Monday, January 30, 2006

Palestine, the Supplicant Society

With the victory of Hamas in the Palestinian elections there are already reports of unrest by armed gangs affiliated with the defeated Fatah movement (the core of the old Palestine Liberation Organization), and predictions of more. To understand why the Fatah gunmen and cronies have so much to lose it is important to understand what kind of government is in charge of the Palestinian pseudo-state. The table below shows the ten nations and territories (out of 160 for which data are available) with the highest ratio of government consumption spending to GDP, according to the World Bank:

CountryGovt. consn./GDP (%)
St. Lucia26.95
West Bank & Gaza51.74

Government consumption spending is spending for immediate purchases of goods and services. It does not generally include welfare-state transfers, and is the most discretionary type of public spending. The Palestinian territories are thus the biggest nanny state in the world, by a substantial margin. Much of this money comes from foreign governments –- Arab states, the EU and the U.S. in particular. Much of it in turn is spent on pure pacification of Palestinians made restless by a dysfunctional economy. Astonishingly, according to the remarks of outgoing Palestianian economy minister Mazen Sinokort paraphrased in the LA Times and The International Herald Tribune, public employees are the “breadwinners for 30 percent of Palestinian families.”

Palestine is thus now perhaps the world’s limit case of what Anne Krueger once called the “rent-seeking society,” a society where who prospers and who does not is mostly dependent on who has an in with the bloated state ministries. The eviction of Fatah means that all of those on the PA’s foreign-funded swollen payrolls now risk losing the ability to feed their families. All too many developing countries have fallen into the rent-seeking trap, where people need to curry favor with the state to survive and the state’s decision-makers in turn expand their control over society to give them more leverage to extract bribes. But the difference between the PA and, say, Zimbabwe is that the world has had too much emotional investment in the Palestinian enterprise to let it fail. The economic dysfunction resulting from such a society, in other words, was kept at bay by a massive inflow of foreign funds. Good money has been poured after bad, and the result has become a society of supplicants, dependent first on Arafat and now on Fatah more generally for support.

If, as seems most probable, Western support for Hamas dries up, Hamas will have only two choices – further shakedowns of other Arabs to replace Western aid or coping with widespread violence that will result when the foreign-aid pipeline and the slush funds it empties into dry up. Of course, it is possible that the West and particularly Europe will find a way to rationalize continued spending on a cause whose emotional hold is powered by guilt over (and maybe belief of) the Left’s portrayal of Israel as simply another manifestation of Western colonialism. But German chancellor Angela Merkel, whose country is caught between believing in the rightness of the Palestinian cause and the embarrassment (unique perhaps to her country) of funding a Palestinian government now officially committed to the destruction of the Jewish state, has so far indicated that the latter is untenable. If the foreign largesse that has for some time been the only thing standing between the PA and fiscal collapse dries up, expect the rent-seekers cut loose to take it very, very badly.


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