There's a persistent Western hope that if only Palestinians possessed nice apartments and late-model cars, they would accept the status quo and call off their war against Israel. It's a projection of Western priorities (economics trumps politics) that willfully ignores the Palestinians' clear record of just the reverse (politics trumping economics). It also defies the general historical record (enriching a party in the middle of war historically prompts it to make war more energetically).
I have been critiquing this idea for years. For example, I wrote in a 1997 discussion of Arab rejection of Israel's existence:
Caio Koch-Weser, a vice president of the World Bank with responsibility for the Middle East, explained in 1994 that for the peace process to succeed, "the Palestinians need to see improvements in their living conditions very quickly." But were Palestinians interested in the good life alone, they would long ago have settled into a comfortable synergy with Israel's dynamic economy. Instead, they have repeatedly shown that they are quite prepared to sacrifice the prospect of better living conditions if doing so will further the cause of obliterating Israel.
In a 2001 critique of Thomas Friedman:
"Underneath the old, encrusted olive-tree politics of this region," he writes, "is another politics bursting to get out, to get connected and to tie into the world of opportunities." Friedman's favoring of policies that disentangle Arabs from Israelis cause him to lavish praise on former president Bill Clinton for doing "the Lord's work" by pushing the parties so hard to reach an agreement. Unfortunately for Friedman's thesis (and Clinton's Nobel Prize aspirations), many Middle Easterners are still preoccupied by those "encrusted olive-tree politics" he has relegated to the dustbin of history
In an analysis of economics and warfare, again in 2001:
What Israel is doing - withholding tax money, denying entry to laborers, and restricting movement - fits into an ancient, sensible, and somewhat effective method of warfare. Why, then, is it expected to do otherwise? The reason, ironically, has little to do with the UN or US and much to do with Israelis themselves. They developed the "new Middle East" notion (which others now echo) that Israel's long-term welfare and security lies, not in depriving its enemies of resources, but in helping them develop their economies.
Years later, the notion of economically growing the Palestinians out of their determination to destroy the Jewish state has new life. Indeed, according to a headline in today's Wall Street Journal, it's a brand-new and sparklingly original idea: "Latest Answer To Mideast Crisis: Fix the Economy." In a worshipful account of James Wolfensohn, the former head of the World Bank "who is now a top diplomat in the region charged with fixing the beleaguered Palestinian economy," Karby Leggett informs us that
Wolfensohn is betting that the Middle East conflict needs not only a political settlement but also an economic one. Prosperity, he believes, will blunt the appeal of extremism and give Palestinians a stake in building a new state after years of nearly continuous violence.
Comment: It is mildly amazing how a failed idea like this one, that Palestinian Prosperity will resolve the Arab-Israeli conflict, does not die but keeps being rediscovered. (December 28, 2005)
Apr. 15, 2008 update: There are too many examples of this mentality for me to cover, but here is one that caught my attention: "New Home-Buying Plan May Bolster Abbas" reads the New York Times headline. The Bush administration has announced a new plan to devote US$500 million for a mortgage company, the Affordable Mortgage and Loan Company (AMAL), with the goal of building ten new neighborhoods over five years to bolster Mahmoud Abbas and his Fatah organization. Half the money will come from U.S. taxpayers via the Overseas Private Investment Corporation, half from a combination of the Palestine Investment Fund, the World Bank's International Finance Corporation, the Bank of Palestine, and the British government. Tony Blair calls the plan "a major step forward for ordinary Palestinians."