend itself, and they thought that the Europeans and perhaps even the United States would force Israel to end the violence by making concessions. They found the evidence for this theory in Israel’s hasty and undignified flight from the security zone in Lebanon, and in the lack of sustained objections from Israel, the United States, or Europe, to their own refusal to carry out the commitments they made in the Oslo agreements.

The Intifada has brought so much additional suffering to the Palestinians, economically and otherwise, that some are saying that they should try to find a way to end the fighting. But they are still very divided, and more than two years of intimate war has increased their hatred and inflamed their emotions. Therefore, any Israeli concessions, any efforts to build Palestinians’ confidence in Israel’s willingness to make an honorable peace, paradoxically run a great risk of providing arguments to those who started the war and those who have suffered much because of it. These aggrieved and injured parties will grasp eagerly at any sign that they were right and that Israel isn’t tough enough for a long war, and that world opinion and the support of the Arab nations will force Israel to retreat if they keep on fighting.

Any significant improvement in economic and social conditions for the Palestinians will therefore require a series of three conditions: first, a new Palestinian political regime sincerely committed to coexistence with Israel; then peace (which will come as a result); and lastly, Israeli cooperation.

Reforming Palestinian Politics

The Palestinian political regime will have to be of an entirely new kind. First, it will have to be driven by the needs and feelings of the Palestinians living there, not by foreign Arab animosity to Israel, nor by personal dreams of eternal Arab glory. Second, the regime must allow open debate in which people can tell the truth about Jewish history and make arguments for living in peace with Israel. The schools must no longer teach hatred of Jews and a social commitment to violence. Third, the government must establish a rule of law, enforced by independent courts, that protects individuals from violence and intimidation, and protects the harvest of people’s efforts and creativity from those who have invested in gaining power rather than in increasing productivity.

Ultimately, such a regime must be based on elections, but it is important to recognize that elections cannot achieve such a regime until there has been a period during which expectations and understandings are changed and the roots of civil society are sown in Palestine. Particularly after the emotions exercised during the nearly three years of war, and the strong hold of Arafat on the current Palestinian leadership, it will be very difficult for the Palestinians to create such an environment by themselves. There are, however, at least two possibilities for the creation of a new political climate and regime.

One is that such a regime could be imposed from the outside, as in the proposal of Israeli Knesset member Natan Sharansky. This proposal suggests the creation of a coordinating body—headed by the United States, with those Arab states that recognize the State of Israel as its members—that would be responsible for establishing a Palestinian Administrative Authority (PAA) in the areas under Palestinian control. Israel would not be involved in this process, and it would maintain only the right to veto any candidates to the PAA who had been connected to terrorist activities against Israel. The PAA, composed of Palestinians who had not been involved in terrorism against Israel, would be responsible for the administration of the Palestinian-controlled territories for three years (overseeing the provision of healthcare, education, welfare, and infrastructure), and for the establishment of independent courts of law; the protection of the institutions of civil society; the protection of individual rights, civil liberties, and freedom of discussion; and for disbanding the refugee camps. At the end of three years, the PAA would conduct contested elections for a Palestinian governing body or constitutional convention.

The second possibility is that, despite the current difficulties, the Palestinians might themselves create such a regime if the following happened: one, the destruction of the whole terrorist organizational apparatus, including the eradication of its heavier weapons and facilities and the imprisonment or death of several levels of its leadership. Two, the removal of Arab and Iranian support for Palestinian terrorism and for Palestinian leaders committed to the destruction of Israel. (This would require a change in regime in Iran and a change in either regime or policy in Syria, Saudi Arabia, and Egypt, and the independence of Lebanon.) Three, the removal of U.S. and European financial support to Palestinians until they give up terrorism and corruption.

Either way it is accomplished, the first requirement for the achievement of peace is a new Palestinian regime. The second is the removal of the Palestinian refugee issue—the only refugee problem that grew out of the turmoil following World War II that has yet to be resolved. The Arab refugees of 1948—most of whom have now been replaced by their descendants—must be resettled elsewhere, just as was the case with the Jewish refugees from Arab lands and from Europe, and all the many millions of other refugees, none of whom are still refugees today. These Palestinian refugees must be accepted primarily by their fellow Arabs, but the United States and Europe will also have to take some. The more advanced countries must tell the Arab nations that if they want to become part of the advanced world, they cannot continue to reject refugees in order to foment conflict between Israelis and Palestinians. Such a message is more likely to come after a change in the relationship between Arab countries and the West that grows out of a more united effort against militant Islamic terrorism.

Changing Hearts and Minds

According to conventional wisdom, peace requires that Israel give the Palestinians a basis for confidence that Israel will make fair concessions (such as land) if the Palestinians stop fighting against Israel. The real problem, however, is the opposite: peace requires that the Palestinians give Israelis a basis for confidence that the Palestinians will live in peace if Israel makes the appropriate concessions. After all, when one stops fighting, one can always start again. Concessions, on the other hand, are difficult to take back. Therefore, the Palestinians must give the Israelis reason to be confident that their concessions will lead to peace. If the discussion among Palestinians recognized that the Jews are also a people with ancient roots in Palestine, and hence that it would be honorable for Palestinians to seek a way for the two peoples to live together in the land, then Israelis could feel some justification for making risky concessions for peace. But the fact that Palestinians exclude Israel on their maps, deny that the Jews are a people, and call the Jewish Temple a Zionist myth, does not inspire confidence among Israelis. A Palestinian regime that made these simple concessions (which, after all, means merely an acceptance of reality) would make a world of difference.

With a different kind of Palestinian regime, the removal of the refugee threat to Israel, and a different political climate in the region, peace negotiations between Israel and the Palestinians would have a much better chance of success, either in a direct movement to final settlement or a two-stage process. For one thing, in such a climate it would not automatically be assumed that a Palestinian state would have to be free of Jews, and thus Israel’s defense concerns would be greatly reduced.

Undoubtedly, however, for the negotiations to succeed, Israel’s majority would have to mobilize itself to overcome the resistance of Israeli groups that profit from exploiting Palestinians. This would require Israel to repeal all unwarranted restrictions on trade with Palestine.

Another important influence on the Palestinian economy in the peace that could come with Israel is the degree of residual or continuing hatred of Israel among Palestinians. The intense feelings that exist today, which have such a long history, will not disappear in a few years. Widespread continuing hatred, however, would not greatly interfere with economic relations that help the Palestinians. The potential problem would come only if some Palestinians had enough hatred to attack Israelis and the rest of the Palestinians did not care enough about the economic benefits of trade and labor arrangements with Israel to prevent or punish such attacks. The damage to economic relationships that would result from a substantial number of Palestinian attacks on Israel would severely hurt Palestine, although it would not prevent substantial economic growth.

Even in a best-case scenario, in which Palestinian violence against Israel was kept to a minimum, the Palestinians would face an additional economic problem stemming from their extraordinarily high fertility and birth rate. Unlike almost every country in the world, fertility has not yet started to fall among the Palestinians; the current natural rate of population growth is 4 percent, which is virtually unmatched in human history. Hence, for many years to come the Palestinians will have an extraordinarily high demand for education and residential construction and a need to develop large numbers of jobs. If the Palestinian economy is integrated with Israel’s, it is much more likely to be able to handle this demographic challenge and subsequently benefit from the larger population. But if Palestinians allow their hatred for Israel to isolate their economy, Palestine will face great difficulties in achieving substantial growth of per capita income, particularly because growth in neighboring countries other than Israel is likely to be very slow.

The Palestinian situation is very difficult, perhaps more so than that of almost any people in history. For half a century, the Palestinians have been the victims of other Arab nations’ hatred of Israel and the hostility and intransigence of their own leaders, most of whom have been chosen by others. If Arafat’s leadership is genuinely replaced and the Palestinians are finally allowed a government of their own choosing, they will be confronted immediately, before they have attained much experience in making choices for themselves, with a fundamental decision: they can continue the conflict with Israel, or they can decide to accept Israel as a legitimate neighbor in the ancient land of both peoples and to negotiate, in one stage or two, as good an agreement as they can get. If they choose negotiation, they can move on to building their economy and society and benefit from integration into the only healthy economy in their neighborhood. They can have peace and prosperity and independence, but only if they give up war and some of what they and their neighbors think they are entitled to. Nobody, not even Israel, can enable the Palestinian people to move toward prosperity so long as they continue to insist on all of their present demands.