It has been more than seven weeks since Israel launched its war on the Gaza Strip. The war took 14,800 Palestinians lives, and injured around 36,000. A four-day truce, extended for two additional days, saw multiple hostage swaps, with three Palestinians held in Israeli prisons released for every Israeli returned from Gaza. 

Now Gaza is at point zero, with its economy shattered, infrastructure leveled to the ground, and a massive humanitarian crisis to contend with. But what possible scenarios extend before it, and when the time comes to build Gaza and its economy from scratch, what lessons can be learned from the past and what political processes should not be repeated. 

Today’s episode of Podcast Palestine: The War on Gaza is with Raja Khalidi, economist and director general of the Palestine Economic Policy Research Institute. Mr. Khalidi served with the UN Conference on Trade and Development from 1985 to 2013. This interview was recorded on Tuesday, November 28th.

Nadeen Shaker: As a Palestinian living in Ramallah, you have a special but perhaps more painful vantage point than the rest of us. What are your brief thoughts at this very moment?

Raja Khalidi: Well, some personal thoughts is more along the lines of I’ve been living in Palestine now for 10 years. I lived the rest of my life and followed the wars that Palestine has lived through over my career, my lifetime, beginning in Beirut, the big one. And from afar, watching the destruction of Iraq on CNN and Jazeera and all that we’ve witnessed the Intifada, etc. So I’ve been living here, however, for the last 10 years. And I can assure you that even before this war, what I realized, even living as a well off, you know, middle class, professional in the best city you can live in in Palestine in some ways, and I always say the safest, you know, whenever there was a war, the safest place in the whole Middle East is Ramallah. This is the last place that anybody wants to see going up in flames.

And even during this war, you know, we didn’t have any rockets at least. Anyhow, my point is that you realize that whoever you are as a Palestinian anywhere, living in the West Bank, obviously in the residency before the war, Jerusalem, inside Israel, we’re all traumatized already. I mean, what I’m trying to say is that we were all occupied.

But we had different ways of accommodating to that. And there were status quos, different status quos in all those areas that I mentioned, or at least premised on different things. And all of those now have been blown to bits. All of those assumptions, everybody is still traumatized, and everybody is totally engaged. So like you say, the pain is, you know, I don’t think I’m any more pain than a Palestinian sitting in Chicago is by everything because it’s no longer about being there. It’s about seeing it and watching it and reading. So anyhow, I mean, it’s very difficult to continue a normal life. Hence, we’ve been obviously thinking about what we know best, which is the economy.

On the other hand, today we had a researcher’s meeting and before talking about our upcoming research sector, we had, you know, political analysis session, because everybody is thinking and wondering and worrying where this is going. So very few of us disagreed with the likelihood that this is going to continue, that it’s going to get worse, that we haven’t seen the worst of what Israel can do. You know, the political horizon immediately is zero. On the other hand, there’s an increasing recognition, way overdue of course, in the West, that there must be finally, we need a proper solution to this. So that, you know, in some way encourages us, but it also frighten, it’s very scary, because we know how much opposition there is in Israel to any accommodation with the Palestinians of any form of any color, and, you know, citizen, not citizen, totally equal, whereas we can see the differences in Israel. We can see the crazies and we’re living with them in the West Bank and we can see some voices of total sanity in these moments.

NS: So today is November 28th and the major headline today is that the truce has been extended for two days in exchange for the release of 20 more hostages by Hamas. Do you think that the strategic goals of Hamas and Israel are shifting, coming closer together in some way? Do you think this type of truce can form the basis of a permanent ceasefire?

RK: I wish so, but no, I don’t think it, I mean, maybe in Hamas’s original strategy for this war, that was the idea. But I think only because they assumed their outcomes would be totally different than what they were. Now, you know, I’m not a military analyst, but I’ve followed as closely as any intelligence citizen has.

It’s clear that they went way beyond what they expected. There is what happened, both the killing, indiscriminate killing of civilians, as well as the extraordinary bounty, military bounty in terms of prisoners and in terms of dead Israeli soldiers and all of that, were clearly way beyond what was in the battle plan. And they’ve dealt with it since not, I mean, they maybe had contingencies, but I don’t think they had a contingency for this. That’s my personal feeling.

Nevertheless, they’ve been able to manage the crisis much, much better than anybody expected. So in that sense, I think they’re much closer, sticking much closer to their strategic strategic plan than the Israelis, because the Israelis didn’t have a strategic plan. Well, they had one, but it’s very clear that they ignored it. I mean, there was the major this massive intelligence and political policy failure, as well as the time it’s taken for them to come up with a coherent military [strategy] which from what we understand is even more vicious than the first 50 weeks could become. Hence, I think their strategy is also being adapted as we go ahead. But I don’t see the resistance’s strategy adapting. I think this is exactly what they wanted. They wanted these sort of exchanges, they wanted these sort of effects, in terms of who’s being released, in terms of who you know, their children, our children, their civilians, our civilians, all of that.

They wanted to be the address for all of this and they are. So they’ve, I think that’s a lot of their strategy has already been over achieved. Now we’re probably in, for both parties, I think in the gray zone. So neither of them has a plan for tomorrow. I mean, the ceasefire, even this last extension could break down, you know, who knows? My point is that therefore my qconcern more is how much Israel is going to be able to mix between its military goals and the time it will take or how it’s going to reconcile its military goals with the time it’s going to take evidently to achieve them. And therefore, what is the weak point in the Palestinian position today in Gaza? At least I think it’s the humanitarian catastrophe.

And just as they (Israelis) weaponize the humanitarian assistance, you know, we might well see if the ceasefire breaks down, you know, we go back to 50 trucks a day, which will compound the disaster. Basically all we’re doing now is mitigating the scale of the disaster, nobody’s preventing one. So my fear is that if they’re, you know, if they’re told they have to not kill hundreds of civilians every day in order to achieve their military goals as they did in the first 50 days and not witness the massive destruction that we’ve been seeing, then the only way I would have thought they can squeeze the resistance is through the people, which is what they’ve been doing, of course, two million traumatized, you know, Nakbatized Palestinians is not, it’s not a good situation for anybody, including for Hamas. So basically they extend the suffering to buy more time to reach their military goal.

If as the general assumption is, and they keep saying it’s going to take months, and if one assumes that the international community will remain in a position that it is now, which is basically allowing them to continue within certain more perhaps strict parameters as the Americans are starting to say. Then yes, I would have thought the weak point in our position will be the people suffering.

NS: I think the question on everyone’s minds is like how far they can go and how worse can get because you’re right, you do talk about the humanitarian catastrophe and what we’ve seen is obviously horrendous, but it could be much worse, it could get much worse. And so my next question is after this pause in the war, say when the truce ends, when they run out of hostages, you know, and all this is said and done, do you think we’re going to witness a resumption of massive war and destruction like the first time around or before the truce? And is there anything politically to signal that there might be a different situation on the ground after that?

RK: There are too many unknowns. If we take them at their face value, that within a few days, there will be no exchanges because the price that they’re going to be asked to pay for soldiers is not one that they’re willing to pay in wartime. And they’re willing to sacrifice them if that. So that the whole hostage issue will reduce in pressure on the government, Israeli government internally, which has been important factor in them not yet pursuing the campaign. Now, okay, it’s hard to imagine how anybody would want to go back to war, including Hamas, after that, who wants to see another 50 days? But apparently the Israelis feel they have to do it. Now, if they feel they have to do it and try to do it, destruction, you know, the physical destruction is one thing that there’s all sorts of levers that Israel is using, has been using, not military, I’m talking about just human destruction and physical destruction, which keeps coming back and things that even Israelis have been saying from the beginning, but others are now saying about now North Gaza is no longer habitable.

We said it at mass the very first week we said, basically is we didn’t say in so many words as a war aim, but we said that ultimately, the inevitable outcome of this will be making Gaza uninhabitable. Now, for the moment, those 800,000 people in the north, seven or eight, they say, are okay, they’re living there. Is it habitable? Yes, I mean, they’ll probably end up finding some, most of them shelter in the ones in the north because they stayed there. Most of them stay there because their houses haven’t yet been destroyed.

But what else is [there]…no electricity, no water, no hospitals, no schools, no nothing, no stores at the best. You know, one can assume commerce small commerce could resume, [which it] has already, you know, to the extent possible where there are goods coming in. So extend that now to one month forward, after another few weeks of terrible fighting in the South, maybe not in the scale [of the fighting that took place in the north], maybe more localized, maybe more deliberate. And don’t forget, they haven’t finished in the North. So we don’t know, are they going to go on two fronts at once, resume with two fronts at once, or are they going to finish mopping up in the North? That might take a few weeks and then go to the South. I mean, we’ll see. But the point is that can Israel conduct normal warfare operations as it feels it needs to and the way it likes to in the South with, at the same time, trucks, convoys having to you know [deliver humanitarian aid]? Or maybe we’ll have daily pauses like we had for a couple times supposedly, full ceasefire pauses for six hours a day so they can kill us in the night. I don’t know, all sorts of options.

NS: Yeah, it’s really tough to think about. And in our email correspondence, you’d mentioned your discomfort with using the words or the phrase “day after” which already, I think a lot of observers are using to talk about reconstruction, return to normalcy, which is unimaginable at this point. But there is an idea that I think is tied to the economy here or to the economic aspect of this, which you bring up in your writings a lot, which is that there’s no proper economic development without liberation and sovereignty. And I wanted you to elaborate a little about your concern with this phrase, “day after”, and how freedom and liberation need to be prerequisites for post-conflict reconstruction.

RK: The reason that I’m averse to that term and I think I’m not the only on,e I discovered a few other people [who share the same view,] because it’s being used precisely in a certain context and that context has been one of the day after Hamas is destroyed in Gaza and is no longer a security threat to Israel, what do we do with Gaza? So it’s totally obviously robbing us of our agency, both in terms of the outcome as well as the discussion. And to be honest, I think the real day after was on October 7. In a sense, that was the day after 30 years of a failed process, let’s say.

NS: You’re referring to the Oslo process, right?

RK: Yeah, of course, exactly. The peace process, if there was one. And after the last peace, actual effort was when, in 2014, I believe Kerry. Since then, we’ve been living in the status quo, which we became more or less accustomed to and expected indefinitely to continue and didn’t see anything on the horizon that might disrupt it, including from us. And we in the West Bank, PA, I think as much as Israel were surprised by what Gaza and Hamas had prepared for us all. Now, my point here is that therefore, the 7th of October, as well as today, we’re still in the day after, is my point. If anything, it’s “the day before” now. Now, the question is, what is the day before? What is this period that we’re in the middle of the war? It’s the before what? Not what comes after the war. So for me, that’s the only way that Palestinians should look at it i.e. if this confluence between conditions on the ground, balance of forces, political, Israel, military, strategic, whatever, regional and Hamas is maintained where we are today, let’s say, in a few weeks and even a few months, even if it’s been reduced, but there’ll be other factors that will come into the balance for and against Hamas.

My question is therefore, if everybody’s saying, well, we need a final, you know, permanent solution to this. And the only permanent solution anybody agrees is the two state solution. Even though myself and most of us have totally gone off the idea if we ever were keen on it because of what we see in front of us in the West Bank, so it became impossible. So why do we keep talking about it? Let’s see what apartheid means and how we can get out of that. That was where we were on the 7th of October. Some people are still there.

There’s an interesting article I haven’t yet read by Tariq Baconi, who says precisely that, you know, whereas I published an article, which maybe some interpreter it as a call for a two state solution, it wasn’t so much that as saying that if you want a two state solution, this is the sort of economic prerequisites that you have to [fulfill,] so if those prerequisites are available, yeah, I’ll go for the two state solution for sure. In that sense, that was what I was saying in that article. My point here is that in the day before, if we as Palestinians don’t assume something like a state, not something like this. This time, we assume a state has to be the outcome, the political outcome, even if God forbid, on the ruins of the resistance—even if that’s what happens to make a state, to make that outcome happen. But I personally don’t believe that what we’re hearing from the West in terms of: we are now serious this time and we’re going to go through with it. But in order to go through it, they’re telling us we have to destroy the resistance. I don’t believe them. I believe that if they destroy the resistance, then they’ll throw us into another Oslo, just like they did in 1991.

Why did we end up in Madrid? Do you remember why we ended up in Madrid? Because the intifada had been violently repressed, but most importantly because the PLO had been ostracized for its position on Kuwait. And the PLO spent a year or two before it was allowed anybody to talk to, right? And it was therefore only allowed into the Madrid peace process. Why? Because it had to be there. Everybody knew, but you remember it was represented by Palestinians from inside [Palestine.]

So what I’m seeing therefore is that the next process, there has to be a political process. I totally agree. There has to be a political [outcome], a mutual [process], not an exclusive, not us or them, definitely not. And to be honest, I don’t think even Hamas is saying us or them. I mean, that’s true, it’s in the charter and all that, but if you read some of their statements on the two state solution and part of this war, if, I mean, anyhow, we can talk about Hamas’s…its own changes that it’s I’m sure going through and will have to go through if it’s going to assume the political responsibility that it’s claiming for itself through what it’s done. So I think there actually is a horizon for the two-state solution that we didn’t have for the last 20 years. A political opening. I don’t call it a horizon. It’s an opening.

NS: Yeah, I was going to say, and you mentioned that in the piece that you just referred to, in that you are thinking of a two state, two economy solution, and that might be the window to do that. And I just wanted to have you talk more about this concept and how we can bring this idea into discourse. And especially, you know, I think that piece was very significant, but I think what you are getting at in it is that you need a nationalist development, liberationist framework for that kind of economy to get back on its feet and also to sort of separate itself from the dependency [on] “economic peace” with Israel?

RK: When I first looked at this idea of economic peace, it was in 2009. It was first floated by Netanyahu when he came to power. And I examined it as just another iteration of basically Israeli economic policy towards well, what the argument there was, was that there is no economic policy per se; Israel doesn’t care about the Palestinian economy so much, except to the extent that it’s a tool in its own purposes, be it, you know, economic or security or resources.

So Oslo itself was a very sophisticated, the highest stage of economic peace, if you wish, because it assumed that we can achieve through the economy and build as part of a political process. Then since Netanyahu, it’s been obviously separated and been basically sold as an alternative to [a comprehensive solution] and we’ve had, as I said, different iterations of it since Netanyahu and every Israeli government comes up with [one.] Even not this [current government,] but the one just before it, the Bennett right wing government was all about facilitation measures as a way of managing the Palestinian-Israeli conflict. And as we know, Netanyahu bought big into that concept. And it’s actually been the worst policy Israel could, in terms of Hamas, one of the greatest, greatest strategic errors Israel has ever made politically.

Coming back to the question of the development state and the Palestinian economy, and I mentioned it in the article that the PLO has always been pretty, you know, very true to what you read about it. I mean, it’s always worked vigorously for the two-state solution, vigorously, I would say, since they were able to get a position in the ’88 National Council of the Declaration of the Independence of the State. So that was all that was the you know, and that was something that all the Palestinians accepted in principle. But there were conditions that we assumed would have to be satisfied. And those conditions were annunciated very clearly by the PLO in 1990 by a pioneering study done by Youssef Sayigh for the PLO that talked about the economic prerequisites and muqawwamat of a Palestinian [economy].

And of course, they were not taken into account because of the political price that was paid by the PLO to get part become part of the peace process. And by 94, there was no longer a Soviet Union, the Arab consensus had congealed around the peace process. And so basically, that’s what was on offer. And what was on offer ended up being obviously not a state, no sovereignty, hence no sovereign economic functions. The whole customs envelope thing with Paris Protocol with Israel, this assumption that you’d have access to the labor markets, which of course Israel has played with, manipulated incessantly and most recently [during] this war, and various other weaknesses which were clear to all of us as economists in the 90s and which were criticized, but we assumed that the final status agreements, Camp David 2000, would [create] equitable economic relationship. That didn’t happen. The Second Intifada happened.

We got involved in a status of: this is the Paris Protocol, you know, the economic agreement between Israel and the PLO. We, the Israelis, will apply what we want to apply and give you what we want to give you. We’ll deduct what we need, [what we ]think you have to deduct, et cetera, et cetera, et cetera. And you have no recourse to anybody to complain except the Israeli military administration next door. And so that was what we were locked into. But of our own making as well as of the world’s making. Now, we’ve been saying it for 20 years and I’ll say it again, you know, and the prerequisites are well known. You need sovereignty over your natural resources. We need a minimal land mass area to do this bloody state. We need contiguity. We need the people, you know, we need freedom of movement, international trade.

We want to have our own trade regime. We don’t want necessarily Israel. We want to be a bit more protective towards our infant industries. We do or we do not want to be linked to your monetary [regime.] All of these decisions, which have been postponed for 30 years, if not, well, at least 30 years. So this is the moment or never. If there’s going to be a two-state solution, it’ll happen as a result of this war. If as a result of this war, the international community and the Arabs—well, the Arabs, I don’t really count anymore in terms of their political weight in all of this—it’s down to the Israelis and the Palestinians, and the extent to which the Palestinians can shift public opinion in the United States and in Europe. And that’s happening.

If Israel is able to quell, snuff out, extinguish, expel resistance from around Palestine, which I think is a huge order, then maybe we’ll just live into this sort of eternal one state reality, you know, apartheid reality. However, I don’t think that’s the balance. I don’t think the world would permit that, to be honest, any longer. And I think that there’s going to be that shift. That sort of outcome is no longer [acceptable].

So I think what we’re looking for now in Palestine is what’s going to happen next door. I mean, at what point will the demands they’re making of the Palestinians regarding Hamas, that you cannot, you know, you have to renounce terrorism, you have to die, I mean, at what point are they going to make those sort of demands on the Israelis and they do and something changes there, then you could talk about a legitimate basis for a Palestinian [state]. I mean, it’s not this before that, but I think change is going to come in Palestine and that change is going to include both some sort of ending of this West Bank-Gaza Strip political divide and the Hamas-PLO [divide], or exclusion from the PLO, some sort of international re-affirmation of support in the PA, at least once it’s more legitimate and representative of all the Palestinians, because it’s a useful mechanism for everybody.

I think there might even be international, we might move now to see some serious international recognition of the state of Palestine, even in the UN. But if not in the UN, then certainly already we know in Europe, that’s going to happen. And I mean, it’s a demand that the PLO is putting to the Americans as well. So those sort of things will help change the mood after the war, and would reflect a certain change of balance of powers. But I think ultimately, you know, how big the destruction and the reconstruction requirements will be, as well as whether there will be a political basis for any reconstruction depends on what’s going to happen militarily. And that is something out of our hands.

NS: Thank you for this answer. It was a lot to unpack, but I do believe the narrative is changing whether it happens due to outside pressure or from within Israel itself. But yeah, until the dust settles and the guns go silent, we’re not going to be able to find out. There’s certain things it’s not [time to talk about,] which brings me to my next question, which totally contradicts what I just said. I know it’s really unfathomable to talk about reconstruction at this point, but as a development economist, what would you say is a good starting point to start rebuilding Gaza’s economy? Just, you know, if you were to do one thing, the first thing, what would it be?

RK: The economy and rebuilding Gaza or rebuilding Gaza’s economy? Obviously, the two are related. But I mean, you know, the rebuilding of Gaza, or [rather] the building of Gaza, I think. Look, there are three phases, please. There’s the relief phase, which we haven’t even begun.

And that includes shelter and that hasn’t even begun. There are people working there and they’re starting to think about different ways, talking about  at least 500,000 refugees for the internally displaced people for the next six months at least. So there’s that, that’s the thing that has to be, everybody has to be working on. Plus of course, all the flow of aid on a daily basis and fuel and whatever.

Then you have the, assuming there’s no hostility, you have the reconnection of the basic utilities, but that’s going to only provide you with certain amount of places where there’ll be electricity. But even if you fix the electrical, Israel is not going to be supplying electricity to Gaza. So is Egypt ready to? I don’t know about that. We know that the power station, anyhow, there are all sorts of huge infrastructure, economic infrastructure issues, which I’m sure that the telecoms people and the water people are already thinking about, making plans for what they would do once they can start repairing. Those will be the sole preoccupation of the next six months. And getting commercial markets running again. I don’t think industry or agriculture can do anything about it, at least until Israel is totally withdrawn and you can use agricultural land again.

So all the available agricultural land has currently been churned under Israeli tanks and 500 factories, if not more, have been put out of commission. So the economy itself is a second, is a third [consideration]. So relief and shelter, basic food and medical supplies. Removing the rubble, just removing the rubble and where do you go with it? You throw it in the sea, you truck it into Egypt? What do you do? I don’t know. I don’t know. No one thought about that.

But that’s a major issue. That’ll take tons of time. I mean, that’ll require this sort of equipment that we don’t have and so on. So there are all of these immediate tasks. We’re talking about six to 12 months of only that. And then the economy will start organically, of course, reconnecting in certain, whoever can get [access] if you have free commercial passage on the commercial passages. Then you know, suppliers [will start working], then people will order supplies and start their factories again, and bit by bit things will start moving. But I assume the economy is decommissioned for the year. At best, you’re going to need to supplement what used to be a 2.5 billion GDP with at least, you know, double that to keep people alive.

At least double that and when people ask how long would it take or what would it take to get Gaza back to where it was on the eve of the war? That is a totally unacceptable goal for us. Where it was on the eve of the war was that it had been reduced from [between] 35 to 70 percent of the national economy. No, per capita income is down to $1,500 GDP a year. Various other indicators, the highest poverty rates, the highest unemployment.

So that is not an unacceptable baseline to be. So we need to go back to where we were 15 years ago, where those gaps with the West Bank were less, where people were, anyhow, where people were better employed, and that, you know, requires something out of the box. And that’s why we’re talking about things like UBI, or universal basic income. I mean, as a scheme, as a way of pumping an aggregate demand quickly throughout to the whole society. It’s why you need to think about very well, politically and security[-wise], for the moment, unacceptable solutions like a floating port, or maritime facilities that you can bring in directly, bring in a lot of these things that you’re going to need.

The idea of Rafa being the only access point to Gaza in itself, even if there is no war… it’s impossible to manage what we’ve just talked about through Rafah. But the Israelis are refusing to use the West Bank, you know, for stuff to come through Jordan via the West Bank. So there’s so many, I mean, as an economist, there’s no use for me. There’s nothing an economist can do right now, except talk about, you know, some big ideas and try to get things, you know, keep people focused properly. But you need building, you need just a huge civil defense arm basically for the next year.

NS: Until that happens, one can only hope.

Thank you for listening to podcast Palestine, the war on Gaza, and to my guest, Raja Khalidi. This episode was produced by myself and the Cairo Review’s deputy senior editor, Omar Auf. Let us know what you thought of this episode and share your feedback with us on social media. Follow us wherever you get your podcasts. Salam.