What the Israel-Hamas war means for Gaza’s already suffering economy
What the Israel-Hamas war means for Gaza’s already suffering economy
Hundreds of foreign passport holders and injured people have left Gaza, crossing the southern border into Egypt. It’s part of an internationally brokered deal between Egypt, Israel and Hamas following Israel’s military bombardment in response to an attack by Hamas fighters on Oct. 7.
More than 1,400 people were killed in Israel during that Hamas attack. More than 8,000 people have been killed in Israel’s military offensive in Gaza, according to numbers from the health ministry controlled by Hamas, which has worsened already dire economic and humanitarian conditions.
For more on the situation in Gaza, “Marketplace Morning Report” host David Brancaccio spoke with Nur Arafeh, a fellow at the Malcolm H. Kerr Carnegie Middle East Center. The following is an edited transcript of their conversation.
David Brancaccio: National Security Adviser Jake Sullivan said in recent days that the endgame in Gaza is “ultimately up to Israel” as it escalates its operations. There was some Financial Times reporting last week suggesting that Israel does not want to occupy Gaza after this military phase, if you could call it that. Whoever does take that responsibility would have to build on a shattered infrastructure, but on an economy that was already in very poor shape.
Nur Arafeh: Yeah. So Gaza is already actually occupied by Israel. And while Israeli troops withdrew from Gaza in 2005, Israel maintained control over the airspace of Gaza and over all land and sea borders. What this means is that the Gaza Strip was completely isolated from the West Bank and the rest of the world. And so trade links of Gaza with the West Bank, with East Jerusalem, with regional and global markets were completely cut off. And this led to uneven dependency on Israel as the dominant trading partner.
So we’re talking about a situation where Israel controls the movement of people and goods. Israel controls how many trucks can enter or leave Gaza, what kind of material can be imported, what kind of goods, technologies and inputs are banned from entering. For example, Israel bans the import of so-called dual-use items. So these are items that Israel deems can be used for civilian and for military purposes. And so it bans their import into Gaza. So we’re talking about machinery, spare parts, fertilizers, chemicals, medical equipment, telecommunications equipment. So all of this has greatly limited Palestinian productive capacity. So the siege, together with the five military operations that took place in Gaza between 2008 and just before what happened on the 7th of October, led to the destruction of infrastructure, capital stock and physical and productive assets. So the productive base of Gaza, before the current war, was already eroded.
Brancaccio: Your analysis here actually is very much in line with something I saw from the United Nations trade and development arm. They issued a news release the other day referring to a decade [and a half] of “suppressed development” in Gaza. And they had this phrase, prior to the current crisis, “the decades-long blockade hollowed Gaza’s economy.” And they also pointed out that that left most, I think 80% of the population by the U.N.’s assessment, dependent on international aid.
Arafeh: Yeah, absolutely. Because in the ’90s, Gaza’s economy was economically integrated and dependent on Israel, and it was strongly tied to the West Bank. And after Israel imposed movement restrictions and the blockade, Gaza’s economy shifted to an isolated, disposable enclave, completely cut off from the rest of the occupied Palestinian territory and the rest of the world.
And this has had important economic, social and humanitarian repercussions for the past 16 years. So we’re talking now about an economy that has been completely extinguished, and that is, in a way, decommissioned. The agricultural, fishing and industrial sectors have deteriorated, and the construction and trade sectors were also completely paralyzed as a result of the severe movement restrictions imposed by Israel and falling purchasing power.
The unemployment rate in Gaza, on the eve of the war, exceeded 45%. More than 50% of young graduates in Gaza were actually unemployed, and two-thirds of the population was living in poverty. So the situation, even before the war, was catastrophic. The United Nations had already deemed Gaza to be unlivable in 2020. And now the situation is only getting more catastrophic.
Israel has cut off food, fuel, water, gas and electricity from the civilian population, which is an act of collective punishment. I have friends in Gaza who are unable to drink more than half a liter of water, together with six other family members, during one day or two days. And the bakeries, many of them were bombed. So the waiting times, for the few bakeries that are still operating, has reached more than 10 hours. And you have a kilo of bread that is being shared between 20 and 30 people. So, economically, the war is leading to a humanitarian catastrophe.
Brancaccio: Given the level of carnage perpetrated by Hamas, Israel is very focused on a military campaign against Hamas. Given that realpolitik, I guess I would call it, what would you want to see in the short term? Would you want to see much more humanitarian aid allowed into Gaza?
Arafeh: So, in the short term, I think the most immediate thing that has to be done is to reach a ceasefire. There has to be a cessation of hostilities, so that we can talk about humanitarian aid reaching Gaza, so that maybe a deal could be reached between Hamas and Israel for a prisoner exchange. But at the end of the day, while humanitarian catastrophe is happening in Gaza, this is not a humanitarian problem. And it’s not a military problem. At the end of the day, it’s a political problem. And any military approach to the current crisis will not provide a solution because violence will only beget more violence, perpetuating the current cycle of bloodshed.
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