Palestine Ltd.

Neoliberalism and Nationalism in the Occupied Territory

Toufic Haddad

• Publisher: I.B. Tauris
• Year: 2016
• ISBN:
  9781786720979
• Edition: 1
• Topic: History
• Subtopic: Middle Eastern History
• Index: History

ince the 1993 Oslo Accords, the Occupied Palestinian Territory has been the subject of extensive international peacebuilding and statebuilding efforts coordinated by Western donor states and international finance institutions. Despite their failure to yield peace or Palestinian statehood, the role of these organisations in the Israeli-Palestinian conflict is generally overlooked owing to their depiction as tertiary actors engaged in technical missions.

PART I

BACKGROUND

CHAPTER 1

NEOLIBERAL APPROACHES TO CONFLICT RESOLUTION AND STATEBUILDING

Palestine Ltd. does not emerge as the product of a linear teleological path that a cabal of evil politicians devised in a smoky back room in the early 1990s. Although there is a basis to impart premeditation and intentionality regarding specific realities to emerge in the OPT as a result of the DOP, and which have yet to be acknowledged by scholars and commentators alike, it is fanciful to imagine that this is the entire story. Instead, complex dialectical processes rooted in theoretical understandings, normative policy prescriptions, and a host of international, regional and local political economic factors, among others, all contributed to shaping the context in which human agency was exercised and political choices made. Moreover, to propagate the notion that the less-than-ideal and politically unresolved scenario to emerge between Israelis and Palestinian as a consequence of the DOP (to put it mildly) was concocted in secrecy, is also ahistorical and intellectually dubious. It demonstrates ignorance of a good deal of the public record evidenced in negotiated agreements, donor reports and the theoretical and political bases which intellectually ground them. The latter have been fairly explicit in elaborating how development, peacebuilding and statebuilding should function and the ends they should serve, both in general and in relation to the OPT. What is thus needed is a firm grounding of these sources, ideas and histories to understand how the local OPT reality was configured within these, and how they served to shape the policies and choices Palestinian elites and social classes needed to make.

This chapter will introduce some of the main theoretical aspects to neoliberalism's utopian transcript and how these have been translated into organizational form and policy formulations in regards to conflict resolution and statebuilding.

Though not a comprehensive review of far larger bodies of knowledge, the analysis included herein derives from a need to establish the most relevant theoretical and practical elements related to the field before applying them to the OPT case study in subsequent chapters.

Neoliberalism

From Theory …

The neoclassical economics tradition upon which neoliberal economic prescriptions are grounded, embodies a series of utopian assumptions about human beings, what motivates them, how they make their choices, and how markets and societies function. While its microfoundational subcomponents and broader policy prescriptions and biases have been well studied and critiqued (see Stein, 2008, pp. 55–110), it is the extension of these policies to explicitly political and social realms that distinguish the neoliberal canon. Milton Friedman's Capitalism and Freedom refashioned the dry neoclassical economic theory giving it an emancipatory political clothing (Friedman, 1962). According to Friedman, capitalism is not just a theory of individual wealth creation, but an instrumental part of political freedom. He constructs a two-part argument: first, that economic freedom is a dimension of freedom more broadly understood, and hence self-evidently justifying; secondly, that capitalism is an ‘indispensable means toward the achievement of political freedom’ (ibid., p. 8). Free markets are believed to have a deleterious effect on ‘concentration of power,’ which to (neo)liberals represents the potential power of ‘coercion’ (ibid., p. 15). Through free markets, a kind of democratic simulation takes place: by ‘removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power’ enabling ‘economic strength to be a check to political power, rather than a reinforcement’ (ibid., p. 15).

Friedman's ideas disembed and unmoor political praxis from its traditional basis within democratic governance norms, functionally rejecting the consensual democratic notion that political movements or groups that gain the right to govern through an electoral process maintain the right to wield the economic resources and political institutions of the state to implement or further the social, political and economic agendas for which they were elected. Instead, free markets and market incentives are seen as best meeting popular needs and hence should lead development. Markets thus inherently de-politicize and should be instrumentalized to this end:

The widespread use of the market reduces the strain on the social fabric by rendering conformity unnecessary with respect to any activities it encompasses. The wider the range of activities covered by the market, the fewer are the issues on which explicitly political decisions are required and hence on which it is necessary to achieve agreement.

(Friedman, 1962, p. 24)

In ‘rendering conformity unnecessary,’ Friedman and the broader neoliberal tradition are incapable of imagining forms of ‘conformity’ that are non-coercive. Any form of cross-identification, interdependence, or social solidarity – including presumably national liberation movements – are coercive by nature and deserve to be melted on the fires of individual choice through markets. If markets instead of governments meet the full spectrum of human need, the requisite for most political practise and decision making dissolves. Political issues and social needs are thus disaggregated into micro-issues that can be commodified and technically addressed through market allocation. Freedom becomes the ability to make an individual choice exercised in the market through the ability to buy or sell, rather than a concept linked to forms of structural oppression and individual or collective rights.

In this modeling, government retains a strictly delimited role providing a means to impose and modify rules, mediate differences and enforce compliance of the ‘game’ – but should be prevented from engaging in the game itself. In Friedman's words, it is strictly an ‘umpire’ (ibid., p. 25).

Needless to say, such an arrangement advantages those with capital and access to forms of power and information that can leverage them over other individuals and groups. This blindness to such asymmetries is particularly utopian in so far as it also assumes that the system tends toward equilibrium and that all agents operating within this game have interests in securing perfectly operating market conditions. It also ignores the basic reality whereby market interactions are socially realized – between bosses and workers, and between members of different social classes, and various racial, national, ethnic, gendered individuals and groupings. Because of historical legacies, some individuals and groups enjoy certain economic and political privileges and rights over others, and may use this power to preserve them. Whether this takes place through formal rules, informal norms, or both, a hypocritical dimension of the neoclassical world view should be noted.

This aside, the economic bases of neoliberalism has evolved over time, giving rise to the New Institutional Economics (NIE) of the early 1990s. The latter reinterpreted and developed many of the core tenets of the neoclassical tradition emphasizing the centrality of institutional design and capacity. This was seen as a way to ‘incorporate realism into economic analysis, including such factors as economies of scale, imperfect information or even the lack of markets’ – issues ignored in neoclassical economics but deemed necessary to ensure that the core neoliberal tenets that emphasized macroeconomic structural adjustment, could finally lead to capitalist ‘take-off’ (Fine and Van Waeyenberge, 2006).

NIE theoretician Douglass North (1995) understood institutions as ‘humanly devised constraints that structure human interaction,’ and ‘reduce uncertainty in human exchange’ (p. 23). They established codes of predictable conduct between agents, with economic performance determined by the interaction between formal rules, informal norms and the enforcement mechanisms of both. Strong institutions that lowered transaction costs, protected property rights and enhanced market efficiency were seen as central to development. Predictability – economic but also political – could thus be generated.

Enforcement of this arrangement ultimately falls upon ‘polities’ which ‘define and enforce the economic rules of the game’ (ibid, p. 25). In a key sentence that captures the political nub of his argument, North writes that the heart of development policy ‘must be the creation of polities that will create and enforce efficient property rights’ (ibid).

This call for creating ‘polities’ to enforce institutional arrangements has profound implications on fundamental questions of sovereignty, democracy and class relations. It can be read as a call to actively engage in social and political manipulation or engineering with deeper implications when read in light of historical Western development interventions in the ‘Third World’, and its mission civilisatrice (see Paris, 2002). North goes a step further though:

• Political institutions will be stable only if they are supported by organizations with an interest in their perpetuation. Therefore an essential part of political/economic reform is the creation of such organizations.
• It is essential to change both the institutions and the belief systems for successful reform since it is the mental models of the actors that will shape choices.

(North, 1995, p. 25)

This wide-ranging call to engineer a society conforming to neoliberal market imperatives would occupy a central place in the policies and practices of IFIs, including in the OPT.

Finally, it is worth noting that all neoliberal prescriptions were seen as having the best chance of succeeding only after the alternatives were seen to have failed. ‘Only a crisis – actual or perceived – produces real change,’ Friedman once noted (Friedman, 1962, p. xiv). ‘When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.’ Indeed Freidman's ideas would make headway internationally only after the discrediting of post-war Keynesianism and Third World developmentalism. What is novel to the OPT setting is to see how ‘crisis’ could arise or be induced through violent conflict, in addition to market failure.

… to Practice

This concise overview of neoliberal development's theoretical bases found an institutional home in IFIs whose workings and policies have been well studied and documented (see Stein, 2008). Basic neoclassical precepts were captured in the World Bank and IMF's ten key policy instruments known as the ‘Washington Consensus’ as implemented through Structural Adjustment Programs (SAPs) (see Williamson, J., 1990). When the empirical data from the experience of SAPs affirmed their failures (leaving aside pre-existent Marxist and Keynesian-inspired critiques), the IFIs amended their prescriptions to incorporate the insights of New Institutional Economics, thus giving birth to a post-Washington Consensus (PWC) (see Saad-Filho, 2005, pp. 116–17; Jomo and Fine, 2006).

During his tenure as World Bank chief economist (1997–2000), Joseph Stiglitz elaborated a more sophisticated comprehensive approach to development that saw the entire process aiming towards ‘society wide transformation’ (Stiglitz, 1998, p. 72). Following in North's conceptual footsteps, where development policy seeks to influence the ‘mental models’ of agents, Stiglitz's ideas demonstrate a yearning for development to reach ‘deep down into society’ such that transformation encompasses ‘the way individuals think and behave’ (Stiglitz, 1998). Johnson and Wasty (1993) had already shown that externally imposed development models had grave limitations to their prescribed loyalty among donor recipients, and hence to their efficacy overall. Stiglitz thus emphasized the need for the subjects of development to participate in and ‘own’ their developmental processes, such that markets can work better, and a new society can be brought into being through market selectivity. He envisioned a world where the acceptance of IFI policies was not the product of the arm-twisting conditionalities of previous eras, but of the conscious embracing of donor recipient governments and society, because those who agree to these policies actually see their interests tied with these kinds of linkages (see Lloyd, 1996). By thickening the ownership and participation of recipient communities at least amongst a stable strata of the recipient society, a state's ‘social capital’ was also seen as strengthened, with development seen as being more sustainable.

The construction of institutional arrangements with built-in incentive structures then becomes decisive for ‘operationalization.’ The private sector, the state, the community, the family and even the individual, all become the target of development policy incentives with their concomitant reliance upon market selectivity. Primacy is given to the private sector as the main agent of change, with the state seen as a complementary, ‘light touch’, regulatory force to facilitate lowered transaction costs.

Finally, Stiglitz stresses the integration of all strata of development, while the whole system is integrated within global capital. ‘At each level, the strategy must be consistent with the environment within which it is embedded, at levels above and below. And all of the strategies are embedded within an ever-changing global environment’ (Stiglitz, 1998).

Although Stiglitz's ideas evolved over time and have been extensively debated (Fine and Jomo, 2006; Lapavitsas, 2006; Van Waeyenberge, 2010; Cammack, 2004; Fine & Van Waeyenberge, 2006; Chang, 2001), his development strategy while at the World Bank irrigates the thoughts and policies that ultimately unfold in the OPT, given he was economist of choice to World Bank president James Wolfensohn during much of the latter's tenure (1995–2005). Wolfensohn would also assume the role of Special Envoy to the Quartet for the Middle East Peace Process during the Israeli redeployment from Gaza (2005), immediately after leaving the Bank.

The evolving neoliberal agenda has long since spread beyond its expected IFI bastions to include the UN system as well.

In 1992, UN Secretary General Boutros-Ghali's Agenda for Peace asserted that the organization needed to go beyond its traditional peacekeeping role and focus on issues of state failures, democratic deficiencies and questions of economic self-sufficiency (UN, 1992). Agenda for Peace proposed ‘nation building’ as the solution to redressing underlying grievances that propel civil conflict, which increasingly characterized the types of conflicts that emerged after the demise of the Soviet bloc and while neoliberalism was ascendant.

Appeals to ‘nation building’ emerged around similar calls for ‘sustainable development’ circulating in various developmental forums including the UNDP. These emphasized ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (UN, 1987). The influence of neoliberalism can be found in the way ‘sustainable development’ embraced an approach that ‘prioritized the development of people ahead of states’ while ‘decoupl[ing] human development from any direct or mechanical connection with economic growth’ (Duffield and Waddell, 2006).

Discourse on ‘human security’ developed in the 1994 Human Development Report equally echoed and advanced this sense of disaggregating the role of the state. ‘Human security’ emphasized the security of individuals over that of the state, concentrating on a variety of social and developmental issues (poverty, population displacement, HIV/AIDS, environmental breakdown and social exclusion) (UNDP, 1994). While these issues had typically been considered under the state's purvey whose fate was enmeshed in the broader question of its overall economic development and social service/welfare provision, their framing in isolation from one another, decoupled from economic development, permitted their individual targeting by various networks of developmental actors. A discursive framing seemingly concerned with various progressive humanitarian values and human rights conventions helped to facilitate the undermining of the state-led approach to development.

With former state functions disaggregated, the ‘good governance’ agenda would emerge as a natural complement to ‘sustainable development.’ The UNDP defined good governance as ‘the exercise of economic, political and administrative authority’ in ways that are ‘participatory, transparent and accountable’ (UNDP, 1997). Between 1997 and 2000, 46 per cent of the UNDP budget was allocated to governance programs, while recognizing that the organization was also the world's largest multilateral grant-making agency. Good governance was seen as a means to stamp out rent-seeking activity, and ensure that former state functions were managed and operated according to free-market principles.

As the ascendance of neoliberal ideas on the world stage throughout the 1990s incorporated widening spheres, traditionally distant developmental actors converged around common policy agendas. The UN, which had primarily concerned itself with the politics of peace enforcement up until the end of the Cold War, saw the need to more actively address economic dimensions in its mandate, incorporating ‘economic recovery’ as part of its conflict resolution and prevention mandate (Gerson, 2001). Alternatively, the World Bank, which had focused on macroeconomic adjustment, began looking to political and governance issues, as part of making its agenda succeed. According to Allan Gerson, former counsel to the US delegation to the UN, ‘there is new agreement about one basic point: the scourge of intrastate war will not be contained unless the vicious cycle of poverty, economic injury, and political grievance is broken’ (Gerson, 2001, p.102). This convergence ultimately took operational form in the UN Millennium Declaration whereby the role of ‘post-conflict peacebuilding and reconstruction’ was endorsed as part of the UN's agenda (UN, 2000). The declaration also pledged to work toward ‘greater policy coherence and better cooperation between the UN, its agencies, the Bretton Woods Institutions and the World Trade Organization, as well as other multilateral bodies, with a view to achieving a fully coordinated approach to the problems of peace and development.’

Neoliberal Conflict Resolution and Peacebuilding

From Theory …

It is important to bear in mind that the absorption and incorporation of neoliberal ideas by institutions engaged in conflict resolution, peacebuilding and statebuilding took place on a changing historical and political landscape after the collapse of the Eastern bloc and the end of its bilateral aid provision. The conflicts which emerged in the wake of this decline informed how Western governments and IFIs molded their ensuing aid/interventions. Wallensteen and Sollenberg (2001) documented 111 cases of armed conflicts in the world between 1989 and 2000, of which 104 were said to be ‘intrastate.’ In many of these cases the UN was called to play a role in ‘peacebuilding’ missions, the aim of which was ‘to create the conditions necessary for a sustainable peace in war-torn societies’ (Annan, 1999a). The World Bank also established a ‘Post-Conflict Unit’ in 1995 under Wolfensohn, assigned to coordinate interventions in war-to-peace transitions.

The intrastate narrative of wars led to debates around what caused conflict (see Beath et al., 2012). Here the work of Paul Collier, director of the Development Research Group of the World Bank from 1998 to 2003 would come to prominence, using quantitative analytic and comparative statistical approaches to explain conflict through econometrics (Collier and Hoeffler, 1998; 2004; Collier, 1999; 2004; Collier and World Bank, 2003). His research ...

Table of contents

• Front Cover
• Title Page
• Copyright
• Contents
• List of Illustrations
• Series Foreword
• Acknowledgements
• Introduction
• Part I: Background
• Part II: Peacebuilding? 1993–2000
• Part III: Statebuilding?
• Conclusion
• Appendix 1
• Appendix 2
• Notes
• Bibliography
• Back cover