Zichron Yaacov, Israel --During the past fifteen years I have been researching and writing about the economic dimensions of the Arab-Israeli conflict- an aspect of the regional conflict that rarely is discussed when solutions to this problem are put forth. Yet without considering how economics plays a role in the conflict, how can any political scenario be proposed- let alone implemented in order to bring peace? Without an appropriate infrastructure, social and economic, what chance does any Palestinian entity have of surviving over the long run?

No political solution to the conflict will succeed if it doesn't include a better socio-economic life for the Palestinians. The Oslo Accords neglected economics and thus that approach to solving the Arab-Israeli conflict failed. If peace is going to take hold in the Middle East it must begin with economics and not politics. Economics has to take precedence over politics- not visa-versa. Economic prosperity has to be created so political stability can prevail.

Starting with the assumption that the lack of a Palestinian state is the reason for the continuation of the conflict blinds us to the real problems and keeps them from getting addressed. The fact is, Arabs have and can live under Israeli rule- and benefit. The million-strong Israeli Arab population is a prime example of Arabs living under Israeli dominion- and prospering. The West Bank and Gaza populations never lived as well or have their socio-economic living conditions improve as rapidly as between l967-l987. The worst economic conditions they have ever faced in the past thirty five years was when they were ruled by the Palestinian Authority/PLO.

Thus it should not be automatically assumed that the best solution for the Palestinians is to create a Palestinian state/entity. However even if once believes this is the goal, it will never happen unless the economic infrastructure is first built and that will take time- a decade or two at least. The State of Israel could not have been declared in the late 1940s if the economic and industrial infrastructure hadn't been created over the previous 25 years. For some reason, those who advocate the establishment of a Palestinian state never bother to deal with this question of where will the meat on the bones of this "Palestinian state" come from? Without it, a newly-created Palestinian political entity won't last very long until the radicals- from the left or from the religious camps- have the power to challenge the legitimacy of the ruling regime due to the ruling regime's inability to create enough jobs and economic prosperity to keep the people content.

Independent states don't come on silver platters. Unless the Palestinians can first build the infrastructure for an independent entity- they will have no independence- period. Yet even with political independence, unless that new state has a strong and growing economy- the political stability that the newly-created political entity will initially deliver- won't last very long. The stability and future of any political entity is dependent on economic prosperity and nothing else. No amount of rhetoric or blaming external factors can replace the need for economic development.

So What Should Be Done?

First, let's understand that regardless of whether the West Bank Arabs have an independent state or an autonomous rule under Israeli dominion, they need to have their own modern socio-economic infrastructure: roads, schools, community centers, hospitals, factories, telecommunications facilities, etc. All of this will take 10-20 years to build- if not longer. It took the Jews a similar amount of time and they begin their initiative with a lot more going for them than the Palestinian population currently has. Let's not be naïve in thinking that the Palestinians today can do in a shorter time what the Jews did in the early part of the last century. The Palestinians have suffered enough from deluded thinking. Now is the time to start thinking about what can realistically be achieved to better the quality of their lives.

I suggest that they start the process of building that infrastructure and leave the issue of "Palestinian states" and "right of return" aside for that period and just deal with solving the socio-economic problems of the day. When that is done- it will be time to discuss whether an independent Palestinian state or an autonomous entity affiliated with Israel and/or Jordan is the way to go, and how many refugees the West Bank and Gazan economy can absorb. While many pro-Palestinian voices will say, "no, a Palestinian state has to be created for economic development to occur" they are wrong and ignorant of the current economic conditions on the ground in the West Bank and Gaza. Until these voices that support the Palestinians stop blaming Israel and point a finger or two at the low quality of Palestinian political leadership when it comes to social and economic development- the standards of living of the West Bank and Gaza population will not improve. That leadership failed when it had the chance from 1993-2000 to improve the quality of life for the Palestinians. Whether a new leadership would do any better is not the issue. What is important is that all Palestinians realize that they have been shortchanged by their own leaders when it comes to improving the socio-economic aspects of their lives.

"Palestinian Inc"

Until that time, a new commercial, economic entity should be created to raise capital from private sources and public sources, to own other companies, to make buy, sell, or whatever helps build infrastructure for the West Bank and Gaza. It would have a board of directors and strategic advisers (not chosen by political affiliation but by qualifications)- most of which would be made up of Israeli Arabs and West Bank Palestinians. While there currently exists a number of "Palestinian welfare organizations" all are part and parcel of the PLO leadership and thus suffers from the corruption of that entity. A new "Palestinian welfare organization" needs to be created made up of people who don't belong to the PLO or Palestinian Authority and are free of their influence. While this may be wishful thinking, as most people reading this will say that nothing can be done in the West Bank and Gaza without the PA's approval- and they may be 100% correct- then at least we know what the problem is and how to solve it: tell the PLO/PA to step aside and let someone else do the job where they have failed.

The underlying goal of Palestinian Inc is to offer shares in it to Palestinians and Israeli Arabs- wherever they may live. To become a common stock shareholder in this new entity you must share the basic principles and vision of it which is to help the Palestinian people prosper by raising their socio-economic living standards. As part of the signed declaration before a share in this new economic entity is allocated is the pledge not to support peaceful co-existence with Israel and the economic development of the entire region. Each Palestinian person would receive one share of the ownership of this new company, called "Palestinian Inc".

This new commercial/economic entity would be reserved exclusively for Israeli Arabs, West Bank and Gaza Arabs, East Bank Palestinians, and Palestinians from everywhere else in the world. Only these populations can receive shares of the common stock in this new entity. By pledging not to support radical and extreme political parties and organizations, and to support peaceful relations with Israel and a commitment to working towards the advancement of the socio-economic infrastructure of the West Bank and Gaza and in Israeli Arab cities in Israel.

What type of investments and assets will Palestinian Inc possess in its portfolio? Why would any Palestinian or Israeli Arab elected to own shares in this new entity?

Could be the Palestinian cellular license that was given to it for a very low price with the promise to raise capital to build a proper cellular infrastructure in the region for the Palestinians. It could be a private radio or TV channel created by a wealthy Palestinian in Detroit who donated it to Palestinian Inc in order to help his people. With a grant from an international aid agency a new factory could be established in Jenin which produces construction material. The owners of this new factory would be Palestinian Inc. and any profits earned would be turned over to the management of this economic enterprise. Any profits left over at the end of the year would be distributed according to the ownership of shares held by the Palestinian people who have elected to support the overall goals of Palestinian Inc.

It may be that Palestinians from London use this new entity as a vehicle to export unique arts and crafts from Palestinian artists on the West Bank and East Bank and sell it in Europe. It could be a publishing venture whereby a grant from the European Union is administered via the Palestinian Inc so that a free press is able to develop in the region. It could own the rights to establish a string of McDonalds, petrol stations, and Blockbuster Video stores throughout the East Bank, West Bank and the Israeli Arab sectors of Israel. Whatever deals it does and whatever profits it earns due to these deals- will be distributed to the shareholders- just like in any corporation that is in business to create wealth.

Under this arrangement Israel will maintain control over the external borders and be responsible for the overall security of the external borders- at least for the first ten years until economic development creates a stable environment thereby marginalizing radical organizations and terrorism. The Israeli government can do for the Palestinians what the British government did for the Jewish community in Palestine between 1921-l945- to create an umbrella of security with which to develop the social and industrial infrastructure which enabled the creation of an independent Jewish state. Once the violence stops and people go back to work- the stability will return a period of rebuilding and reconstruction would begin.

However until an entity is created that is immune from the corruption of the Palestinian entity- nothing will change for the Palestinians. The fact is Arafat and the Palestinian Authority/PLO has failed drastically to create a better life for the Palestinians. There is no reason for the Palestinian people and foreign governments to continue to support Arafat and his organization if it is clear that they have failed to bring peace, stability and prosperity to the Palestinians. The solution I have proposed will never work as long this political entity remains the ruling dictatorship in the West Bank and Gaza.

Another important aspect of this solution is that in this configuration, the Israeli Arabs will be the front runners as they have ties to Israel, and then the West and East Bankers are going to do deals with the Israeli Arabs to provide the services. The Israeli Arabs replace the role Israel served for nearly 30 years in its "senior trade partner" with the West Bank and Gaza. It will be easier for the Palestinians to receive services from the Israeli Arabs rather than from Israel even if ultimately it is coming from Israeli ships and know-how.

For the Israeli Arabs, all this new economic activity will be a welcome considering how educated they are and how few white color jobs there are for them in Israel. Think if just $5 billion of economic activity was stimulated with this new model in the first three years. Think of what a few billion in public and private investment vehicle could do to cheer the spirits of the Palestinians up? How great it would be that Israeli Arabs were working these issues out with Palestinian Arabs. There is no need ever to return to the days where the Israeli Civil Administration ruled over the Palestinians. The Israeli Arabs can provide all the services the Palestinian population needs. Under a peace I am describing military rule over the Palestinians by Israel can end.

Why This Approach Has A Good Chance Of Working

Here's the reason why I truly belief this approach will work.

It is the same concept whereby Jews accept the covenant of the Torah- they gain a lot by being part of the Jewish community. In return they have to take on the commandments- but still- the rewards outweigh the downsides.

The early founders of America came up with the idea that the state should provide a small number of services to the states, such as basic security, international customs and duties, coinage. In return for pledging a common security and common goals those who believed in the new form of government benefited from immensely by being able to develop and prosper. By making the pledge to the Constitution as that form of governmental arrangement between the people and their government, the people acquired the highest standard of living in the world. This type of politic system, a republic, was based on the notion of pledging allegiance to this republic, its laws, as it was framed by the Constitution.

The concept is the same here. The Israeli Arabs are being asked to take the West Bankers by the hand and create an economic institution that promotes trade, commerce, and deal flow between the Israeli Arab sector, the West Bank, The East Bank, and Gaza. That entity will be owned by anyone who "pledges allegiance" to the goals of the new commercial entity. In return, they will become instant owners in this enterprise- which over time- could be world in the tens of billions of dollars. There is reward and allegiance built into the system in all three systems.

Can you imagine how things would change if people were making money and jobs were plentiful and brand new infrastructure projects were popping up everywhere? Why should it matter if the Palestinians have a state or not if they see their lives are improving? Israel can provide political stability without having to beat up or kill Palestinians. From 1967-l987 the Palestinians may have been under "Israeli military occupation" but boy were they ever advancing- and quick- to worry about whether that mattered or not. For the most part in that 20 year period there was little if any actual military problems between Israel and the Palestinian Arabs (including Israeli Arabs in that group). Thus nobody can tell me regional strife and conflict is inevitable. It isn't because Jews and Arabs have lived together even when Arab sovereignty did not exist. Israeli Arabs prove that this is the successful approach to model future relations on

Considering how bad they are off today (just in comparison to pre-Oslo days) can anyone really be naive enough to believe that the lack of an independent Palestinian state is the reason why Palestinians are living worse today than in the past? During their rule over seven years of the West Bank and Gaza the Palestinian Authority/PLO totally neglected to build any economic or social infrastructure for their people. Nothing was done. What makes anyone think the existing Palestinian ruling class are capable of creating an independent and prosperous Palestinian state living side-by-side in peace with Israel?

As a long-time student and researcher of the Arab economies, I believe that was the Jews did from 1921-1945, the Palestinians can do- but certainly not in less time than it took the Jews. It takes a good twenty years or so of political stability to build a decent socio-economic and industrial. The solution I have proposed provides for this.

The fact is the Palestinians have failed on every level to build the infrastructure for their own political entity. While this may sound distasteful for some in the Palestinian world and their supporters to hear- it doesn't make any less the truth. Israel and the Israeli Arabs can help them create that infrastructure in order to raise their living standards and improve their quality of life. When will the time come when their socio-economic needs are put on par with their "political needs"?

While so many will say "but the Palestinians would never accept that", my response is "so what". Some may not. Many may defy Hamas and Arafat's orders and apply to own a piece of this new economic institution because whoever has a share of it could be richer in the future. I have faith in the magic formula of "making bucks" which says that higher standards of living diminishes the attraction of radical political rhetoric.

Perhaps more than any other group of people, the Palestinians need to realize why they are living the way they are and who is responsible for their tragedies. For the past four decades they have blindly followed Arafat and his henchmen yet they have received nothing in return for this support. It is time they lent their support to other entities which will be in a better position to offer them and their children a better life in the future. If supporters of the Palestinians outside of the Middle East understood what is ultimately the best for the Palestinians- they too would stop advocating "the creation of an independent Palestinian state" as the solution to the problem and begin to look for economic scenarios which can be applied to the current situation to improve the day-to-day life of the Palestinians- wherever they may be living.

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Joel Bainerman has been writing about Israeli and Middle East political and economic affairs since 1981. An archive of his publishing record and current essays can be viewed at his website www.joelbainerman.com or via by email at isratech@netvision.net.il