The root of all ...
The Council of Foreign Relations describes the Palestinian Authority's financial system this way:
Where does the PA government get its funding?
From a combination of overseas assistance and tax collection, Abuznaid says. He estimates that taxes—from businesses in the territories, as well as a customs tax collected by Israel and then paid to the Palestinians—account for about 40 percent of the PA budget. Donations from abroad make up the rest. The PA has run into budget trouble lately, running a massive deficit and sparking the wrath of European donors by adding thousands of people to the security service instead of cutting costs. Experts say Fatah padded its payroll with young militants to win their votes ahead of the polls, and expect the PA will be unable to pay all their salaries after the elections. Since November 2005, the European Union has withheld $42 million in aid payments to the PA as punishment for missed fiscal targets.
|Source||Amount in $millions|
How well have these monies been spent? EUFunding.Org has copies of two reports commissioned by the European Parliament in 2003 which examined whether funds provided by the EU were used in a legal and responsible manner. This ought to give some indication of how well donor money is spent in general. The site describes the conclusions reached.
There are two versions, and members were asked yesterday to vote on the report they support. One version, the "majority opinion", is authored by Wynn and Theato, the two budgetary chairmen [Wynn and Theato report]; the second, by the Foreign Affairs Chairman, Laschet [Laschet report]. As it turned out, Laschet's version has the support of many of the proponents of the original petition. "Irreconcilable differences" make it impossible for a single report to be published. The vote on which report to publish could not have been closer: seven for the Wynn/Theato version against six for Laschet.
Apparently 60% of all payrolls were disbursed in cash and not by bank transfer, making it difficult to rule out the possibility that vast sums have been used for purposes other than intended. Nor is it clear whether these monies have been largely used to benefit the ordinary Palestinian people and not to line the pockets of the PA officials.
The Chicago Tribune is reporting tensions between the defeated Fatah and the newly elected Hamas.
Young fighters and police affiliated with the defeated Fatah movement staged angry protests Saturday, firing rifles into the air outside the Palestinian presidential compound in Ramallah and marching on the parliament buildings in Gaza and the West Bank. Hundreds of Fatah members marched outside the presidential compound in the West Bank city of Ramallah, with some firing automatic rifles skyward. They demanded the resignation of Fatah's Central Committee and rejected any alliance with Hamas in the new government. "No partnership with Hamas," they chanted.
Part of the problem may be rivalry over who will control the money. The fact that a large proportion of the Palestinian Authority's money comes from external sources can create what can be called the Simple Plan effect, after a book written in 1994 about a group of friends who stumble onto four million dollars and eventually wind up killing each other for its possession. Roger Stern of Johns Hopkins University writing at the Proceedings of the National Academy of Sciences has a more sophisticated version of the Simple Plan effect applied to regional politics. He argues that monopoly rents arising from the huge difference between the lifting cost of oil and the cartel price has created a vast inflow of money from the rest of the world which has destabilized the Middle East. Stern writes that warfare in the Middle East is:
warfare for monopoly proceeds. In such war, the aggressor’s goal is not to deny supply but to gain more of it to sell, as in Iraq’s invasions of Iran and Kuwait. Although this logic escaped U.S. policymakers, it was plain to one economist:
If the [Hussein] regime survives [the coming 1991 Gulf War], without a large U.S. presence . . . the whole region and a far more effective oil monopoly is his. Higher revenues will buy more arms, which will lead to more conquest and hence higher revenues. As he occupies one neighbor after another, he will absorb their wealth and gain territory for launching further attacks. (ref. 22, pp. 537–548 Adelman, M. A. (1993) The Economics of Petroleum Supply MIT Press, Cambridge, MA)
Adelman’s insight is that oil market power, not oil per se, creates instability in the Persian Gulf. More simply, each firmstate’s monopoly proceeds are a potential war prize to another.
The Congo too has been cursed by wealth which is there for the taking, because it is independent of whether the society which surrounds it is devastated. Global Security writes:
It has long been established that the exploitation of these resources, including coltan, gold, and diamonds in eastern Congo, and diamonds, copper, cobalt, and timber in central DRC, contributed to and exacerbated the conflict in the DRC. Concerned with reports of pillaging of resources by the foreign forces, the UN Security Council mandated an independent panel to investigate these allegations. The panel has produced a series of reports, detailing the circumstances of this exploitation.
But whereas the Congo is wracked by a war over its natural riches, the struggle for donor funds in Palestine is a perverse scavenger's brawl over the begging bowl of the Palestinian people. Perhaps never before has a government stood to gain more from the misery of its people (60% foreign aid) than their prosperity (40% taxes). It creates a perverse set of incentives and one wonders whether 'in such wars, the goal is not to diminish misery but to gain more of it to sell ...'. Just wondering.