Has BDS Contributed to Israel’s Economic Success?

Basic economic principles tell us that stronger economic activity creates jobs and brings prosperity to the economy as a whole. This has happened to the Israeli economy, but not the economies of the West Bank and Gaza. Surprisingly, the pro-Palestinian Boycott, Divestment, Sanctions (BDS) may have been a catalyst in both the recent Israeli economic growth and Palestinian economic downturn.

Primarily through technology exports and counter to BDS intentions, Israel’s economy has grown significantly over the past number of years. What’s more, Israel’s economy grew by a staggering 7.2 percent during the fourth quarter of 2014, which demonstrated a significant uptick of economic activity after a third quarter lag due to the Gaza war (the high fourth quarter number is likely a correction after a war-filled third quarter). Concurrently, in an effort to pressure Israel into territorial concessions with the Palestinians, BDS movement increased its activity worldwide. Specifically boycott “targets products and companies (Israeli and international) that profit from the violation of Palestinian rights”. Divestment “means targeting corporations complicit in the violation of Palestinian rights and ensuring that the likes of the university investment portfolios and pension funds are not used to finance such companies”. Sanctions are “an essential part of demonstrating disapproval for a country’s actions.” ( Nonetheless, Israel’s economic numbers demonstrate that BDS’s mission has failed. At the same time, the Palestinian economy has floundered, in part due to BDS-inspired sanctions.

Moreover, the BDS movement may have partially triggered the current Israeli economic tech boom. In 2006, then-Bank of Israel Governor Stanley Fischer devalued the shekel in attempt to increase technology exports. The strategy succeeded, as a flood of Israeli technology startups mushroomed, exporting technological goods such as aviation, communications, computer-aided design, medical electronics, and fiber optics. In fact, Israeli companies currently comprise the largest number of non-North American companies listed on the tech-heavy NASDAQ. There has been a dramatic shift from agrarian and manufacturing exports, which used cheap Palestinian labor, to technological exports, which relies less on manual Palestinian labor. The combination of the world’s growing appetite for technology, shekel devaluation, and BDS pressure may have pulled Israel’s economy away from the kibbutz model to its current model.

A World Bank report tells of economic hardship for Palestinians in the West Bank and Gaza. Between 2007 and 2011 average yearly economic growth exceeded 8 percent, but declined to 1.9 percent in 2013 and minus 1 percent for the first quarter of 2014. Israeli companies employ less Palestinians as the Israel’s agricultural sector shrinks and its tech sector grows.

The overall numbers demonstrate the asymmetry between the Israeli economy and the economies in the West Bank and Gaza. Israel, with a population of 8.3 million, has a GDP of $291 billion, while the West Bank and Gaza, with a population 4.1 million, has a GDP of $11.3 billion. Bank of Israel numbers further contrast the economic situations: in 2012, Israeli sales to the Palestinian Authority were $4.3 billion, or 5 percent of Israeli exports (excluding diamonds) and less than 2 percent of the Israeli GDP, while Palestinian sales to Israel accounted for 81 percent of Palestinian exports and less than a percentage point of Israeli GDP. In addition, Palestinian purchases from Israel were two-thirds of total Palestinian imports, or 27 percent of the Palestinian GDP.

This economic story is not only asymmetrical, it is also telling of reliance. With the shift from agriculture and manufacturing, Israelis have reduced their reliance on Palestinian labor. Palestinian laborers now seek jobs with Palestinian or other Arab-owned businesses, which are struggling in the economy and pay significantly less. It seems that Israel adapted well to the new realities and the Palestinians have not.

Though dangerous for non-economic reasons, it seems the BDS movement has strengthened Israel economically. At the AIPAC conference on Sunday, Senator Ben Cardin (D-MD) stated that he plans to introduce legislation to combat BDS. Senator Cardin linked BDS activity to the growing anti-Semitism in Europe. From an economic point of view, BDS has been a failure because its unintended consequences have contributed to Israel’s economic success and Palestinian economic strife.

In part, the BDS website states that ” [g]iven that all forms of international intervention and peace-making have until now failed to convince or force Israel to comply with humanitarian law, to respect fundamental human rights and to end its occupation and oppression of the people of Palestine… We, representatives of Palestinian civil society, call upon international civil society organizations and people of conscience all over the world to impose broad boycotts and implement divestment initiatives against Israel similar to those applied to South Africa in the apartheid era… These non-violent punitive measures should be maintained until Israel meets its obligation to recognize the Palestinian people’s inalienable right to self-determination and fully complies with the precepts of international law…” So far, BDS measures have been economically punitive against the Palestinians, not against the Israelis. What’s more, those measures may have been economically beneficial to the Israelis.

If, as the website claims, BDS’s mandate stems from the failure of all peace-making efforts, then it should join that list of failed efforts. The BDS movement has arguably spurred more violence, but its core platform for non-violent economic intervention is not working. The BDS website lists the “[a]mazing things we have achieved together.” As mentioned, those “amazing things” are not referring to the economies of the West Bank and Gaza. Perhaps the “amazing things” list should include Israeli economic success.

About the Author
Ari Mushell works in the banking industry.
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