Israel's Economic Controls in the Occupied Territories: 1967-80

In the late 1960s the Israelis decided to allow Palestinians to work in Israel, Moshe Dayan claiming that such interaction and a better knowledge of one another would reduce hostilities. Around 30 percent of the work force on the West Bank went to work for Israelis and 40 percent of the work force in the Gaza Strip, attracted by the higher wages.

Israelis were happy to hire Palestinian labor and to sell goods to the Palestinian consumers, but some Israelis did not want competition from the Palestinians and had lobbied their government for protection. Israeli officials were split between economic integrationists regarding the Palestinians and economic protectionists, and the protectionists won. A Palestinian shoe factory, for example, was not allowed to sell its shoes to the Israelis, and restrictions were placed on Palestinian growers selling their products to the Israelis. Palestinian entrepreneurs had to apply for licenses from the Israeli authorities for any economic activity they wished to initiate, while Israeli entrepreneurs had an open market to the Palestinians.

The Israelis did little to develop an economic infrastructure in Palestinian areas. Under Israeli authority, banking among the Palestinians remained undeveloped. Israel did allow Palestinian growers to sell their products to Jordan, while trade between the Palestinians and the rest of the world was subject to Israeli permission and Israeli interests.

The Israelis were also exercising authority over use of water, to their advantage, with consequences for Palestinian agriculture. In 1967, the Israelis confiscated almost all West Bank water wells, and they began restricting well drilling and water pumping by Palestinians. The amount of water allocated to Palestinians was to be capped at 1967 levels. Israeli settlements grew in number, however, and settlements drew water from neighboring Palestinian areas, with Palestinians seeing Israeli swimming pools being filled while their communities had barely enough water. Israeli settlements, according to experts, were using three to five times as much water per capita as their Palestinian neighbors. With Israeli settlements getting priority in access to water, nearby Palestinian agriculture was suffering, with fields drying and farmers being put out of work.

In 1965, before the Israeli occupation, the Palestinians were farming on 2,435 square kilometers of land. After 1980 that had been reduced to 1,707 square kilometers – a reduction of 30 percent.

As the Palestinians saw it, they had more grievances against the Israelis than did the American colonists against the British in 1776.