Trying to Put a Price on Middle East Peace


2 May 2011
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In July 2002 a small group of Israeli and Palestinian economists sat down for a rare meeting in the idyllic French village of Aix-en-Provence. It was the height of the violent Palestinian uprising known as the Second Intifada. A Hamas suicide bomber had recently blown himself up in a hotel where a Passover meal for 250 people was taking place, and Israel was engaged in a military campaign in the occupied territories that would ultimately result in thousands of Palestinian deaths. Official communication had been severed and political solutions were obviously coming up short.

The economists believed they could help. They concluded that translating the conflict into the data-driven language of economics might enable the two sides to cut through the rhetoric and begin to think dispassionately about the details of what peace would look like and cost in actual shekels.

The leaders of the Aix Group, as it came to be known, were two economists—a Palestinian and a Jewish Israeli. Arie Arnon, a left-leaning professor at Ben-Gurion University, was a child of Holocaust survivors, a veteran of the Six Day War, and a lifelong citizen of Jerusalem. Saeb Bamya was a Palestinian refugee from Jaffa—the Arab-majority section of Tel Aviv—who became a high-ranking official in the Palestinian administration. Both were born in 1947, the year before Israel became a state. They began with the premise that eventually the six-decade-old conflict would, somehow, end in a two-state solution. They foresaw countless economic questions that would require concrete answers: What would it cost to resettle more than a million Palestinian refugees? What kind of trade agreements would exist between the two states? How would Jerusalem function economically as a divided capital?

In the decade since, despite spotty economic data and a political environment that changes month to month, they have slowly set about trying to put a price tag on peace. Every two years, Bamya and Arnon select a new problem for the group to sort out. They meet at least twice a year to discuss their findings.

The future of the 5 million Palestinian refugees recognized by the United Nations was among the most difficult issues the group tackled. The men found it was not easy to separate their feelings from their calculations. “I am a Palestinian from Jaffa. I dreamt of returning my whole life. And if I let my feelings go, then I lose my mind, and that’s it, I cannot compromise,” says Bamya, who served as a Finance Minister in the Palestinian Authority until the election of Hamas in 2006. “A price for peace must be paid,” he says. “But … there must be fair compensation.”

After two years of work, the economists concluded the cost of resolving all refugee issues will be steep, between $55 billion and $85 billion. They propose dividing the cost between the UN and the Israeli and Palestinian governments, with additional help from other countries, including the U.S. Using data culled from 60-year-old tax and land registry records—and factoring in inflation—the economists calculated that refugees could reasonably demand up to $30 billion from the State of Israel in exchange for giving up their claims to land they owned prior to 1948.

They looked at the Palestinian population, roughly 450,000 refugees in Lebanon, 500,000 in Syria, and 2 million in Jordan, and tried to figure out how many people might choose to relocate to a new Palestinian state, and what impact a mass migration would have on the regional economy. “You have to look at how an economy, at its current level, could sustain a large influx of people while maintaining the standard of living,” says Arnon, who teaches a course on the Palestinian economy.
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