Has the United States been taking a Cold War era approach to gain favor in Palestine? Read this article, and decide for yourself. Newman out.

THE PALESTINIANS' LOST MARSHALL PLANS
(OP-ED by Patrick Clawson)

The report released this week by the US Agency for International
Development on malnutrition in the Palestinian territories signals
how deep the humanitarian and economic crisis has become. It is
heartening to see the growing concern about how to alleviate the
suffering of Palestinians and at the same time give them hope of a
more prosperous future. To translate this concern into real progress
on the ground, we must study the past decade of efforts to aid the
Palestinian economy. The facts may prove surprising.

A New Marshall Plan?

The essence of the Marshall Plan was to provide financing for
dollar-starved European countries, which had many highly profitable
investment projects that could not be financed by the limited private
funds then available. In other words, these countries had good business
environments and well-functioning governments but lacked money. The
situation of the Palestinian territories is exactly the opposite. As is well
known, they have a bad business environment and poorly functioning
governance. But what may come as a surprise is how well endowed
the Palestinians have been with foreign-aid funds.

A comparison to the Marshall Plan is telling. The Marshall Plan
distributed $60 billion (at today's prices), which worked out to $272 per
European in the main participating countries. By contrast, by the end
of last year according to the World Bank, the Palestinians had received
$4 billion since Oslo, which translates into $1,330 per Palestinian. In
other words, the Palestinians have already gotten more than four times
as much as the Europeans got from the Marshall Plan. Or if done on
an annual basis, the Palestinians have gotten $161 per person per
year compared to $68 per person annually under the four-year Marshall
Plan meaning the Palestinians have gotten more than twice as much
aid for twice as long as Europe got under the Marshall Plan.

Another way to gauge aid to the Palestinians "WBG" (West Bank and
Gaza) in the lexicon of international agencies is to compare aid levels
to other poor areas. In 2000, WBG received $636 million in aid or $214
for each of the three million WBG residents. That is the highest in the
world by far.

Compared to the $214 for the Palestinians, the average for sub-Saharan
Africa is $20; for South Asia, it is $3. Those areas are much, much
poorer than the Palestinian territories. Consider a country like Ethiopia,
which got about the same amount of aid as the Palestinians but has
more than 20 times the population. In Ethiopia, national income is $100
per person that is per year, not per week. In other words, each Ethiopian's
income from all sources is, on average, less than half what Palestinians
receive from foreign aid alone.

The cynic could suggest that if the Ethiopians caused more terrorism or
threatened global political stability, they would see more dollars headed
their way. But that is not all that is at work here. Even compared to
countries of great terrorism concern, the Palestinians are in a special
class. The world has become concerned about unemployed Pakistani
youth educated in radical madrassas, but aid to Pakistan was a mere
$7 per person, one-30th the Palestinian level.

How has the intifada affected aid? The aid has shot up since intensified
violence began. The increased aid has come overwhelmingly from Arab
states; the PA reported that in the first 18 months of the intifada, Arab
countries provided $677m. in aid. According to the World Bank March
2002 report on the impact of the intifada, donor funding was "only" $482m.
in 1999 before the violence began; it ballooned to $929m. in 2001. That is
an extra $447m., or $149 extra per Palestinian. The cynic would say
violence pays; the compassionate would say the world has responded
to greater Palestinian suffering.

So with all this aid, why has WBG not had better economic
performance? The easy answer is that aid to the Palestinians has been
used extraordinarily badly. Aid programs the world over face renewed
criticism from those who argue that aid "too often has done harm, by
sustaining either grossly inefficient policies, or corrupt and brutal
leaders, or too often both together" (in the words of Martin Wolf of the
Financial Times).

But the problem is not just with the aid agencies, which keep shoveling
the money out the door irrespective of results. The bigger problem is that
aid cannot provide what the Palestinians need, which is peace and better
governance. The biggest single barrier to Palestinian growth is their
violence against Israel, which forces Israel to impose closures and
curfews. Those who want to relieve the suffering of the Palestinians
should concentrate on stopping their offensive, which would allow Israel
to lift the devastating restrictions on the flow of goods.

It is galling to many Palestinians that the "occupation" years saw better
economic performance than since the establishment of the PA. In the
"occupation" years 1968-92, Palestinian per-capita incomes almost
quadrupled. Palestinian per-capita income has never recovered to the
levels pre-Oslo: it was almost there in 1999, but then came the
disastrous decline during the current intensified violence.

In the absence of stability, pouring in more aid money will do little to
improve the economy and may only provide politicians the resources to
keep on muddling through without tackling the fundamental political and
economic problems.